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05 05 2013 Q113 Industry Summary Report

05 05 2013 Q113 Industry Summary Report

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Daily Letter |
1
5 May 2013
Canaccord Genuity is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the Investment Analyst’s personal, inde
pendentand objective views about any and all the Designated Investments and Relevant Issuers discussed herein.
For important information,
please see the Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s
OnlineDisclosure Database.
Technology -- CommunicationsTechnology -- Wireless Equipment
T. Michael Walkley
 
612.332.8069mwalkley@canaccordgenuity.com
Matthew D. Ramsay
 
612.332.2208mramsay@canaccordgenuity.com
Siddharth Sinha
 
612.252.0056ssinha@canaccordgenuity.com
Q1/13 HANDSET MARKET SUMMARY & APRIL SURVEY:SAMSUNG POISED FOR STRONG H1/13 SHARE GAINS
Samsung cements smartphone market share lead in Q1/13:
Our wireless store surveysand recent earnings reports from leading global handset/smartphone OEMs indicated anormal seasonally soft Q1/13 for smartphones sales after a very strong December holidayquarter. Our surveys indicated an increasing sales mix of LTE smartphones in developedmarkets and ramping sales of affordable 3G smartphones replacing feature phones inemerging markets, particularly China. Strong global sales of 
Samsung's broad smartphone
 portfolio including very strong flagship Galaxy S III and Galaxy Note II sales resulted inSamsung increasing its smartphone market share from 28.9% in Q4/12 to 33.0% in Q1/13.Our April surveys indicated a very strong initial Samsung Galaxy S4 global launch withSamsung ramping supply of the Galaxy S4 to over 300 carriers in 155 countries the nextseveral weeks. The S4 ramp combined with our expectations for soft June quarter iPhonesales should result in Samsung extending its leading smartphone market share in Q2/13.
Apple and Samsung dominate value share, competitors struggle:
 We estimate Samsungshipped a remarkable 69.7M smartphones during the seasonally softer Q1/13, an increasefrom 63.5M
 
smartphones during the strong Q4/12 holiday quarter, resulting in Samsungcapturing an impressive 43% of handset industry profits. Further, despite seasonally softeriPhone 5 sales and a stronger mix of legacy iPhone 4S/4 sales, we estimate Apple captured57% of industry profits. In fact, we estimate Apple and Samsung combined to capture aremarkable 100% of Q1/13 handset industry profits as several competitors such asBlackBerry, Nokia, and LG posted break-even results. During the June quarter, we believesofter iPhone sales combined with Samsung Galaxy S4
's
global ramp should result inSamsung surpassing Apple for the top share of handset industry profits.
April surveys:
Our U.S. April wireless store surveys indicated strong initial sales of therecently launched Samsung Galaxy S4 and HTC One smartphones in late April. While theiPhone 5 was a top selling smartphone at all four tier-1 carriers, other top selling productsincluded the Galaxy S4 and the HTC One at AT&T/Sprint and the Samsung Galaxy S III andthe Galaxy Note II at Verizon/T-Mobile. Our surveys indicated weakening BlackBerry Z10sales, but our U.K. surveys indicated strong initial Q10 sales but with limited initial supply.
Qualcomm, Avago, RFMD, Skyworks and Peregrine should benefit from LTE smartphoneramp:
We believe the Galaxy S4 global ramp should result in strong sales for RFMD.Further, while weaker June quarter iPhone sales will impact Avago, Skyworks, Peregrineand TriQuint near term, we believe these suppliers are well positioned to benefit fromsecular trends of increased RFIC content in an increasing mix of LTE smartphonesthroughout 2013. Based on results from most leading OEMs, March quarter weightedaverage ASPs were above our expectations, and we believe this is most positive for
Qualcomm's QTL revenue due to strong
3G/4G global ASPs and sales trends.
 
