Invest in mobile, not PC in 2012 say financial analysts
12/27/2011 11:29 AM EST
SAN FRANCISCO-- Investment bank Canaccord Genuity has unveiled its top tech picks for 2012, with Qualcomm Inc. and Apple Inc. topping the list, while investors were warned to be wary of buying Intel Corp. stock in the coming months.
The strongest trends being tracked into the New Year centered on mobile, said Canaccord, with smartphone growth, mobile advertising and advanced embedded functionality leading the way. Cloud-based services were also a strong financial bet, the firm said.
“While we anticipate global handset units will increase by 7% YoY in 2012 to 1.72B units, we anticipate much faster growth trends for the smartphone market. In fact, we are modeling 481M smartphone units in 2011 ramping to 650M units in 2012, or 35% YoY growth,” noted a Canaccord report.
The bank said it expected to see continued strong sales of Apple’s iPhone and iPad, despite the upcoming launch of a slew of competing tablets from competitors in 2012. “We believe Android tablets will continue to struggle given the limited number of apps designed specifically for tablet form factors,” said the firm’s analysts.
Windows 8 tablets, set to launch in the second half of 2012 could see success in “certain markets” according to Canaccord, noting that this was particularly likely within the enterprise sector which sports a large install base of Microsoft enterprise software, but even then, the iPad is expected to continue its tablet market domination.
In terms of mobile chips, Canaccord was most bullish about Qualcomm’s prospects, saying the firm was “well-positioned to grow faster than the handset market for the next several years.”
Qualcomm’s success, said the bank, was thanks mainly to ongoing Snapdragon momentum, especially its new 28nm products, as well as increased traction for the firm’s integrated strategy in mid-tier smartphones, improving 3G CDMA mix in China, and new market opportunities such as the tablet and Windows 8 markets.
Snapdragon is already powering over 300 mobile devices, with another 350 or so said to be in the design pipeline, and Qualcomm has a 100 percent share of Windows Phone 7 smartphones to boot.
While the mobile market continues to thrive, the PC market persists in its near-term softness, said Canaccord, owing to the lingering effects of recent inventory correction as well as the devastating consequences of the Thailand flooding and the resulting HDD shortage. While soft, however, Canaccord does believe that the very worst has now passed.
The investment bank said its recent checks of the PC assembly and test supply chain indicated only incremental weakness for semiconductor vendors.
“Specifically, substrate suppliers have received cuts for December from customers shipping commodity parts into smartphones, while packaging houses have seen reduced orders from power management semiconductors used in PCs,” said the Canaccord report, which also noted a softening demand for motherboards.
The bank said it expected Q1 PC shipments to be weaker than seasonal, despite the launch of Intel’s Ivy Bridge platform in late Q1/early Q2, and that this would be compounded by consumers delaying PC refreshes until the emergence of Windows 8.
“We see a potential air pocket for consumer demand in Q3 as Win8 likely won’t be available in PCs and tablets until Q4, prompting customers to limit back-to school purchases,” Canaccord said.
Intel’s new Ultrabook category might help to accelerate PC sales slightly, though that would depend on their pricing and competitiveness with Apple’s MacBook Air, said the firm, laying the impetus on Intel.
OEMs and the PC supply chain have been vigorously working to reduce pricing, said Canaccord, but with the CPU accounting for approximately 1/3 of the Bill of Materials (BOM), the most significant impact on pricing lies with the chipmaker. “Intel needs to reduce the processor platform price in order to stimulate demand,” said the bank in its report.
“Intel lowered guidance for Q4 on HDD supply disruption. While we acknowledge supply disruption to be severe and likely to worsen in Q1, we see additional negative issues with demand softening for motherboard makers and ODMs while component inventories build downstream,” said Canaccord’s Bobby Burleson.
If, however, Intel does manage to keep the costs of its processors down in order to stimulate demand for its new Ultrabook platform, Canaccord says it could end up having a positive knock on effect for many other component makers in the PC space, especially in the SSD market.