Qualcomm Inc. (NASDAQ:QCOM) falls in the supply chain of nearly all smartphone, tablets, and mobile phone manufacturers, including Apple Inc. (NASDAQ:AAPL). The San Diego California-based telecommunications products manufacturer held its analyst day on Thursday.
In a report published Friday, Jefferies Equity research analysts noted, “QCOM’s analyst day had implications for the broad smartphone, tablet, and mobile market in the short to medium term. In particular, smartphone ASPs are declining, and the iPhone 5 is unlikely to launch at China Mobile in the first half of 2013.” The analysts also noted that there is room for growth in the smartphone industry, but pointed to the emerging markets as a place where real opportunity lies. The growth in developed markets is expected to be within the low double digits, while the emerging markets are expected to experience a growth rate in high double digits.
Average Smartphone Selling Price
According to the report, FY12 handset ASPs were up 6% year-on-year to $219 and much higher than FY10’s $186; however, ASPs are expected to be only $220. The analysts noted, “we believe smartphone penetration in developed markets is ~50%, suggesting that average smartphone ASP growth has likely peaked, as the positive ASP impact from the feature phone upgrades to smartphones is being offset by smartphone pricing pressure and a mix shift in growth to emerging markets”.
Nonetheless, penetration rates are expected to continue growth globally, the analysts believe that the LTE networks will play a big role in boosting smartphone penetration in developed markets. However, the obvious growth areas are in emerging markets.
No iPhone 5 at China Mobile in H1:13
During the investor/analyst day, Qualcomm expressed skepticism towards gaining TD-SCDMA (China Mobile’s 3G technology) penetration until the ramp of TD-LTE, which is not expected to start wider trials until the second half of 2013, with a full ramp later. Notwithstanding, the analysts noted that the unavailability of iPhone 5 in China was not related to any business or technical issue, but rather, a political decision.
The analysts left their model unchanged on iPhone 5 unit sales, as they opted to exclude sales from the World’s most populated nation. Qualcomm’s analyst day takeaways also indicate an upside in smartphone sales in 2013, as well as ballooned low-end device sales. However, the mid level devices are likely to experience a squeeze.
China remains a big wheel in Apple’s strategy, as it seeks to tap to the massive population of the Asian country. The iPhone maker is in the process of building a gigantic research and development facility in China and a majority of its supply chain companies originate from the Asian region.
The analysts remained positive on Apple Inc. (NASDAQ:AAPL) stock. They reiterated the stock at Buy with a price target of $900. Apple closed at $525.62 per share on Thursday.