2021-22 estimates intact looking past a slower 2Q. We maintain smartphone units growing +8.7%/+4.4% to 1.39 bn/1.45 bn in CY21/22 netting a stronger 1Q21 and weaker 2Q21 with a potential 2H21 pick-up from easing Asian COVID-19 restrictions, normalising China from low 2Q base, and re-opening in US/Europe which shifts screen time from PCs/laptops toward mobile devices and could refresh to capture more experiences. 

5G maintained at 551/706mn units. We maintain 5G units growing from 255mn in 2020 to 551mn/707mn in 2021/22 and 1.3 bn by 2025. 5G in 1Q21 paced above our estimate at 125 mn vs prior 110 mn, driven by China, as MIIT reported 80% of devices built as 5G.  The rest of world stayed on track with 58 mn units. We allow for a 12% QoQ pullback in 2Q21 from the China slowdown and COVID-19 outbreaks before rebounding in 2H21. 

Mix lifting the industry and chipset revenue opportunity. We project smartphone revenue could grow 17% YoY in 2021 as units and ASPs may both increase 9% YoY supported by proliferation of 5G at higher pricing and mix up at the vendors. Mediatek is penetrating higher value smartphones, with its customers’ device ASP rising from US$110 in 1Q15 to US$170 in 1Q21. It has further potential with mmWave and tapping the 40mn non-Apple units in US/Europe where ASPs are US$600 vs $450 in China and $250 in EM. 

Stock calls. We continue to see cloud computing, 5G and automotive electronics as preferred investment themes in tech and could see rebounding smartphones in 2H21 with reopening following the 2Q21 correction with on-going 5G upgrades driving a rebound to stocks with good position and exposure. Figure 7 lists key stocks for the theme, including top picks Mediatek, ASE, Largan, VPEC, SEMCO, Sunny Optical and Luxshare.