In recent times, Transsion Holdings, often referred to as the “African King” in the smartphone industry, has voluntarily disclosed a performance forecast on its official website. According to estimates from its financial department, Transsion is projected to achieve a net profit attributable to the parent company owner of approximately 1.58 billion Chinese Yuan (CNY) in the second quarter of 2023, marking a substantial 84% increase compared to the same period in 2022.

Perspective from TrendForce:

• Improved conditions in certain regional markets have facilitated Transsion’s growth, though the growth rate is approached with caution.

In contrast to most Chinese brands that primarily target the domestic market, Transsion has maintained a sales focus on overseas markets. Building on its pioneering advantage by being among the first to enter the African market, Transsion established its position as the market leader. To mitigate the risks associated with dependence on a single market, the company also expanded into emerging markets like India. This strategic approach has contributed to Transsion’s potential for profit growth this time.

Based on the disclosed information, Transsion attributes the increase in profitability primarily to improvements in emerging markets’ economic conditions, leading to increased product sales. However, from a market perspective, the internally estimated 84% growth rate might be based on a relatively optimistic scenario.

Further analysis suggests that the term “emerging markets” here likely refers not to the Middle East and Africa, which have historically represented a significant portion of Transsion’s revenue, but more likely points to the Indian market.

Despite adjustments made by the World Bank and the International Monetary Fund (IMF) in their economic outlooks for the Middle East and Africa, factors like high inflation in countries such as Turkey in the Middle East and Egypt in North Africa have weakened consumer purchasing power. In such an economic environment with declining growth, consumers are likely to feel pessimistic about their future disposable income, resulting in reduced non-essential expenditures such as buying smartphones.

In the case of the Indian market, it has benefited from an economic recovery following a slowdown caused by the pandemic, coupled with a trend of foreign investment shifting away from China as a manufacturing hub. Increased exports have driven GDP growth in India, translating to higher disposable incomes for consumers.

However, despite the seemingly promising outlook for India’s smartphone market, competition is fierce, with brands like Samsung and Xiaomi already occupying a significant market share. As a newcomer to the market, Transsion faces challenges in achieving substantial performance growth amid this intense competitive landscape.

• China remains the largest market for smartphones, indicating short-term market recovery remains challenging.

Transsion’s focus on expanding into overseas markets outside of China has opened doors for potential growth. When examining global smartphone revenue by regional markets, China still reigns as the largest single-country market, contributing nearly a quarter of the company’s revenue. However, a closer look at China’s recent macroeconomic performance reveals a youth unemployment rate surpassing 20%, reaching a staggering 21.3%.

Given the rising unemployment rate, it can be inferred that consumers may hold pessimistic expectations for their future disposable income. Moreover, as the smartphone market matures and innovation becomes scarce, the lack of growth momentum in China’s market suggests that the overall smartphone market may continue to struggle to recover in the short term.

(Photo credit: Transsion)

According to the news reports from money.udn, which indicate that Foxconn, the prominent tech manufacturer, has clinched a substantial contract to supply Apple with AI servers, marking a monumental stride into the Apple AI server market. Notably, these servers will be dispatched from Foxconn’s manufacturing facility in Vietnam, positioning it as a pivotal player in Taiwan’s burgeoning AI sector.

While Foxconn traditionally refrains from commenting on individual clients and order specifics, market insiders reveal that Foxconn is not only the foremost assembler of Apple iPhones but also a crucial supplier of data center servers. As Apple charges ahead in the realm of AI applications, necessitating heightened support from AI servers, Foxconn’s stronghold in the AI server market has positioned it as Apple’s preferred collaborator due to its longstanding partnership.

Insiders indicate that Apple’s directive has prompted Foxconn to exclusively ship AI servers to Apple via its subsidiary, Foxconn Industrial Internet (FII), stationed in Vietnam.

Market research firms report that Foxconn currently holds a substantial global server market share of approximately 43%. This prominence not only establishes Foxconn as a manufacturing leader but also as the primary supplier to Amazon, the global cloud services (CSP) frontrunner. Having already supplied AI servers for ChatGPT and NVIDIA, and with primary customer Google rapidly venturing into generative AI, along with Apple’s recent strategic foray, Foxconn is poised for a surge in server business orders.

Apple’s CEO, Tim Cook, recently confirmed Apple’s longstanding involvement in various AI technologies, including generative AI, while emphasizing the current surge of resources into AI development. With Apple’s R&D expenditure rising to $22.61 billion last quarter, experts speculate that a significant portion has been allocated to AI development.

Moreover, international sources report that Apple is discreetly crafting the “Ajax” large-scale language model, potentially heralding the arrival of the generative chatbot “SiriGPT” in the near future. With Apple’s vast user base across the globe, abundant data resources could pose a threat to rivals such as Google and Microsoft.

Industry pundits assert that Apple’s extensive global user feedback from devices like iPhones, iPads, and Macs, combined with the mature ecosystem of the App Store, endows it with a strategic advantage in AI application development. Swiftly advancing AI server and data center deployment could enable Apple to navigate the curve and surge ahead in this competitive race.

Foxconn’s Chairman previously expressed optimism in the growth potential of CSP and AI servers. With Foxconn’s server revenues reaching $1.1 trillion last year, the company’s status as a server manufacturing leader naturally aligns with this burgeoning demand. Industry estimates underscore the dramatic increase in Foxconn’s AI server-related orders, reaching several billion dollars. This positions Foxconn as the definitive victor in the current AI wave, solidifying its place at the forefront of global AI server leadership.

(Source: https://money.udn.com/money/story/5612/7351082)

As we enter the second half of 2023, smartphone brands are eagerly launching their new devices, hoping to revitalize the market that is yet to fully recover. Among them, Samsung stands out with its ambitions to captivate consumers with flagship models while maintaining stability in the mid-to-low-end segment.