Daily Letter |
2
5 May 2013
Q1/13 HANDSET MARKET SUMMARY & APRIL SURVEY;SAMSUNG WELL POSITIONED FOR H1/13 SHARE GAINS
Updated global handset and smartphone unit estimates by OEM; Q1/13 marks firstquarter smartphones outsell feature phones
Based on Q1/13 earnings results from leading OEMs, we believe global handset unit salesdeclined from 480M units in Q4/12 to 420M units in Q1/13, representing a normalseasonal sequential decrease of roughly 13% during the seasonally softer March quarter. We believe this is the first quarter smartphones outsold feature phones. In fact, weestimate smartphone sales decreased 4% sequentially to 211M units, and we estimatefeature phone sales declined 20% sequentially to 209M units. With record 3G subscribergrowth in China during the March quarter, we believe affordable Android smartphonescontributed to the first quarter of smartphones sales exceeding feature phone sales.Our global surveys during the March quarter indicated an increasing mix of LTEsmartphones led by strong sales of the iPhone 5, Samsung Galaxy S III, Samsung GalaxyNote II and other LTE smartphones. Overall, we believe Samsung will grow its dominantsmartphone market share due to its impressive Galaxy lineup with the Galaxy Y selling intothe channel for under $100, the Galaxy S III mini now sub $300, the Galaxy S III nowaround $400, and the Galaxy S4 likely to dominate high-end smartphone sales for the nexttwo quarters or more. Figure 1 below is our total combined feature phone and smartphoneestimates by OEM, and Figure 2 shows our smartphone estimates by OEM.
Figure 1: Handset (feature phone and smartphone) unit sales estimates and market share by OEM (millions)
Canaccord Genuity Handset Unit Sales Estimates by OEM (millions)20111Q122Q123Q124Q1220121Q132Q13E3Q13E4Q13E2013E2014E
Global OEMsNokia417.182.783.782.986.3335.661.964.265.771.0262.7231.9
Nokia market share25.9%21.2%21.0%19.5%18.0%19.8%14.7%14.9%14.5%14.0%14.5%12.3%
Samsung341.697.2100.9108.7115.2422.0115.5120.5126.5144.3506.8566.8
Samsung market share21.2%24.9%25.3%25.6%24.0%24.9%27.5%28.0%28.0%28.5%28.0%30.1%
Apple93.135.126.026.947.8135.837.425.029.049.5140.9187.6
 Apple market share5.8%9.0%6.5%6.3%10.0%8.0%8.9%5.8%6.4%9.8%7.8%9.9%
Motorola Mobility41.48.77.26.05.727.52.92.62.73.011.37.9
Motorola Mobility market share2.6%2.2%1.8%1.4%1.2%1.6%0.7%0.6%0.6%0.6%0.6%0.4%
Sony (Sony Ericsson)34.27.27.88.88.732.58.99.19.210.037.137.5
Sony market share2.1%1.8%1.9%2.1%1.8%1.9%2.1%2.1%2.0%2.0%2.1%2.0%
LG88.113.713.114.415.456.615.415.616.017.664.664.2
LG market share5.5%3.5%3.3%3.4%3.2%3.3%3.7%3.6%3.5%3.5%3.6%3.4%
BlackBerry52.811.17.87.46.933.26.07.17.46.827.225.9
BlackBerry market share3.3%2.8%2.0%1.7%1.4%2.0%1.4%1.6%1.6%1.3%1.5%1.4%
HTC44.66.99.27.76.630.34.87.78.18.328.833.8
HTC market share2.8%1.8%2.3%1.8%1.4%1.8%1.1%1.8%1.8%1.6%1.6%1.8%
Huawei55.210.510.812.118.652.017.218.119.021.876.186.8
Huawei market share3.4%2.7%2.7%2.8%3.9%3.1%4.1%4.2%4.2%4.3%4.2%4.6%
ZTE80.520.518.421.225.485.519.119.019.922.980.987.5
ZTE market share5.0%5.2%4.6%5.0%5.3%5.0%4.5%4.4%4.4%4.5%4.5%4.6%
Total Other OEMs364.597.4113.9128.7143.4483.3130.9141.7148.3151.0572.0555.7
Market Share22.6%24.9%28.6%30.3%29.9%28.5%31.2%32.9%32.8%29.8%31.6%29.5%
Total Global Handset Units
1,613
391399425479.9
1,694
420430452506
1,8081,886
YoY % Change
11.9%2.4%6.6%5.6%5.6%5.0%7.4%7.9%6.4%5.5%6.7%4.3%
QoQ % Change
-14.0%2.0%6.5%13.0%-12.5%2.5%5.0%12.0%
 
