The three major 3C devices resonate with each other in terms of demand factors, which is expected to bring about a surge in demand for 3C devices in multiple sections, such as automated assembly/welding/testing/panel production/machining.
According to the research report released by HTSC, consumer electronics is in a moderate recovery channel at the moment, and the demand for production lines and equipment is supported. The continuous iteration of software/hardware/product form and version of consumer electronics terminal equipment will bring about the demand for new purchase and upgraded equipment due to new technology and new applications. Long-term automated production line upgrade has been committed by Apple and other major manufacturers. The three major 3C devices resonate with each other in terms of demand factors, which is expected to bring about a surge in demand for 3C devices in multiple sections, such as automated assembly/welding/testing/panel production/machining.
The main factors driving the growth of 3C equipment demand include three aspects: 1) production line expansion, including the demand for new construction lines brought about by the growth of shipments and the reconstruction of industry chain; 2) the acceleration of innovation cycles among Apple and other major manufacturers, and new technologies and applications driving equipment updates; 3) automated production line upgrades, enhancing automation rates and reducing human use.
Here are the main points of HuaTai Securities:
Factor 1: Consumer electronics are in a moderate recovery channel, and the rebound of shipments is expected to drive production line expansion.
The global demand for consumer electronics terminals in 24Q1 continued to slowly recover. As for mobile phones, according to IDC, the global year-on-year decline in mobile phone shipments in 23Q1~Q3 continued to shrink, and it stopped falling for nine consecutive quarters at the end of 23Q4. Global smartphone shipments in 24Q1 reached 295 million units, up 9.7% YoY; in the domestic market, the number of mobile phone shipments was 24.071 million units in April 2024, up 28.8% YoY. From January to April 24, the cumulative number of mobile phone shipments in the domestic market reached 91.486 million units, up 12.3% YoY. PC/tablet/wearable device markets have also shown a recovery trend. According to Canalys, global PC shipments in 24Q1 increased by 3.2% YoY to reach 57.2 million units; according to IDC, after more than two years of decline, global tablet shipments in 24Q1 increased by 0.5% YoY to reach 30.8 million units; according to IDC, global wearable device shipments increased by 8.8% YoY to reach 113 million units in 24Q1. The moderate recovery downstream is expected to drive the steady rise of capital expenditures of mainframe factories and further support or boost demand for 3C equipment.
PC/tablet/wearable device markets have also shown a recovery trend. According to Canalys, global PC shipments in 24Q1 increased by 3.2% YoY to reach 57.2 million units; according to IDC, after more than two years of decline, global tablet shipments in 24Q1 increased by 0.5% YoY to reach 30.8 million units; according to IDC, global wearable device shipments increased by 8.8% YoY to reach 113 million units in 24Q1. The moderate recovery downstream is expected to drive the steady rise of capital expenditures of mainframe factories and further support or boost demand for 3C equipment.
Current consumer electronics terminal equipment is continuously iterating in terms of software/hardware/product form and version, and new technology and new applications will bring about the demand for new purchase and upgraded equipment. As for AI applications, Apple Intelligence was the highlight of WWDC 2024, but it is only supported from the iPhone 15 Pro/max series onward, which could boost the demand for equipment due to Apple users changing their devices. At the same time, AI functions have different requirements for components such as chips, batteries, sensors, and cooling systems. Changes in components will drive new demand for related assembly/testing equipment. Form factor changes and innovation, such as foldable screens, drive the upgrade of production equipment. According to Counterpoint, the panel shipments of foldable smartphones increased by 46% YoY in Q1 24, and many large factories are actively deploying foldable screens, which will bring about upgrades of smartphone production technology and equipment. In addition, the technology of wearable devices is still constantly iterating. The new types of wearable devices including the Vision Pro and Apple TWS earphones are expected to have some changes every time they are upgraded and replaced.
