7-19 #AgingIsABlessing: Driving the ASML’s sales growth is EUV lithography equipment; Huawei plans to spend about GBP10M to open 3 stores in London and Manchester; etc.

Driving the ASML’s sales growth is EUV lithography equipment. As semiconductor micro-fabrication processes have recently advanced to the 5nm level, it is essential for foundry companies to secure EUV equipment worth KRW200B per unit. It is impossible to upgrade the level of micro-fabrication processes below the 7nm level with the current ArF exposure equipment. This has led major foundry companies such as GlobalFoundries to give up the EUV-based semiconductor market due to cost burdens. Currently, only Samsung Electronics and TSMC are introducing EUV equipment to their foundry lines.  (CN Beta, Business Korea)

TSMC has 5 12” fabs (Fab 12, 14, 15, 16, 18), 7 8” fabs (Fab3, 5, 6, 8, 10 and SSMC), and 1 6” fab (Fab2). The new 5nm process plant under construction in Tainan Science Park and the planned 3nm new plant are expected to be mass-produced in 2020 and 2022, respectively. In 2019, TSMC and its subsidiaries own and manage annual production capacity of more than 12M 12” wafers. (Guoyuan Securities report)

Advanced technology (less than or equal to 28nm) capacity accounts for 22% of the global total capacity. Among them, the process technology of nodes below 10nm accounts for 5%, and in 2019 it accounts for 5% of global production capacity; 12-20nm accounts for 7% of global production capacity in 2019. Advanced technology production capacity is completely owned and controlled by the leader companies (Samsung, SK Hynix, Intel and TSMC). In the field of 28-65nm technology, Taiwan has the largest share of production capacity. (Guoyuan Securities report)

As the largest market for NAND flash memory, the smartphone market will continue to decline in 2020. Apple, Samsung and Huawei’s smartphone businesses have all been under pressure. The flash memory market has also fallen, and prices have fallen by 20% in the past 3 months, and continue to fall by 8% in the past 1 month. Nearly 1.5B smartphones annually is the largest driver of NAND flash growth. Currently the storage capacity of mobile phones is 64-128GB, and 256GB and 512GB are not uncommon.  (My Drivers, CN Beta)

UBS Evidence Lab surveyed 1,000 WeChat Pay and Alipay users in April 2020. The percentage of daily active usage of facial-recognition payment is in the single digits, but weekly penetration is relatively high. They believe this sets a solid foundation for upside. Convenience is the main reason for using the feature, according to the respondents, underscoring the objectives of the operators. Concerns over privacy and security as well as the immaturity of the technology are among factors potentially handicapping the broader acceptance of facial recognition payments. (UBS report)

Ericsson has increased estimate for the number of 5G subscriptions, and now forecast about 190M by the end of 2020. This is mainly due to a faster uptake in China than previously expected. For other parts of the world, slight downward adjustments have been made due to the effects of the pandemic. By the end of 2025, Ericsson forecasts 2.8B 5G subscriptions globally, accounting for around 30% of all mobile subscriptions at that time. (Ericsson Mobility Report)

Global total mobile data traffic reached around 33EB per month by the end of 2019, and is projected to grow by a factor close to 5 to reach 164EB per month in 2025. This figure represents the mobile data that will be consumed by over 6B people using smartphones, laptops and a multitude of new devices at that time. (Ericsson Mobility Report)

Huawei plans to spend about GBP10M to open 3 stores in London and Manchester. It will also open the first batch of private label shops on High Street in the UK. Huawei stated that it will create more than 100 jobs in the region.  (GizChina, IT Home, CN Beta)

In all 11 waves of the survey over the past 5 years, Chinese consumers have exhibited a stronger desire to upgrade than the US, the UK, Germany and Japan. In UBS’ latest survey, 62% of Chinese respondents expressed an intention to change handsets within the coming year, dropping from 67% one year ago, but still a wide margin above the global average of 40%. Chinese consumers tend to use their handsets for a shorter period of time before upgrading. (UBS report)

Despite the uncertainty caused by the COVID-19 crisis, the 5G device ecosystem is continuing to expand, as both standalone (SA) and non‑standalone (NSA) networks are rolled out and new frequency bands are utilized: 1) over 100 commercial 5G device models; 2) increasing support for mmWave frequency bands; 3) fixed wireless terminals (FWT), modules and connected PCs gaining traction; 4) an additional chipset player in the commercial 5G ecosystem; and 5) retail prices of 5G devices as low as USD300–400 expected in 2H20, reaching mid- to low‑tier segments. (Ericsson Mobility Report)

A total of around 410M additional smartphone users are expected in India by 2025. Even if the traffic per existing smartphone user continues to grow significantly over time, the increase in average traffic per smartphone is expected to moderate as more consumers in India acquire smartphones. The average traffic per smartphone is expected to increase to around 25GB per month in 2025. (Ericsson Mobility Report)

UBS believes UnionPay already has a solid presence across a number of government-backed settings including public transit, hospitals, schools and government services. However, they believe usage of the QR code by offline merchants is limited, despite good traction in recent years, due to Ant and Tencent’s market-leading positions. The unified QR code could allow UnionPay to gain a sizeable market share given that CloudPay is backed by all the major banks in China and payment security would therefore not be a major concern for users. (UBS report)

There has been increasing evidence of unified QR penetration since the start of 2020 and the COVID-19 outbreak appears to have had little impact on the rollout. This suggests that the regulators remain focused on making the unified QR code a reality in 2021. (UBS report)

China’s video live streaming driven e-commerce gross merchandise volume (GMV) in 2019 exceeded CNY450B, c.4% of the total online shopping GMV, and is expected to grow at a CAGR of c.85% to reach CNY2.9T in 2022 according to iResearch, representing c.16% of the total eCom GMV. Barclays views e-commerce companies, including Alibaba, JD and PinDuoDuo, and short video companies, such as ByteDance and Kuaishou, as the major beneficiaries of the market tailwind. (Barclays report)

After almost two decades, we are starting to see relative stability in the competitive dynamics of both the upstreaming (user traffics) and down streaming (fulfilment services) of the e-commerce market. On the user acquisition side, instant messaging, video (long and short) and media platforms share the top layer of the traffic funnel, while e-commerce companies, such as Alibaba and JD, dominate and consolidate the logistics and delivery markets. As a result, all these companies are exploring measures to enhance the from-traffic-to-transaction conversion rates, and have coincidently selected video live streaming as the critical element. (Barclays report)

Barclays views live streaming as the most effective tool to improve the user understanding of these products, as they organize promotions and help users make purchasing decisions. (Barclays report)

Short video apps have 3 main ways of monetizing e-commerce related traffic. Barclays uses Douyin as an example of how traffic originating from short video apps can: 1) Generate traffic to non-Taobao merchants’ stores outside of the app, which could be Weixin stores or the seller’s own website for example; 2) Generate traffic to eCom partners, such as Taobao and JD.com; and, 3) Generate traffic to merchants which directly open stores on Douyin. (Barclays report)

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