The Pacific Securities: Foldable screens driving continuous innovation, future potential growth in the supply chain.

Pacific Securities released a research report stating that foldable screens are becoming a key direction for hardware innovation in smartphones. Chinese manufacturers have good prospects in the global foldable screen smartphone market, and the mature industry chain brings investment opportunities, but also requires attention to related risks. Key companies mentioned include Avary Holding (002938.SZ), Luxshare Precision Industry (002475.SZ), and Shenzhen Everwin Precision Technology (300115.SZ). Key viewpoints from Pacific Securities are as follows: Foldable Screens: The Next Frontier for Smartphones As top brands release or plan to release foldable screen smartphones, the focus of hardware innovation (especially for mid-to-high-range models) is gradually shifting towards foldable screens. Chinese manufacturers are expected to maintain the largest market share of foldable screen smartphones globally. According to IDC forecasts, the shipments of foldable screen smartphones in China are expected to grow at a CAGR of up to 19.8% in the next 5 years. In terms of product innovation and specific models, domestic phone manufacturers are more actively positioning themselves. According to Counterpoint statistics, in Q1 2024, Huawei surpassed Samsung for the first time, becoming the top global quarterly smartphone shipment. According to statistics from the iResearch Consumer Research Institute, Huawei's Mate X5, Mate X3, Pocket S; OPPO Find N2 Flip; and Honor Magic V2 are the top 5 foldable screen smartphones in terms of sales in the Chinese market in 2023, with Huawei taking the top three spots. Overseas brands are expected to introduce or continue iterating foldable screen models to enhance their product competitiveness. The foldable screen smartphone industry chain is maturing, with the greatest benefit to added components The BOM (Bill of Materials) for foldable screen smartphones has significantly increased, with noticeable increments in key components. Taking Samsung Galaxy Fold1 and Galaxy S9+ as examples, the total cost increased by nearly 70% compared to non-foldable smartphones. Due to the significant changes in physical appearance, the display module, mechanical/electrical structural components, and battery BOM values see a significant increase, exceeding 50%. 1. Due to its structural characteristics, foldable screen smartphones require the use of flexible OLED materials, with the key difference between flexible OLED and traditional OLED lying in the cover plate material. At present, there are mainly two flexible screen cover plate solutions: CPI and UTG. Due to its mature mass production technology and lower costs, CPI is widely used in the initial design of foldable screen smartphones. Samsung Galaxy Z Flip was the first to introduce UTG material, gradually commercializing it. UTG has gradually gained a more important position in the market due to its higher hardness and superior touch experience. UTG competition landscape: One-time molding technology is mainly led by foreign manufacturers, while China's second molding technology has the participation of more mature companies. Leading companies in one-time molding include Germany's Schott and the US's Corning, while domestic technology is still in the research and development stage; domestic companies have achieved mass production with the second molding technique, represented by South Korea's eCony, China's Triumph Science & Technology, and Wuhu Token Sciences. 2. Hinge: Core component, various brands actively lay out patents. The hinge, as the core of foldable phone technology, is the key component that determines the lifespan and form of the folding device. With a complex structural design, the waterfall hinge is currently the mainstream solution. It is estimated that the global foldable hinge market will exceed 7.8 billion yuan in 2024, with a CAGR of up to 24.71% from 2023 to 2028, indicating a wide market space. 3. MIM (Metal Injection Molding) technology is the core process for hinge manufacturing, with liquid metal (amorphous alloy) offering better performance, thereby opening up further market opportunities. Risk Warning: Risks include new product development falling short of expectations, industry cyclical fluctuations, downstream demand falling short of expectations, and other risks.