'Foldable Stocks' Gaining Attention in the Market Crash

Increase in Device Shipments
More Adoption by Chinese Manufacturers Next Year

[Asia Economy Reporter Kwon Jaehee] As the KOSPI index forms another low point due to macroeconomic risks and stock prices continue to fall relentlessly, the 'foldable' sector has been highlighted as one to watch. Despite the slowdown in IT consumption this year, the shipment volume of foldable devices is expected to increase, and from next year, manufacturers in the Greater China region are known to expand their adoption of foldable technology. Accordingly, expectations for the performance of companies with over 50% exposure to foldable technology are rising this year.

On the 17th, Shinhan Financial Investment issued an overweight rating particularly on the 'foldable' sector within the IT components and electrical electronics sectors. Currently, in the IT field, due to the base effect from COVID-19, there are clear concerns about demand peak-out for smartphones, laptops, and home appliances, with foldable devices being the only momentum driver. Samsung Electronics’ foldable smartphone shipments have shown remarkable growth despite being high-end products, increasing from 370,000 units in 2019 to 2.1 million in 2020, 7.3 million in 2021, and 12.5 million units this year. Foldables are a market growing over 100% annually, and besides Samsung Electronics, last year Huawei, Oppo, Xiaomi, and Motorola also entered the foldable market. This year, more manufacturers such as Vivo, Honor, and TCL plan to launch foldable products, and the performance trends of foldable-related stocks are expected to accelerate from the second half of this year.

Consequently, foldable-related stocks are also gaining attention. Among the foldable-related stocks responsible for Samsung Electronics’ key foldable supply chain are Fine Technix, KH Vatec, BH, Interflex, and BH again. Among these, Fine Technix is expected to have over 80% of its profits this year derived from foldable products. Fine Technix supplies the metal plate, a core component of foldable technology, which is the second most stable supply price segment after panels among foldable parts. Demand is also expanding into the Greater China region, and diversification of foldable-related products is anticipated. KH Vatec and Interflex are also considered foldable-related stocks; unlike Fine Technix, they face relatively limited customer diversification but are expected to benefit from high operating profit margins, providing a leverage effect on performance.

Researcher Park Hyungwoo of Shinhan Financial Investment stated, "While demand peak-out for IT devices is evident after COVID-19, foldable demand is showing differentiated performance in this environment. We need to watch not only this year’s foldable shipment volume but also 2023 and 2024. From the second half of this year, the earnings improvement of foldable-related companies will continue," he analyzed.