"Apple consistently introduces 'new concepts,' and its share price hits new highs concurrently."

Source: US Stock Research Society

During Tuesday's trading, TSMC's share price soared to a new high, marking an over 82% increase year-to-date. This makes the world's largest contract chip manufacturer poised for its best annual share price performance in 25 years.

With a customer list that includes Apple and AMD, TSMC stands as a primary beneficiary of the surge in AI spending. The company is anticipated to report a 36% increase in sales and a gross margin of 58.3% in the December quarter, the highest level since 2022.

Kevin Net, Asia Equity Head at Financiere de L'Echiquier, commented, "For us, TSMC remains the optimal way to participate in the AI theme at a reasonable valuation without having to select winners or technologies." Meanwhile, the next notable catalyst to watch will be NVIDIA's keynote at CES 2025 next month, along with TSMC's upcoming earnings and guidance.

Apple set a new all-time high for the third consecutive day, with a market capitalization exceeding USD 3.9 trillion. It is anticipated to launch the M4 MacBook Air earlier than expected, in early 2025.

Apple Frequently Introduces 'New Concepts'

Share Price Hits New Highs Concurrently

Reports indicate that Apple has requested Samsung Display and LG to develop borderless OLED screens. Initially, Apple planned to introduce iPhone models with such screens in 2026, but the borderless OLED technology currently faces challenges.

According to reports, Apple aims for a borderless display effect but avoids adopting Samsung's curved or waterfall screen design due to inherent display deficiencies. Instead, Apple envisions a display akin to the Apple Watch, featuring a smooth transition under light refraction, resembling a pebble in a stream.

To realize this vision, Samsung and LG are developing TFE technology to protect OLED from moisture and oxygen. Concurrently, the OLED's edge circuits need to be bent under the screen to accommodate antennas and address complex issues such as signals, reliability, and waterproofing.

Apple originally hoped to introduce at least one borderless design model in the iPhone 18 series in 2026, but technical challenges may hinder this. Additionally, Apple plans to eliminate the Dynamic Island design in 2026, retaining only a camera cutout and hiding Face ID under the screen.

Notably, with the introduction of AI technology, Apple is redefining the concept of edge-side AI. The Chinese market is expected to witness rapid expansion of Apple's AI products, reflecting both technological progress and strong market demand.

Driven by AI technology, Apple's hardware products will undergo revolutionary changes, with potential new product projects to be launched in 2026, further demonstrating the tremendous potential of the consumer electronics market.

Market data shows that Apple's iPhone shipments grew steadily in 24Q3, albeit at a slower pace than Q2, but overall performance remained robust. Meanwhile, PC shipments are anticipated to reach 66.4 million units in 2024Q3, a year-on-year increase of 1.3%, enhancing market confidence in consumer electronics.

Furthermore, Jiangsu Province's digital product subsidy campaign has garnered widespread attention and positive market feedback. Experts believe it will effectively stimulate consumption, boost consumers' willingness to purchase electronic products, and drive overall demand.

Inventory Adjustments in the Electronics Industry are Underway

Consumer Electronics Demand Recovers

Under the influence of continuously deepening policy guidance in the semiconductor industry, signs of market recovery are emerging. Global semiconductor sales have increased month-on-month for six consecutive months, surpassing the historical high in December 2021.

With this trend, the design sector also faces significant opportunities. The proliferation of AI applications will drive large-scale technological upgrades, aiding the industry's recovery.

Meanwhile, inventory adjustments in the electronics industry are gradually taking shape, and overall demand is showing signs of recovery.

In particular, driven by AI hardware innovations, consumer electronics demand is expected to lead the recovery. Huawei's return has further bolstered overall smartphone demand, making the fourth-quarter peak season for consumer electronics highly anticipated.

Benefiting from increased demand during the peak season for consumer electronics and the release of new terminal products, ODM manufacturers witnessed a significant improvement in overall revenue in 24Q3 compared to the previous quarter and year. Luxshare Precision's revenue grew steadily, primarily due to increased demand during the peak season for consumer electronics, robust growth in traditional products, and new growth from acquisitions.

Huaqin Technology's revenue also achieved high growth both year-on-year and quarter-on-quarter in Q3, primarily due to upward resonance across multiple business lines. Additionally, smartphones and wearable devices maintained good growth momentum.

WTD's net profit in 24Q3 turned around from a loss to a profit quarter-on-quarter, primarily due to a significant reduction in net losses from its product integration business. Longcheer Technology's revenue nearly doubled year-on-year in 24Q3, mainly due to continuous growth across all business segments.

