- Mizuho hosted its quarterly handset industry call for checks on the state of the global handset supply chain amidst escalating geopolitical risks and deteriorating macro conditions.
- Analyst Vijay Rakesh listed his key takeaways.
- Handset component inventory was more than two times standard as distribution channels remain stressed.
- China’s demand was softer ahead of October 16 Party Congress.
- The weaker-than-expected base Apple Inc (NASDAQ:AAPL) iPhone 14 demand could extend industry time to recovery into 2H23E.
- Qualcomm Inc (NASDAQ:QCOM) could see pricing pressure (though offset by gains at Samsung).
- They cut the C22E 5G units forecast to ~595 million, up ~8% y/y (prior: 600 million, up ~9% y/y), with demand weakness.
- As he looks to a potential 2023E recovery in handsets, he saw Broadcom Inc (NASDAQ:AVGO), QCOM, and Skyworks Solutions, Inc (NASDAQ:SWKS) as best positioned with a better long-term roadmap and wider competitive moats.
- He saw AVGO (Buy; Price Target $725) well positioned with 2022E opportunities with 5G and ASIC ramps and a strong position in Wired Infrastructure and Enterprise Storage.
- He believes its software segment could provide further operating leverage and drive even stronger FCF.
- He believed QCOM (Buy; Price Target $175) is well positioned in the smartphone market as a technology leader with a long-term focus on 5G and expanding into new markets in RF and Auto.
- He saw SWKS (Buy; Price Target $150) positioned well for the upcoming 5G ramps around the globe driven by strong iPhone, Korean OEM share gains, China OEM traction, and a significant 50-100% dollar RF content increase per handset vs. 4G.
- SWKS also has opportunities in its broad markets business with growth in IoT, auto, and industrials, which he believes can improve SWKS’s gross margins towards its 53% target.
- Price Action: AVGO shares traded lower by 5.02% at $437.39 on the last check Monday.
