Given HTC Corp’s (宏達電) aggressive model launches in the first half of the year, the company has seen its sales grow faster than the smartphone industry as a whole on average, but analysts said the company’s earnings growth would likely slow next year because of strong competition.
A recent survey by US-based research group Nielsen showed that the Taiwanese smartphone maker remained the top Android smartphone vendor in the US in the second quarter, with a 14 percent market share. It was followed by Motorola Inc with an 11 percent market share and a 8 percent share for Samsung Electronics Co, the survey showed.
HTC’s strong performance came after the company teamed up with No. 1 US telecoms operator Verizon Wireless Inc to sell the HTC Thunderbolt for the high-speed long-term evolution (LTE) network, it partnered with the second-largest US telecoms operator AT&T Inc to sell HTC Inspire 4G for the HSPA+ network and the firm launched its HTC EVO Shift 4G with Sprint Nextel Corp, the No. 3 US telecoms carrier, for WiMAX network users.
The Thunderbolt, Inspire 4G and EVO Shift 4G all use the Android operating system.
HTC’s Windows Phone 7 devices also accounted for 6 percent of the US market, giving the company a combined 20 percent smartphone market share in the US, tied for second with Research in Motion (RIM) Ltd, according to Nielsen.
Even so, Citigroup said HTC faced challenging market conditions ahead in light of Apple’s potential launch of a mid to low-end iPhone in the second half, as well as Samsung’s aggressive marketing strategy and product launches over the past few months, while Nokia now has a much smaller smartphone business to lose to other vendors.
“We believe it would be difficult for HTC to maintain its market share momentum without sacrificing its average selling price and margin at a larger magnitude,” Citigroup Global Markets analyst Kevin Chang (張凱偉) said in a client note yesterday.
Chang’s remarks came after HTC on Friday delivered strong second-quarter sales and profits to investors and told analysts in a teleconference that the company would pay more attention to earnings per share and return on equity, rather than average selling price and margin.
“In our view, that argument makes sense if HTC can continue to deliver strong top-line growth next year. However, we believe strong top-line growth could be difficult given rising competition, deteriorating [product] mix and slower industry growth,” Chang said.
While HTC may still enjoy a strong balance sheet, cash flow and one of the highest returns on equity among Taiwanese tech companies, “when a hyper-growth company faces sharp earnings growth deceleration, [the] share price seldom performs,” Chang said. “Moreover, we believe the uncertainties of the legal dispute between HTC and Apple may depress the price-earnings multiple until the legal dispute has been resolved.”
However, Credit Suisse said -concerns about HTC’s litigation issues and the company’s market fundamentals appeared to be “over done” and it was still confident that the firm would achieve moderate gains to maintain its tier-1 smartphone position, according to a separate note issued by analyst Pauline Chen (陳柏齡) yesterday.
“We still believe a settlement is more likely than a product ban and it is likely a higher royalty payment for HTC,” Chen said in the note.
Because of concerns over weakening demand and legal -uncertainties, Citigroup maintained a “sell” rating on HTC, with a target price of NT$883, while Goldman Sachs maintained a “buy” rating on HTC, but lowered its target price to NT$1,080 from NT$1,330. Credit Suisse offered an “outperform” rating on the stock and raised its target price to NT$1,070 from NT$1,048, citing a better sales outlook for Windows-based smartphones.
HTC shares closed up 0.23 percent yesterday at NT$860 on the Taiwan Stock Exchange.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is