>Asian Tech Strategy (MACQUARIE RESEARCH)

● Asian brands gain shares – from strength to strength. The market share gains of LGE and Samsung are not new news, but the significant weakening of Won further powers up their advantage (Figure 1). Michael and Dohoon estimate that LGE and Samsung are likely to beat their 1Q09 handset shipment guidance by 5–10%. They believe that both are likely to see double-digit QoQ shipment growth in 2Q, with multiple new models. LGE is introducing four to five new models, while Samsung is gunning for 30 models. Importantly, our checks indicate that, with US telecom operators’ handset inventory depleted to as low as one week, it is likely that they will rebuild some inventory. They may have reduced inventory to six weeks in mid-2008 and to just one week in late 2008. LGE and Samsung have strong relationships with operators.

For the smartphone, Chialin estimates that HTC is shipping five new models in 2Q and expanding its Google phones to six operators from two in 1Q. At the lowcost side, the strength from Mediatek is well documented (Figure 3). Importantly, the Chinese government’s subsidy program on electronic goods is critical. Of the 250–300 hand models qualified by this program, 75% is powered by Mediatek’s solution, we estimate. Both smartphone and low-cost handsets are the areas of expected positive unit growth in 2009.

● The semi and electronic components are benefiting. Our channels across Asia show that component suppliers are seeing a material pickup in order patterns to support new models to be launched in 2Q09 and inventory restock. Utilisation at semiconductors is picking up materially in March on the back of higher orders from 2G/3G basebands, application processors, CMOS sensors and RF. The former two are expected to lead to an increase of 300mm fab utilisation to 70–80% in April in TSMC and Chartered, while the latter could lead to improvement in the 200mm fab run rate (50%; Figure 5). Samsung’s System LSI fab is experiencing a similar trend. Japanese electronics suppliers such as Hirose and Murate are experiencing sequential improvement in their monthly order patterns (Figures 7 and 8), and George expects double-digit QoQ growth for the June quarter. Murata controls 30% of global MLCC handset market, while Hirose has significant exposure to Tier 1 and low-cost handset vendors.

To see full report: ASIAN TECH STRATEGY