China Hardware Technology:Takeaways from Consumer &Technology Corporate Day

Technology companies takeaways.

    We hosted five technology companies (O-Film, Han’s Laser, ZTE, Tonly,and DJI) at CMS China Consumer & Technology Corporate Day onSeptember 12 in Shenzhen. In this report, we highlight key takeaways fromour meetings with their mgmt.

    Companies expecting positive outlook in 2H17-2018.

    O-Film expects CCM upgrade trend to accelerate in 2H17, and plans toexpand single/ dual-cam CCM capacity to 60-65kk/15kk in 2H17 (from 50kk/8kk currently). The company also believes next growth drivers will comefrom OLED touch panel and 3D glass in FY18E. As the global leading laserequipment manufacturer, Han’s Laser expected high-power equipmentsales to remain strong in FY17-18E, driven by automotive/industrial/aerosectors. For ZTE, mgmt. expected solid growth from both smartphone/operators segments in overseas market in FY17-18E despite flattishChinese operators’ CAPEX ahead of 5G investment cycle.

    Industry focus shifting from smartphones to new products.

    As the OEM for Alibaba/JD’s smart speakers, Tonly believes smart audioproducts is a promising market given its integration into smart homeecosystem with AI/cloud services, and target to derive 50% of sales fromsmart audio in FY20E. DJI, the global drone leader with ~70% of mkt share,now generated 80-90% of sales from overseas mainly through offlinechannels (80% of sales). Following the success in consumer drones, DJIexpected agricultural drone market (3% of sales now) to become its nextgrowth engine after obtaining authorization in Europe and USA.

    Our views on industry trends and sector outlook.

    We remain positive on the technology upgrade trend in both smartphoneand non-smartphone space, given that 1) smartphone now becomes themost important consumer product which captures major consumer demandin social/communications, entertainment, cameras and payment/finance,etc, and 2) while small as a percentage of sales, emerging segments suchas AI/cloud, automotive and drones are poised to fuel industry growth innext decade.