Taipei: Shares of major smartphone makers and other suppliers of microchips and touch-sensitive screens in Asia have been stellar performers recently thanks to optimism over sales growth next year.
As more feature-jammed smartphones fly off the store shelves, South Korea’s Samsung, the world’s no.2 mobile phone maker which also supplies touch panels, saw its share price rise to a more than two-month high this week.
In Taiwan, shares of Asustek Computer, one of major PC brands that piled into the smartphone segment this year, are hovering at their highest level in more than one year.
Worldwide smartphone shipments are expected to rise about 20% next year, faster than the 9% growth predicted for global PC shipments, according to research firm IDC.
“There is a huge opportunity,” said Derek Lin, who manages a $18 million fund covering markets in Asia for Taiwan’s Uni-President Asset Management.
“The two biggest players in South Korea, and HTC and some other components makers in Taiwan are all likely to benefit from the boom,” said the fund manager, who owns shares of Samsung and LG in his portfolios now.
Samsung and LG have recently boosted their smartphone line-ups to compete with Apple and Research In Motion, even though some analysts have doubts about Samsung’s own software platform.
Of 45 brokers tracked by Thomson Reuters I/B/E/S, 43 rate Samsung Electronics, which also makes memory chips and sells flat-screen TVs, as either a buy or a strong buy.
Another strong performer is chip designer and supplier Mediatek. Its shares have more than doubled this year, outpacing a 67% rise on Taiwan’s main TAIEX index.
Mediatek and Qualcomm entered a patent arrangement last month, paving the way for it to gain a bigger share in the fast-growing smartphone chip market.
US chip desinger Marvell Technology expects smartphones to take the lion’s share of the global cellphone market in the next six years.
With big PC names, including Acer and Dell, entering the market where telecom operators are selling more models running on new software, a price war looks set to intensify and hurt margins next year.
Analysts also attributed lower handset prices to the rollout of new technologies, including cheaper panels and chips that help save more power and extend battery life.
Investors have started selling shares of some smartphone makers, such as Taiwan’s HTC, after the world’s no.4 smartphone vendor posted worse-than-expected November sales this week. The stock has fallen 10% since a near four-month high on 26 November.
“I want to be cautious about the sector because selling prices are going down next year,” said Vincent Chen, a technology analyst at Yuanta Securities.
“Not just HTC, other players will also get hurt,” said Chen, who put a ‘sell’ rating on HTC Corp.
“HTC shares are trading above most Taiwan tech rivals at about 14 times Yuanta’s 2010 earnings per share forecast,” Chen added.
Given a lack of scale and 3G patents, Citi also rated HTC at ‘sell’ and forecast HTC’s 2010 net profit would fall 16% from 2009, with its operating profit margin shrinking to 13.1% from this year’s 16.4%.
“Mediatek was also not a good target at its current price around T$517 a share,” said Kevin Chung, manager at Jih Sun Investment Consulting.
“There are risks and I don’t think foreign investors will add their holdings. If the stock falls to T$400-T$450, then I would believe some people will pay attention to the stock again,” Chung said, citing growing pricing pressure on the smartphone market.