As AI continues to advance, the appetite for related hardware products remains insatiable. Recently, alongside AI servers and AI PCs, the market has been abuzz with discussions about the upcoming wave of "AI smartphones" expected from major manufacturers in the latter half of the year.
At a recent briefing, Largan Precision Chairman and CEO Adam Lin shared his outlook on high-end device sales, quoting customers who noted that "no one is optimistic." Despite this bleak view, Lin's comments contrast with his early 2023 remarks, which indicated a clear recovery in smartphone sales driven by a cyclical upgrade trend.
PCB supply chain insiders highlight that strong sales of flagship models have been a consistent trend over the past three years. With Apple's iPhone entering its peak shipment season, and the iPhone 16 series rumored to feature the A18 chip as Apple's first AI-integrated smartphone, expectations for a sales surge are high.
Long-time Apple PCB suppliers note that the current iPhone upgrade cycle spans 40 to 50 months, with the last major cycle coinciding with the iPhone 11. They predict that 2024 will see a significant upgrade demand fueled by AI innovations and cyclical factors. However, concrete sales growth data might not be evident until mid-September, following the product launch event.
During Largan Precision's Q422 earnings call, the smartphone industry was in a slump. Lin noted then that "market conditions were universally pessimistic." The 2023 consumer electronics market remained sluggish, with smartphones being the first consumer products to reflect economic downturns.
With AI driving the industry's momentum, Lin remains cautious about the sales outlook for the second half of 2024, citing feedback from brand manufacturers. Nevertheless, he acknowledges that AI smartphones are expected to perform relatively well.
Despite the near-saturation of the smartphone market, Lin previously emphasized at a shareholder meeting that Largan would continue to invest in the development of smartphone camera lenses. The company plans to expand its R&D team, broaden product ranges, and enhance product quality and quantity.
Lin confirmed a significant increase in demand for periscope lenses, though this surge has yet to be reflected in revenue. Addressing the buzz around foldable phones, Lin pointed out that while these devices typically feature fewer cameras, their ultra-thin design increases complexity.
Semiconductor and PCB supply chains widely believe the smartphone market has significantly rebounded, with Taiwanese companies expected to benefit substantially. The global inflation of 2023 severely cooled consumer markets, impacting demand for substrates. This downturn affected both BT substrates used in smartphones and memory, as well as ABF substrates for CPUs and GPUs.
The iPhone 16 series is anticipated to bring significant innovations, such as periscope lenses and enhanced AI integration. Combined with the upgrade cycle, sales are projected to grow by 5-10% year-over-year. Lin consistently highlights that end-consumer demand is the key factor.
Industry experts recall that Apple's first-quarter performance in 2024 was hit by declining sales in the Chinese market, with production dropping to 47.9 million units compared to the same period in 2023. Corresponding supply chain adjustments were made, although processor chip production plans remained unchanged. The market expects a roughly 10% quarterly production decline during Apple's product iteration gap in the second quarter of 2024.
Looking ahead, global smartphone sales growth is expected to resume from 2025 as consumers in most countries gradually adapt to high inflation and the appreciated dollar. Emerging market users transitioning from feature phones to smartphones and the continuous expansion of 5G networks in mature markets like the US, Japan, Western Europe, and China will further drive the 5G upgrade cycle. Annual shipment growth rates are projected at 4-8%, with a compound annual growth rate (CAGR) of 5-6%.