Current consumer electronics terminal equipment is continuously iterating in terms of software/hardware/product form and version, and new technology and new applications will bring about the demand for new purchase and upgraded equipment. As for AI applications, Apple Intelligence was the highlight of WWDC 2024, but it is only supported from the iPhone 15 Pro/max series onward, which could boost the demand for equipment due to Apple users changing their devices. At the same time, AI functions have different requirements for components such as chips, batteries, sensors, and cooling systems. Changes in components will drive new demand for related assembly/testing equipment.
Form factor changes and innovation, such as foldable screens, drive the upgrade of production equipment. According to Counterpoint, the panel shipments of foldable smartphones increased by 46% YoY in Q1 24, and many large factories are actively deploying foldable screens, which will bring about upgrades of smartphone production technology and equipment. In addition, the technology of wearable devices is still constantly iterating. The new types of wearable devices including the Vision Pro and Apple TWS earphones are expected to have some changes every time they are upgraded and replaced.
HTSC pointed out that Apple has long been committed to upgrading its automated production lines and replacing humans with machines, and has been continuously promoting flexible modular production lines such as glass backplane assembly. In 2016, Apple's Shanghai assembly factory started to use automated production lines; By 2023, Bozhong Precision Industry, the supplier of flexible modular production lines for Apple, has delivered more than 40 of them, and Zhixin Precision has delivered a fully automatic assembly line for mobile phone glass backplane. Apple continues to increase its production automation rate to drive demand for related equipment. In addition to Apple, major manufacturers are also actively promoting automated production line assembly to improve efficiency and product quality. Automation of 3C production lines is the trend and its penetration rate is gradually increasing.
HTSC pointed out that Apple has long been committed to upgrading its automated production lines and replacing humans with machines, and has been continuously promoting flexible modular production lines such as glass backplane assembly. In 2016, Apple's Shanghai assembly factory started to use automated production lines; By 2023, Bozhong Precision Industry, the supplier of flexible modular production lines for Apple, has delivered more than 40 of them, and Zhixin Precision has delivered a fully automatic assembly line for mobile phone glass backplane. Apple continues to increase its production automation rate to drive demand for related equipment. In addition to Apple, major manufacturers are also actively promoting automated production line assembly to improve efficiency and product quality. Automation of 3C production lines is the trend and its penetration rate is gradually increasing.
Related companies in the 3C equipment industry chain include: Automated assembly equipment: Bozhong Precision Industry (688097.SH), Suzhou Secote Precision Electronic Co., Ltd (603283.SH), Shenzhen Colibri Technologies Co., Ltd (002957.SZ), Zhixin Precision Machinery Co., Ltd (301512.SZ); Testing equipment: Suzhou Hyc Technology (688001.SH), Shenzhen Yanmade Technology Inc. (688312.SH), Rongqi Technology (301360.SZ), Shenzhen JPT Opto-electronics Co., Ltd (688025.SH), Fast Intelligent Equipment (603203.SH), Shenzhen United Winners Laser Co., Ltd (688518.SH); Welding equipment: Jilin OLED Material Tech (688378.SH); Panel production equipment: Guangdong Create Century Intelligent Equipment Group Corporation (300083.SZ).
Related companies in the 3C equipment industry chain include: Automated assembly equipment: Bozhong Precision Industry (688097.SH), Suzhou Secote Precision Electronic Co., Ltd (603283.SH), Shenzhen Colibri Technologies Co., Ltd (002957.SZ), Zhixin Precision Machinery Co., Ltd (301512.SZ); Testing equipment: Suzhou Hyc Technology (688001.SH), Shenzhen Yanmade Technology Inc. (688312.SH), Rongqi Technology (301360.SZ), Shenzhen JPT Opto-electronics Co., Ltd (688025.SH), Fast Intelligent Equipment (603203.SH), Shenzhen United Winners Laser Co., Ltd (688518.SH); Welding equipment: Jilin OLED Material Tech (688378.SH); Panel production equipment: Guangdong Create Century Intelligent Equipment Group Corporation (300083.SZ).
Risk warning: The sustained recovery of consumer electronics is not as good as expected, and the pace of new technology application lags behind expectations.