We believe smartphone makers cannot compromise on the display, processor and memory for high-end smartphones as they are critical components that affect user experience. There is also a limited supplier base for these components and tight supply issues (memory), which would make it difficult for smartphone makers to exert pricing pressure on these critical components.
Display makers and lens module makers set to benefit
The key to hardware upgrades will likely be the display, as a direct user interface, followed by camera. We expect the smartphone screen resolution to move up from HD (1280×720) in 2012 to FHD (1920×1080) in 2013 and QHD (2560×1440) in 2014. The larger and higher resolution display comes at a higher cost, as does improvement in the camera; we see sustained upward migration in phone camera pixels in low-end smartphones. Currently, 8MP+ is becoming mainstream in the Chinese smartphone market. As there are limited qualified lens suppliers, we believe Largan will continue to gain market share in China, thus
compensating for a potential shortfall from Apple.
The obvious beneficiaries of mobile display upgrade competition are display makers, especially Samsung Display , which is the sole supplier of highend AMOLED. We estimate that AMOLED module prices rose 30% from Galaxy S2 to S3, and rose 16% from S3 to S4. We expect the forthcoming Galaxy S5 to command a higher price than the S4
Mobile Phone Memory Makers – Largest Beneficiary
The increase in screen resolution and processor power leads to larger and faster buffer memory (mobile DRAM). We expect super smartphones to adopt QHD screens (2560×1440) and 64-bit processors in 2014- 2015, which should lead to higher mobile DRAM content (3GB~4GB) and higher bandwidth (LPDDR3/4, WideIO). We expect mainstream NAND content in high-end smartphones to change to 32GB in 2H13, from 16GB in 1H13, which would lead to a sharp increase in NAND demand growth. We expect the forthcoming Galaxy Note 3 in 3Q13 to come mostly with 32GB NAND storage.
We believe the pricing pressure will be centred on general components with a large supplier base, where makers have less bargaining power, such as PCB, camera modules, etc