GoerTek's revenue also grew steadily in 24Q3, primarily driven by new product launches from AR/VR major customers and Customer A.

With the deepening application of AI technology in mobile devices and the launch of Apple's 'next-generation productivity tool,' Vision Pro, the consumer electronics industry is gradually embracing recovery.

Wang Fang, Deputy Director of the ZT Securities Research Institute and Chief Analyst of the Electronics Sector, is optimistic about the development of the consumer electronics industry in 2024. She believes that new stimuli like AI technology could spur consumers' demand for new phones.

Concurrently, chip, storage, and cooling manufacturers will also benefit from the integration of AI in mobile phones. From the perspective of the XR industry, the launch of Apple's Vision Pro will significantly drive the industry, creating substantial opportunities for hardware like screens and software applications.

The Second Half of Consumer Electronics Recovery

AI Technology as a Powerful Engine

This year has seen a steady recovery in the consumer electronics industry, with AI terminal innovations adding new vitality to the market and driving continuous growth in related companies' performance. Taking Lenovo Group, a leading player in consumer electronics in Hong Kong stocks, as an example, its outstanding performance in AI PCs and high-end intelligent terminals directly reflects new industry trends.

The consumer electronics terminal industry is typically innovation-driven, and the introduction of new technologies often triggers industry changes and creates new market demands.

Currently, the wave of AI technological innovation is sweeping through the intelligent terminal industry, accelerating the evolution and upgrade of AI capabilities. Lenovo Group, as a leading player in consumer electronics, has keenly captured this trend, actively utilizing AI to reshape its intelligent terminal business and deeply embedding AI in its terminals.

Bank of China Securities points out that the smartphone market is about to enter a period of intensive launches of SoCs, OS, large models, and new types of phones. According to its statistics, the trend of edge-side AI is driving the upgrade of smartphone software and hardware, which is expected to boost sales and inject new growth momentum into consumer electronics companies primarily in the smartphone supply chain.

IDC's quarterly mobile phone tracking report predicts that global smartphone shipments will increase by 4.0% year-on-year in 2024, reaching 1.21 billion units. The gradual recovery of consumer demand provides strong support for market growth in 2024.

By 2025, the market is expected to continue recovering with a growth rate of 2.3%. For the remainder of the forecast period, the market is anticipated to maintain low single-digit growth, with a five-year compound annual growth rate of 2.3%.

In addition, data for the first quarter of 2024 shows that global smartphone shipments increased by 7.8% year-on-year to 289.4 million units. This marks the third consecutive quarter of growth in global smartphone shipments, providing strong evidence of market recovery.

Huafu Securities analysis indicates that the consumer electronics industry is at a triple turning point of short-term stabilization and recovery, AI-driven innovation cycles, and frequent launches of new products by industry giants. AI will take the lead in being applied to mature consumer electronics products such as mobile phones, driving both volume and price increases.

Meanwhile, AI will accelerate the exploration of new hardware forms. AIoT products such as AR/VR and smartwatches are expected to explore new application scenarios empowered by AR technology.

Central China Securities also notes that smartphones will usher in a new era of AI, benefiting from the empowerment of large AI models. The integration of AI technology into smartphones dates back to 2017 when Android vendors began incorporating independent AI computing units into their SoC platforms.

Subsequently, AI technology was gradually applied by mobile phone manufacturers in more areas such as security enhancement, battery life optimization, and network performance improvement. It was not until large models were integrated into smartphones that mobile AI applications transitioned from the era of small and medium-sized models to the era of large models.

At the human-computer interaction level, new multimodal interactions will replace traditional touchscreen interactions. Users can communicate with their phones more naturally, and the combination of multimodal input and output capabilities can significantly enhance the productivity tool attributes of smartphones.

Central China Securities further points out that generative AI will become an important strategy for smartphone manufacturers in 2024. Industry leaders are spearheading the development of AI technology. For example, Samsung has released the new Galaxy S24 smartphone and established generative AI as a long-term product strategy. Meanwhile, Chinese vendors such as Xiaomi, vivo, OPPO, and Honor have also launched flagship models with generative AI capabilities.

Global major vendors like Apple, Google, and Samsung, along with leading Chinese vendors such as Honor, OPPO, Xiaomi, and vivo, are actively integrating generative AI capabilities into their devices. Their strategies vary, ranging from developing dedicated AI chips to enhancing ecosystem integration utilizing AI to improve user experience.