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ANALYSIS

Move to metal casings for smartphones to benefit BYD Electronic, Ju Teng

Chinese smartphone brands tipped to follow Apple, aiding firms such as BYD and Ju Teng

PUBLISHED : Tuesday, 15 April, 2014, 11:45am
UPDATED : Monday, 21 April, 2014, 6:45pm

Since Apple introduced an aluminium unibody design on the iPhone in 2012, few smartphone brands have followed suit by introducing metal casings for their flagship devices.

Analysts, however, predict a big transition this year. Many Chinese smartphone brands are expected to use metal casings to improve product design as competition intensifies on the mainland, the world's largest smartphone market, and overseas because of expanding adoption of 4G mobile network services.

"Using metal casings is a way for smartphone vendors to differentiate their premium and mid-priced models against stiff competition from a wide range of cheaper handsets that use plastic casings," Susanna Chui, an analyst at Cinda International, told the South China Morning Post.

"We expect to see rising metal adoption for non-Apple smartphone brands."

As a result, leading Hong Kong-listed casing providers BYD Electronic and Ju Teng International were poised to grow their share of the global smartphone metal casings market against the larger Taiwan-based companies that supply to Apple, Chui said.

She said leading Chinese brands such as Lenovo, Huawei Technologies, ZTE, Oppo Electronics and TCL were set to release new high-end and mid-market 4G smartphone models with metal or hybrid metal-and-plastic casings this year.

A Macquarie Securities research note said the shift to metal casings had been slow because they cost more than plastic, and falling smartphone prices were squeezing the margins of handset makers.

The advantages provided by metal are thinner and lighter smartphone design and sturdier support for big screens.

Foxconn Technology, a listed unit of electronics contract manufacturing giant Hon Hai Precision Industry, and Catcher Technology are the leading suppliers of smartphone metal cases because of their ties with Apple, which uses single-moulded aluminium casings on its iPhone, iPad, iPod touch and MacBook products.

Chui estimated that about 15 per cent of the one billion smartphones shipped worldwide last year had metal casings. That segment was mostly made up of Apple's iPhone 5 and 5s models, while the rest included premium models from HTC, Sony, Lenovo and BlackBerry.

Research firm IDC forecast global smartphone shipments this year to total 1.2 billion units. Huawei estimated up to 200 million 4G smartphones could be sold on the mainland this year.

Shenzhen-based handset components supplier BYD Electronic, which was spun off in 2007 by Hong Kong-traded battery and electric car maker BYD, raised its profile last year after it won about 50 per cent of the metal casing allocation for the HTC One, trumping former main supplier Catcher.

"We expect BYD Electronic's metal and plastic-metal hybrid casing business to grow 100 per cent this year," Chui said.

The firm, which also counts Lenovo and Huawei as customers, posted 16 billion yuan (HK$20 billion) in revenue last year, with metal casings estimated as 28 per cent of its total product mix, as against 10 per cent in 2012.

In a report, EBS International analyst Kary Sei said Ju Teng, the world's largest plastic casings supplier for laptops, said new orders from smartphone makers were boosting revenue growth. It reported HK$9.26 billion in revenue last year, bolstered by high profit margins from its metal and composite material casings business segment.

Macquarie expected Ju Teng, which is a supplier to Motorola Mobility, to meet growing demand for both metal and composite material casings through its recent production site expansion on the mainland.

However, Macquarie indicated that BYD Electronic and Ju Teng still lagged behind their Taiwanese peers in the number of computer numerical control (CNC) machines used to produce metal casings.

As of last month, Catcher had about 18,000 CNC machines and Foxconn about 16,000. BYD Electronic had about 4,000 machines, while Ju Teng had 3,000.

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