Shares of heat-dissipation parts makers have generally outperformed the market this year, as investors are positive about their business outlook next year and believe that market demand will increase further as 5G adoption takes off.
Thermal modules are crucial, as they help dissipate heat and ensure normal performance of computers, smartphones, servers and vehicles, analysts said.
Good heat-dissipation systems, such as heat pipes and vapor chambers, have become increasingly crucial as electronic devices continually become lighter and slimmer, they said.
This year, Chaun-Choung Technology Corp (超眾) saw its shares surge 40.39 percent on the Taiwan Stock Exchange as the broader market slid 8.6 percent, while Auras Technology Co Ltd (雙鴻) rose 34.11 percent on the over-the-counter Taipei Exchange, where the benchmark TPEX retreated by 16.82 percent.
Over the same period, Jentech Precision Industrial Co (健策), Forcecon Technology Co (力致) and Taisol Electronics Co (泰碩) rose 17.24 percent, 11.92 percent and 7.53 percent respectively.
The sector has seen greater competition since last year, with the gross margins at most firms sliding, but Chaun-Choung stands out among its peers with vapor chamber products that have been adopted in high-end computers, gaming notebooks, flagship mobile phones and gaming handsets, Yuanta Securities Investment Consulting Co (元大投顧) said.
“Vapor chambers will be the company’s main growth driver,” Yuanta analyst Calvin Wei (魏建發) said in a research note on Thursday last week.
“With 5G construction to begin next year, vapor chambers should see even greater demand,” Wei said.
The company’s alliance with Japan’s Nidec Corp would help it focus on niche and high-priced product development to avoid price competition, Wei said.
The government-funded Industry, Science and Technology International Strategy Center (產科國際所) said next year would mark the beginning of the 5G era, with South Korea and the US taking the lead by launching commercial services based on 5G technology, which offer high-speed transmission and low data transmission latency compared with 4G.
As for consumer services, shipments of 5G handsets are likely to commence next year in small volumes and account for less than 1 percent of global handset shipments, Yuanta said.
Shipments would accelerate gradually in 2021 and 5G phones could account for 65 percent of total handset shipments in 2026, creating higher demand for heat-dissipation designs, due to the larger power consumption of 5G handsets, it said.
There are still no reliable statistics on the power consumption of 5G handsets, Wei said.
However, based on tests conducted by Huawei Technologies Co (華為), which is to launch the first 5G handset by the middle of next year, 5G smartphones could on average consume 10 watts to 15 watts, compared with less than 5 watts for 4G handsets, menaing that heat pipes or vapor chambers would increasingly need to replace graphite sheets, he said.
Demand for heat-dissipation parts would also be boosted by the need for 5G base stations, switches and servers, benefitting local players such as Chaun-Choung, Auras and Taisol, as well as Asia Vital Components Co (奇鋐) and Sunonwealth Electric Machine Industry Co (建準), he said.
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