Strong 3G subscriber growth trends in China should benefit semiconductor sector players Qualcomm Inc., ARM Holdings PLC and others.
Chinese wireless carriers China Mobile, China Unicom and China Telecom reported a combined 16.5 million 3G subscriber net additions in May, representing the second-strongest month on record. It also marks a 29% increase from the combined 12.8 million 3G net additions in April.
Since 3G accounted for just 26.6% of China?s total subscribers at the end of May, Canaccord Genuity analyst T. Michael Walkley expects subscriber growth trends and smartphone sales will remain healthy throughout 2013 and 2014.
He believes Qualcomm is well positioned to benefit through higher royalties in its patent licensing business and other initiatives into the growing smartphone base at China Telecom and China Unicom.
Mr. Walkley also highlighted the sharp increase in TD-SCDMA subscriber growth, as China Mobile reported a 66% monthly gain, or net additions of 9.37 million in May.
The analyst thinks these sales trends are most positive for Spreadtrum Communications Inc. and consistent with the company?s higher revenue guidance for the June quarter.
Since ARM Holdings generates approximately four or five times the royalty revenue from low-tier smartphones with its Cortex-A processors than it does for 2G feature phones, Mr. Walkley believes strong smartphone sales in China should help drive royalty growth for the company.
He also expects RF Micro Devices Inc. and Skyworks Solutions Inc., which have strong alignment with Chinese manufacturers, will benefit from China?s recent smartphone growth.
Source: http://business.financialpost.com/2013/06/20/chinas-3g-growth-is-good-news-for-semiconductor-stocks/
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