New | Chip makers and related companies set to benefit from internet connectivity boom, analysts say

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Government-led technology development is expected to boost opportunities alongside growing consumer demand

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Visitors look at a screen displaying a smart city system at the 18th China Beijing International High-Tech Expo in Beijing on May 13, 2015. Photo: EPA

Brendan Clift

Published: 12:24pm, 23 Feb 2016Updated: 10:55am, 25 Feb 2016

The outlook for China’s semiconductor manufacturers and mobile parts makers is beginning to look up, thanks to rising consumer demand and government backing for more internet connectivity in lifestyles, even as a tough competitive environment remains, analysts say.

Mobile phone handset shipments in China rose 5 per cent year-on-year in January to 49.4 million units, according to statistics published by the Ministry of Industry and Information Technology.

Of those, smartphone shipments were up 10.3 per cent to 44.59 million. In December, the monthly net increase in LTE subscribers exceeded 30 million for the first time, reaching 386 million in total.

“It appears that the switchover from 2G/3G to 4G (LTE) has begun to accelerate in earnest,” wrote Nomura analysts in a note last week, forecasting smartphone shipments of 40 to 45 million units per month in 2016 versus 38 million in 2015.

A file photo of The Nest Learning Thermostat in San Francisco from June 17, 2015. Google's Nest Labs is releasing new versions of its surveillance video camera and talking smoke detector as part of its attempt to turn homes into yet another thing that can be controlled and tracked over the Internet. Photo: AP

The benefits of market growth haven’t flowed directly through to smartphone component manufacturers. Jefferies analyst Ken Hui points out that smartphone makers Huawei and Xiaomi have added pressure to an already competitive market with increased insourcing and in-house development.

“We expect in-house development to mostly impact [Taiwan-based] Mediatek, which shipped around 20 million chips to Xiaomi in 2015,” Hui said, citing Xiaomi plans to develop a chip based on technology licensed from Chinese semiconductor maker Leadcore Technology.