Research

Preview: A Look at the China Handset Market and Telco Spend with Huawei

Vijay Rakesh
Senior Equity Research Analyst, Semiconductors
March 28, 2016

MIZUHO SECURITIES USA INC.  |  US EQUITY RESEARCH

Summary

We are hosting a call with Huawei. Huawei is a key leader in the China Telco switch and router market with almost 80% share, and in the global carrier Telco market with 20-30% share. Huawei is also the fastest growing, and we believe the largest handset OEM in China in 2016; world-wide, Huawei is the #3 handset OEM. We expect to hear Huawei's thoughts on carrier, base station and datacenter spending, trends in China handsets, 4G growth, and how Huawei is differentiating its handsets versus its peers and gaining share.

Key Points

Some key trends we expect to focus on during the call include:

Handset Outlook; China is slowing but Huawei expects 25-30% y/y handset growth in 2016. With 4G now 90%+ of handset shipments in China, the broader China handset market could see a slowdown. But Huawei expects its handset units to grow 25-30% y/y into 2016. Some of the China handset OEMs could also see muted growth as their handset shipments are restricted into the U.S. We will be looking at Huawei's confidence in its 2016 handset growth outlook, carrier aggregation and what sets it apart from the other handset OEMs.

Huawei's handset processor trends with Hi-Silicon. Huawei is a standout in the handset market. While most handset OEMs depend on the Snapdragon or Mediatek, Huawei uses Hi-Silicon processors for much of its handsets. We expect to get more color on Huawei's trends with Hi-Silicon processor adoption in 2015 and into 2016, versus the Snapdragon and Mediatek processor offerings.

A look at the carrier telco, data center market and trends. Huawei is also a big player in the China carrier and telecom equipment market. With China focusing on growing its domestic technology capabilities and focusing on using more domestic content, a key beneficiary has been Huawei. We believe Huawei has also been able to bring strong R&D capabilities, and is less encumbered versus its public carrier telecom peers. Huawei, we believe, has almost 70-80% share of the China carrier telecom market and also a key competitor in the global wireless infrastructure market with Cisco and Juniper, among others. We expect to get some color on 4G data center rollouts, China 4G carrier spending and market share trends with Huawei, key for suppliers such as AVGO and INTC.

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