R&D crucial for smartphone demand in 2019

The unavailability of ’s iPhone sales unit creates negative perception on the market that the company is facing difficulty in selling the handset. — Reuters photo

KUCHING: Research and development (R&D) remains a crucial component for smartphone growth worldwide in 2019, with Malaysian manufacturers possibly bearing the brunt of a slowdown from mainstream models such as iPhones.

This comes Apple’s suppliers have issued warnings on result that may indicate weakness on volume order. Meanwhile, iPhone may be reviving its older phone models such as the iPhone X to fill the purchase agreement with for the OLED panels.

“We view that the iPhone X, which is now more affordable, would be rake in better sales in the emerging markets,” opined MIDF Amanah Investment Bank Bhd (MIDF Research) in its 2019 Outlook report.

To note, Apple announced that it is going to stop disclosing the unit of iPhones, iPads and Macs it sells each quarter. It claims that the number of units sold does not necessarily representative of the underlying strength of the group’s business.

“However, we suspect that the group may be trying to mask a downturn in the popularity of the product,” MIDF Research added. “Nonetheless, the absence of iPhone sales unit as one of the leading indicators for the smartphone market will make it difficult to gauge the outlook of vendors who fall within Apple’s value chain.”

The unavailability of Apple’s iPhone sales unit, it said, creates negative perception on the market that the company is facing difficulty in selling the handset.

This is further substantiated by the rumour that Apple is enforcing a second wave of order reduction due to weaker-than-expected sales for its new iPhones.

“Given that a number of semiconductor companies in fall within their value chain, we are anticipating earnings pressure for 2019. In light of this, these vendors are actively diversifying its revenue stream to mitigate the weakness in volume order,” MIDF Research added.

This comes as demand for are on a downward trend, as the quarterly shipment of smartphone continues to fall on a year-over-year basis.

According to IDC, shipment volumes of smartphones in the third quarter of 2018 declined by six per cent year on year (y-o-y) to 355.2 million units.

This represents the fourth consecutive quarter of yearly declines. It is observed that Samsung lead the decline, with its shipment volume decreased by 13.4 per cent y-o-y to 72.2 million.

“This was mainly due to competition from the brands such as Huawei, Xiaomi, OPPO and vivo. Moving forward, we view that higher penetration rate of smartphone and higher ASP could further stall the growth in smartphone shipment. This could impact smartphone component’s vendors.

“While we view that overall demand of smartphone could trend lower, it could be partially supported by new line-up of smartphone in 2019,” it said, adding that a notable line-up includes Samsung Galaxy S10, Samsung Galaxy X (foldable phone), Samsung Galaxy Note 10, Oneplus 7, Xiaomi Mi, Vivo Nex 2 to name a few.

Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) expects smartphone manufacturers to focus more on R&D in 2019 to incorporate 5G connectivity and breakthrough features like foldable display into future devices, replacing the stale trend of annual marginal upgrades that consumers have been desensitised to.

“5G connectivity will be a game-changer reaching a theoretical speed that is 20 times faster than 4G LTE, pushing the frontier of IoT innovations with the higher bandwidth and lower latency that comes with 5G connection,” it said in a separate outlook.

“However, we believe commercial adoption may only take place in 2020 owing to bottlenecks from current network architecture which requires optimisation; and higher cost of incorporating 5G modem into smartphones due to the need for multi-mode legacy network support until we achieve widespread 5G coverage.

“We do not discount the possibility of several smartphones being launched in the next six to 12 months and marketed as “5G capable”, as these devices will probably serve as a reference device for 5G adoption rather than a commercial deployment.”

AmInvestment Bank maintained its overweight stance on the technology sector, expecting growth to stem from the automotive and cloud computing division which is anticipated to grow ahead of other categories.

“However, the growth will likely be moderated, owing to a slowdown in the heavily weighted communication segment. One of the main reasons for the slowdown is the lack of breakthrough features in recent smartphone launches, which has lengthened the replacement cycle among consumers.

“With commercial rollouts of 5G connectivity to be seen only in 2020, we believe FY19 to be a year of research & development, with companies allocating more resources towards the innovation and adoption of the Internet of Things.”

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Source: Borneo Post Online

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