Michael Ching on wireless equipment industry
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Wireless Equipment Industry Overview
—April 16, 2001
Merrill Lynch Semiconductor Analyst Michael Ching provided the following analysis on the wireless equipment industry:
We are entering into a transition period for the wireless equipment industry in both wireless devices and wireless infrastructure. Slowing subscriber growth and a weak replacement market are impacting wireless device sales. Infrastructure sales have been relatively steady, but will ultimately be impacted by slower subscriber growth. While we remain long-term believers in the promise of mobile data, we do not believe the market will materialize as rapidly as hoped.
Global Handset Forecast: We recently lowered our global handset forecast for 2001 and 2002. The issue for this year will be new subscriber additions and the rate of replacement. Based on input from our wireless services analysts, we believe the sell-through for mobile phones will be 450 million to 475 million, compared to 410 million phones sold last year. High levels of channel inventory could further exacerbate shipments by handset manufacturers. As a result of our lower global handset forecast, we believe that production adjustments are also needed and, in some cases, are ongoing.
Mobile Data: In the non-Japanese environment, we are still some way from creating an ecosystem that enables real value creation for mobile data services. Specifically, the third-generation (3G) wireless network buildout will not, in our opinion, occur in volume until 2004. Moreover, total 3G capital expenditures may be lower than expected due to high license costs, consolidation and network sharing. We have reduced our total 3G capex outlook from an estimated $200 billion to $150 billion.
Infrastructure Vendors: We continue to believe in the displacement of voice traffic from fixed to the mobile space, especially in the non-U.S. environment. However, we believe that I-mode success (in Japan) cannot be translated to the European and international arena as it has been built on a unique value chain that is far from constructed internationally. |