Source: Company Reports and Canaccord Genuity Estimates
 
Daily Letter |
3
5 May 2013
Figure 2: Smartphone and feature phone unit sales and market share estimates by OEM (millions)
Canaccord Genuity Smartphone Unit Sales Estimates by OEM (millions)2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E
Global OEMsApple 93.1 35.1 26.0 26.9 47.8 135.8 37.4 25.0 29.0 49.5 140.9 187.6
 Apple market share 18.8% 22.4% 15.9% 15.3% 21.8% 19.0% 17.7% 11.4% 11.8% 16.3% 14.4% 14.6%
Samsung 95.2 44.5 50.5 56.3 63.5 214.7 69.7 81.9 93.0 111.5 356.1 511.2
Samsung market share 19.3% 28.4% 30.9% 32.1% 28.9% 30.0% 33.0% 37.3% 37.8% 36.8% 36.4% 39.7%
Nokia 77.3 11.9 10.2 6.3 6.6 35.0 6.1 7.8 8.8 11.2 33.9 51.9
Nokia market share 15.6% 7.6% 6.2% 3.6% 3.0% 4.9% 2.9% 3.6% 3.6% 3.7% 3.5% 4.0%
BlackBerry 52.8 11.1 7.8 7.4 6.9 33.2 6.0 7.1 7.4 6.8 27.2 25.9
BlackBerry market share 10.7% 7.1% 4.8% 4.2% 3.1% 4.6% 2.8% 3.2% 3.0% 2.3% 2.8% 2.0%
HTC 44.6 6.9 9.2 7.7 6.6 30.3 4.8 7.7 8.1 8.3 28.8 33.8
HTC market share 9.0% 4.4% 5.6% 4.4% 3.0% 4.2% 2.3% 3.5% 3.3% 2.7% 2.9% 2.6%
Motorola Mobility 18.6 5.1 5.5 4.8 4.6 20.1 2.5 2.5 2.7 3.0 10.7 7.9
Motorola Mobility market share 3.8% 3.3% 3.4% 2.7% 2.1% 2.8% 1.2% 1.1% 1.1% 1.0% 1.1% 0.6%
Sony (Sony Ericsson) 21.3 5.2 7.4 8.8 8.7 30.1 8.9 9.1 9.2 10.0 37.1 37.5
Sony market share 4.3% 3.3% 4.5% 5.0% 4.0% 4.2% 4.2% 4.1% 3.8% 3.3% 3.8% 2.9%
LG 20.2 4.9 5.3 7.0 8.6 25.8 10.3 10.8 11.9 13.7 46.7 55.8
LG market share 4.1% 3.1% 3.2% 4.0% 3.9% 3.6% 4.9% 4.9% 4.8% 4.5% 4.8% 4.3%
Huawei 20.0 5.1 7.6 8.6 10.8 32.2 10.3 10.8 11.9 14.2 47.1 61.1
Huawei market share 4.1% 3.3% 4.7% 4.9% 4.9% 4.5% 4.9% 4.9% 4.8% 4.7% 4.8% 4.7%
ZTE 14.9 5.2 5.4 6.8 9.2 26.6 9.0 9.7 11.1 13.9 43.7 59.7
ZTE market share 3.0% 3.3% 3.3% 5.0% 4.2% 3.7% 4.3% 4.4% 4.5% 4.6% 4.5% 4.6%
Total Other OEMs 36.2 21.5 28.4 34.8 46.3 131.1 46.1 47.0 52.9 60.9 206.9 256.1
Market Share 7.3% 13.7% 17.4% 19.9% 21.1% 18.3% 21.9% 21.5% 21.5% 20.1% 21.1% 19.9%
