China Display Stocks Surge on Foldable Hopes and Trade Optimism, PSSI Jumps a Record 19%!
It was a record week after the Chinese Lunar New Year for Chinese display stocks with:
- BOE rising 42%
- Tianma rising 36%
- Visionox rising 47% (will be added to our index next week) and
- TCL which includes CSOT rising 12%.
The primary cause according to the Chinese media was the series of foldable smartphones being launched next week at the Mobile World Congress (MWC). Royole’s FlexPai was also presented at the CCTV Spring Festival Gala which impressed consumers and investors alike and led to the once in a lifetime surge by Chinese OLED stocks. Is this a bubble given the small foldable volumes this year? Most likely. But the investor response to foldable is another sign that panel manufacturers must succeed with foldable to manage the current utilization and supply/demand challenges they are facing.Summing up the rumored foldable announcements expected at the MWC:
- Samsung is expected to announce the Galaxy F/Galaxy X on February 20th in San Francisco with pre-orders from the 21st. We expect a high price given the two displays with some rumors indicating it could be around $2000. We continue to hear rumors of a 2nd foldable smartphone to be launched in Q4’19 which will have a number of differences with the current model which they could also show at MWC. Samsung has put up billboards with the slogan “The Future Unfolds” in Korean in 6 cities – Paris, NYC, Milan, Madrid, Moscow and in Singapore.
- Huawei will reportedly launch its foldable smartphone on February 24th. Huawei’s business plan reportedly ranges for 2019 between 50K and 200K according to who you talk to with plans for 300K in 2020 and 1M units in 2021. Pricing may be high with rumors around $1700. We have heard that SDC will supply one of next year’s models. One thing we have learned recently is that yields at the OEM for foldable smartphones are lower than conventional smartphones, which could create quite a gap between foldable smartphone shipments and foldable panel shipments. Hinge complexity is one of the biggest issues.
- Vivo established a new sub-brand called IQOO on February 12th and they are expected to demonstrate an outfolding smartphone shown below for more than $700. Previously, we heard they would show a demonstration unit only, so this is encouraging for foldable volumes given that they have established a price point. The price is also quite aggressive.
IQOO’s Foldable Smartphone
Other brands expected to announce foldable smartphones at MWC include:
- Motorola – We think the re-launching of the clamshell Motorola Razr4 has great potential to do significant volume. The clamshell approach is less risky and delivers on the original promise of foldable by producing a larger display in a smaller foldable form factor.
- Energizer – Made under license from France’s Avenir Telecom, they are expected to produce a foldable smartphone at MWC.
- Oppo is expected to have a foldable smartphone at MWC and they are reportedly targeting 10K units in 2019 with a 2H introduction with SDC as the panel supplier.
- Xiaomi – They have shown a foldable smartphone that can be folded both ways. However, we believe this will just be a prototype for demos with no commercial production in 2019.
- We still don’t believe LG has any foldable plans this year, but they could show a demo.
- TCL is expected to show a demo with CSOT panels which can be bother foldable and rollable. It is expected to be 7.2” 2048 x 1536, but is not expected to enter production in 2019.
The next 2 weeks should be exciting for foldable smartphones with the Samsung launch on February 20th, the Huawei launch on February 24th and MWC from February 25th – 28th. It should be noted that DSCC has reduced its foldable forecast for 2019 from 2.1M to 1.6M units on delays in panel production at SDC due to a change in spec which pushed out volume shipments by a month or so as well as concerns about price, thickness, battery life, Royole’s volumes, when SDC will start shipping to Chinese brands, etc. However, we are very optimistic about 2020.
Getting back to the panel supplier stock performance, as shown below, DSCC’s Panel Supplier Stock Index (PSSI) rose a record 19.4% last week gaining nearly $6B in market value. BOE’s market cap surged by 36% to $18.5B and its share of the index grew from 45% to 51%. BOE is now up 38% YTD. Tianma was the other stand out performer in the PSSI up 42% and is now up 41% YTD with its market cap rising by around $1B. The next highest results for the week came from CPT and LGD up 5%, JDI up 2% on strong Q4’18 results with HannStar, Innolux and AUO losing round. On a YTD basis, Tianma and BOE now have a wide lead up 41% and 38% respectively with LGD up 7%, Innolux up 3% despite disappointing Q4’18 results and Q1’19 guidance while JDI, CPT, HannStar and AUO are all down.
Recent Stock Price Changes for Panel Suppliers and Major Indexes
YTD Results for Panel Suppliers and Major Indexes
Overall, it was a good week for the stock market with the US large cap index (SPY) rising 2.5% with the emerging market index (EEM) down 0.2%. YTD, the SPY and EEM Are now well behind the PSSI thanks to the great week for Chinese display stocks. Tailwinds this week included a deal to avoid another US government shutdown and progress on US-China trade negotiations which are expected to continue next week. Headwinds included negative US retail data which fell 1.2% in December and was the largest monthly Y/Y decline since September 2009. The consensus was for a 0.1% increase. This data will likely cease the Fed funds rate increase discussion for some time. Excluding automobiles and gasoline, retail sales were down 1.4%, the biggest drop since March of 2009. All but 2 of 13 retail categories fell including online stories which fell 3.9%, the largest decline since November 2008. Only auto detailers and building materials gained.
PSSI vs. SPY vs. EEM Indexed to 12/31/18
Stock Price Results by Index and Panel Supplier Indexed to 12/31/18