• Trump will be throwing tariffs at US imports but that will hit the pockets of Americans. Collateral damage. In contrast, consumers in emerging markets like India and Southeast Asia are enjoying rising disposable incomes, and can be expected to drive an impressive 8% growth in mobile phone shipments, according to DBS Research. • Consumers there are upgrading from feature phones to smartphones. • Meanwhile, the global PC market is heading for a transformation, fueled by the integration of AI capabilities. AI PCs are projected by Boston Consulting to comprise an astounding 80% of the world's PC market by 2028. • Another development is the end of Windows 10 support in Oct 25, ahead of which a wave of business PC replacements to Windows 11 can be expected.  • A PC vendor stock on DBS Research's "buy" list is Hong Kong-listed Lenovo, which is seeking to penetrate the Middle East and Africa market (MEA). It has just announced a strategic partnership with Alat. • Alat. The name may be unfamiliar to many. Alat was formed in Feb 2024 as a company under the Saudi Public Investment Fund. Its objective is to transform Saudi Arabia into a global hub for technology manufacturing focusing on advanced technologies and electronics. • Find out more about DBS Research's picks below. And you don't have to worry about the mad man in the White House ... |
Excerpts from DBS report
Analyst: Jim Au
| Riding the Upgrade Wave in Emerging Markets |
| • Expect emerging markets' 8% y/y mobile phone growth to top other regions’ 3% in 2025, fuelled by wealth-driven phone-to-smartphone shift • Expect smartphone ASP increase of 7% y/y in 2025, echoing China’s 2012-2016 upgrade trend • Windows 11 migration drives business PC refresh cycle, boosting shipments by 7.4% • BUY: Xiaomi (1810) and BYDE (285) to capitalise on emerging market growth, and Lenovo (992) due to PC replacements |
| Wealth effect to accelerate smartphone transition in 2025 |
Strong stock market performance (Dow Jones Southeast Asia Index +24% YTD in 2024 vs. -4.1% average in 2021-23) and rising disposable incomes in emerging markets like India and Southeast Asia are set to boost consumption and accelerate the shift from feature phones to smartphones.
| BYDE | |
| Share price: HK$34.35 | Target: HK$48 |
This transition is expected to drive 8% y/y growth in mobile phone shipments in these markets in 2025, outpacing the 3.1% growth expected in other regions, and accounting for 28.3% of global shipments.
A 7% y/y increase in average selling price (ASP) in emerging Asia, echoing China’s 2012-2016 (7% p.a.) upgrade trend, and rising AI smartphone adoption are projected to lift global smartphone shipment growth to 4.4% y/y in 2025.
| Expect PC OS migration to stimulate a business PC refresh |
PC replacement in 2025 will be led by commercial demand, driven by Windows 11 migration.
| Lenovo | |
| Share price: HK$9.11 | Target: HK$12.70 |
The end of Windows 10 support in Oct 25 is expected to trigger a peak in the business PC refresh cycle during 1H25.
With Windows 10 commanding 71.9% of the global operating system (OS) market in 2023 and Windows 11 requiring at least an Intel 8th Gen central processing unit (CPU), businesses are under pressure to upgrade.
This will drive the replacement of a large share of the 299mn PCs shipped in 2018- 2019.
Combined with the launch of AI PCs powered by X86- based AI CPUs, PC shipments are projected to grow 7.4% in 2025.
| Prefer vendors with higher exposure to emerging markets |
Xiaomi, commanding a significant share of the smartphone market in India (16.7%) and Southeast Asia (15.5%), is well positioned to capitalise on faster-than-industry growth in shipments and ASP increases in these regions.
| Xiaomi | |
| Share price: HK$28.40 | Target: HK$36 |
BYDE is expected to continue benefitting from supplying chassis for AI-driven upgrades in the iPhone 17, with Apple leading the AI smartphone trend and expanding its sales in emerging markets.
Lenovo is also set to gain from accelerating PC replacements, supported by its strong commercial PC market share.
We maintain BUY on the stocks and raise Xiaomi’s TP to HKD36.0.
Its broad product portfolio, from Redmi (low-tier) to POCO (mid-tier) and Mix/Fold (high-tier), caters to diverse consumer segments.
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Full report here.
