3M 2021 financial data from 157 sample downstream (components/EMS/IPC/auto) companies showed: (1) strong revenue growth (+30% YoY) and stronger operating profit growth YoY (+85%) on an easy comparison base (COVID-19 outbreak in 1Q20); (2) capex (+47%) outgrowing labour costs (+21%), given accelerating investments in non-China operations, smart manufacturing, and M&A; (3) different inventory patterns, with components inventory increase mainly from raw materials (+30%, likely in preparation for raw material cost inflation), EMS/IPC increase mainly from finished goods 

(+42%/+15%, vs. revenue +30%/+6%, respectively);   

(4) PC/NB outperforming handsets (components) in terms of revenue growth & OPM, as the latter suffered from Huawei impact and pricing pressure; (5) only battery pack, substrates and auto saw QoQ GM expansion; (6) power supply & PCB at record-high capex-to-sales ratio; (7) EMS' performance divergence reflecting respective exposure to iPhone 12 model and CSP, and subsidiaries’ performance; (8) IPC relatively underperformed EMS, including smaller growth in revenue and operating profits, higher capex and labour intensity, and higher inventory days; (9) continued growth acceleration and stable inventory days in auto, reflecting customers’ strong restocking.   

Stock calls. The set of data supports continued strength in auto and substrates but mixed on PC/NB (margin down from peak). iPhone supply chain’s momentum is expected to improve from June on 1-2 weeks earlier ramp (vs 3-5 weeks of delay in iPhone 12). We still like Delta (5G/EV), LOT (data centre), Hulane (auto tech), and Largan (bottoming out). The industry’s record-high capex, emerging redesign activities (in BT substrates), and valuation at peak level keep us sideways on ABF substrates, with Unimicron as our relative pick.