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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (8417)	2/4/2003 8:49:28 AM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 95761

CSFB is looking for strong growth in the wireless handset market Pricing, Not Units, is the Problem •Units Strong, Pricing Weak. In this report we provide our quarterly update the wireless handset market. We believe there were 133M phones sold into the channel in Q4:02, with ASPs down 2.5%. This compares to our estimate of 125M units with flattish ASPs. •Vendors Still Underestimating. Although a few market research firms have come in-line with our views on the industry, MOT ($8, N, TP $7) and NOK ($14.40, O, TP $19.50) continue to estimate lower industry units. NOK implied 118M units and MOT estimates sell-through of 115M for Q4:02. •Slight Channel Build. Although we are continually updating our sell-through analysis, we estimate a channel build of ~5M phones in the quarter, meaning sell-through was up 15% sequentially. We believe the channel had an excess of 6-8M units as of the end of 2002, which represents one extra week of supply. •Asian Share up big in 2002. We estimate that Asian brands lost four points of share in Q4:01. NOK, MOT, Siemens (Siegn.de, eu38, N, Tpeu46), and Sony (6758, ¥4,800, O, TP¥5,500)/Ericsson (ERICY, $8.13, U, TP $5.3) all gained share sequentially, while Samsung (05930.ks, W293K, O, TP W472) and several other Asian brands lost. For the full year, Asian brands gained five points of share to reach 32%, better than the two-point gain recorded in 2001. •Raising units. We believe there were 450M handsets sold into the carrier channels in 2002, up 14% from 2001, driven by new subs and replacements. Based on a slightly better replacement rate, we are raising our unit ests. for 2003/2004/2005 from 465M/495M/525M to 485M/525M/565M. We are establishing ests. of 605M in 2006 and 645M in 2007. This reflects long-term growth of 7.5%. •More Cautious ASP Outlook. We estimate that average selling prices declined by 2.5% sequentially in Q4:02, and by about 5% for the full year. We do not believe new technologies like color and camera will be enough to offset the move towards emerging markets, increased competition, and lack of a killer app. We expect at least 5% annual ASP degradation over the next few years. •Maintain Industry Underweight; Models Unaffected. We remain cautious on the wireless equipment universe given our concerns about pricing pressures, slower unit growth, and competitive forces from Asia. We are not making any changes to our MOT, QCOM ($37.34, N, TP $40), NOK or ERICY ratings, models, or price targets.