However, the Galaxy A and M series, targeting the mid-range to low-end market, have faced lackluster sales. To reverse this trend, Samsung is gearing up to unveil new devices in the coming months, including the highly anticipated Galaxy Fold/Flip5. This foldable flagship is seen as a game-changer that could drive up shipments in the latter part of the year.

The company’s flagship models, which encompass the Galaxy S and Fold/Flip series, account for about 20% of its total shipments. Within this segment, foldable devices contribute approximately 5% to the overall sales.

On the mid-tier front, Samsung is planning to introduce the S23FE series later this year, targeting the mid-range flagship market. Although the S23FE will feature a dual-platform of AP configuration, catering to different regional markets, it will be equipped with older-generation processors. As a result, its potential to significantly boost sales might be limited. According to TrendForce’s estimate, the total production and shipment of the S23FE series are expected to be less than 1.5 million units by the end of 2023.

A comprehensive view of Samsung’s strategy reveals that the second half of 2023 will be driven by the flagship Fold/Flip and FE series. Despite the company’s efforts, the overall performance will still be influenced by the prevailing economic conditions, posing significant challenges.

Notably, the decision to unveil the FE series in the fourth quarter marks a strategic departure from the previous year’s delay of the S21FE until the following year’s first quarter. This move by Samsung demonstrates a strong commitment to address the market gap resulting from the absence of the A7x series mid-range models. By positioning the mid-tier flagship as a compelling marketing point, Samsung aims to entice consumers to upgrade their devices, potentially bolstering the company’s sales and maintaining a robust presence in the highly competitive smartphone market.

As the mass production of the new iPhone draws near, TrendForce, in April this year, raised concerns in the smartphone industry about several design changes made to the 2023 iPhone models almost half a year ahead of production. The industry is closely monitoring whether related components can keep up with the production schedule to ensure smooth execution of subsequent assembly plans. Recently, TrendForce provided updates on the production progress and details of these components.

According to TrendForce’s investigation, two critical components in the iPhone supply chain are causing worries about potential supply issues – the CIS (CMOS Image Sensor) and the titanium alloy frame. Currently, there are still bottlenecks in the production of these components that need to be overcome.

Regarding the CIS, the bottleneck arises from Sony’s supply of the new 48MP CIS, which is expected to be used in iPhone 15 and iPhone 15 Plus. This CIS adopts a new stacked design, separating the CIS photodiodes and peripheral transistors into three layers instead of the previous double-layer structure. This poses a significant challenge to yield rates, and despite Sony’s efforts to increase production capacity to cope with the yield ramp-up difficulties, the supply situation does not meet anticipated levels, affecting the initial production schedule of the entire device.

As for the titanium frame, due to the elimination of the pressure-sensitive button structure and the slight adjustment in the opening for the mute switch, the suppliers need to re-allocate, set up, and verify the basic operating time of the production lines.

Additionally, the processing procedures for titanium are more complicated compared to stainless steel, which leads to longer production lead times. TrendForce confirmed recently that the titanium frame for the new iPhone is currently one of the components with lower yield rates and supply stability. Therefore, suppliers have expanded production capacity by 20-30% and are working diligently to ensure that even if the initial supply is tight during the early stages of production, they can respond accordingly, ensuring that the launch and supply of the entire device will not be affected.

Given the supply constraints of these two components mentioned above, TrendForce believes that Apple may increase the production proportion of the two Pro models in 3Q23 to fill the gap caused by the initial iPhone 15’s production capacity shortage. This adjustment, in an optimistic scenario, will only involve shifting production proportions between different models in two quarters, with no impact on the annual shipment performance. TrendForce assesses that this possibility is more likely under the current circumstances.

However, if the CIS yield bottleneck is difficult to overcome, it could lead to a substantial reduction in the shipment volume of the 2023 iPhone models. TrendForce will continue to monitor the situation closely.

TrendForce’s investigation into the supply chain reveals that Apple plans to upgrade the PCB materials in its new iPhone models in 2024. The current copper-clad laminate (CCL) will be partially replaced with resin-coated copper (RCC), aiming to reduce the size and thickness of the mainboard. This upgrade is expected to enhance electronic signal transmission efficiency, reduce energy consumption, and save internal space, providing more room for increased battery capacity.

Apple first introduced the substrate-like PCB (SLP) with the launch of the iPhone X in 2017. SLP offers advantages over conventional high-density interconnect (HDI) PCBs by reducing line width and spacing, optimizing PCB area, and increasing battery space. This design has remained unchanged since its introduction. However, recent discussions within the supply chain indicate that there are plans to introduce RCC materials in the second half of 2024 for the upcoming iPhones, marking an upgrade after a seven-year gap.

The main difference between RCC and traditional CCL lies in their structure. RCC eliminates one layer of fiberglass cloth, significantly reducing the overall thickness of the PCB. It also simplifies the manufacturing process and improves the laser drilling yield. In terms of component performance, RCC allows for further reduction in line width and spacing of circuit wiring based on SLP, reducing the spacing between various passive and active components on the board. It even enables the embedding of some passive components, thereby saving space required for surface mount technology (SMT) processes. All these upgrades contribute to greater power efficiency and improved performance in end devices.

Considering the similarities between RCC and ABF substrates in terms of the manufacturing process, the most likely supplier for RCC is the Japanese company Ajinomoto. If Apple successfully replaces some layers with RCC in 2024, it may impact the demand for existing CCL, particularly affecting the CCL supplier, Elite Material (EMC). It is anticipated that EMC’s RCC product may require 1-2 more years of research and development before it has a chance to be completed.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com