In a new report, analysts at Brean Capital provide an update on the Chinese PC and handset supply chain. Analysts’ latest conversations with suppliers have them convinced that upcoming numbers in the space could be a mixed bag.
Supplier Conversation Takeaways
Analysts list three major takeaways from recent discussions with suppliers:
1. Demand in China following the Chinese New Year (CNY) has been “lackluster at best.”
2. The strong dollar is negatively impacting Chinese manufacturers’ foreign demand.
3. Apple Inc. AAPL 0.86% demand for Q1 was likely stronger than expected.
How Bad Is The Weakness?
While analysts concede that there has been demand weakness in recent months, they are not yet convinced of the severity of the weakness or how long it will last. Analysts see weakness in the mobile channel as particularly troubling.
While the strong dollar hasn’t impacted Chinese manufacturers’ business within China, Chinese demand from other emerging markets has been hurt by dollar strength. Analysts see emerging market demand weakness carrying over into Q2 and feel that Chinese manufacturers will likely dial-back inventory levels in anticipation.
Analysts note that Apple alone should boost RF TAM demand in 2015, although they are uncertain exactly how large the demand will be. In addition, analysts predict an increase in geographic coverage and corresponding device capabilities coming in China.
Analysts specifically mention China Mobile Ltd CHL 1.52%‘s FDD application.
Stock Picks
Despite the recent weakness, analysts remain positive on several names in the space.
Brean has Buy ratings on Avago Technologies Ltd AVGO 0.49%, QUALCOMM Inc QCOM 2.1%, Qorvo Inc QRVO 1.28% and Skyworks Solutions Inc SWKS 0.34%.
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