Total Global Smartphone Units
494.2
156.4 163.3 175.5 219.7
714.8
211.0 219.3 245.9 303.0
979.2 1,288.8
YoY % Change
66.6% 53.6% 47.9% 45.6% 36.0% 44.6% 34.9% 34.3% 40.2% 37.9% 37.0% 31.6%
QoQ % Change
-3.2% 4.4% 7.5% 25.2% -3.9% 3.9% 12.2% 23.2%
Canaccord Genuity Feature Phone Unit Sales Estimates by OEM (millions)2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E
Global OEMsNokia 339.8 70.8 73.5 76.6 79.7 300.6 55.8 56.4 56.9 59.8 228.8 179.9
Nokia market share 30.4% 30.2% 31.2% 30.7% 30.6% 30.7% 26.7% 26.7% 27.6% 29.4% 27.6% 30.1%
Samsung 246.4 52.8 50.4 52.4 51.7 207.4 45.8 38.6 33.6 32.7 150.7 55.6
Samsung market share 22.0% 22.5% 21.4% 21.0% 19.9% 21.2% 21.9% 18.3% 16.3% 16.1% 18.2% 9.3%
Motorola Mobility 22.8 3.6 1.7 1.2 1.0 7.4 0.4 0.1 0.0 0.0 0.6 0.0
Motorola Mobility market share 2.0% 1.5% 0.7% 0.5% 0.4% 0.8% 0.2% 0.1% 0.0% 0.0% 0.1% 0.0%
Sony (Sony Ericsson) 12.9 2.0 0.4 0.0 0.0 2.4 0.0 0.0 0.0 0.0 0.0 0.0
Sony market share 1.1% 0.9% 0.2% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
LG 67.9 8.8 7.8 7.4 6.8 30.8 5.1 4.7 4.1 3.9 17.9 8.4
LG market share 6.1% 3.8% 3.3% 3.0% 2.6% 3.1% 2.4% 2.2% 2.0% 1.9% 2.2% 1.4%
Huawei 35.2 5.4 3.2 3.5 7.8 19.9 6.9 7.3 7.1 7.6 28.9 25.6
Huawei market share 3.1% 2.3% 1.4% 1.4% 3.0% 2.0% 3.3% 3.5% 3.5% 3.7% 3.5% 4.3%
ZTE 65.6 15.3 13.1 14.4 16.2 58.9 10.1 9.3 8.8 9.0 37.3 27.8
ZTE market share 5.9% 6.5% 5.6% 5.8% 6.2% 6.0% 4.8% 4.4% 4.3% 4.4% 4.5% 4.7%
Total Other OEMs 328.3 75.9 85.4 93.8 97.0 352.2 84.8 94.7 95.4 90.2 365.1 299.6
Market Share 29.3% 32.4% 36.3% 37.6% 37.3% 36.0% 40.6% 44.8% 46.3% 44.4% 44.0% 50.2%
Total Global Feature Phone Units
1,118.8
234.6 235.5 249.2 260.3
979.5
208.9 211.1 206.0 203.2
829.3 596.9
YoY % Change
-2.3% -16.3% -10.7% -11.6% -11.2% -12.4% -10.9% -10.3% -17.3% -21.9% -15.3% -28.0%
QoQ % Change
-20.0% 0.4% 5.8% 4.4% -19.7% 1.1% -2.4% -1.4%
 
Source: Company Reports and Canaccord Genuity Estimates

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