European foreign capital released its latest report today (3105), highlighting a significant shift in the market dynamics for 3D VCSEL orders used in iPhones. The report indicated that the market share of stable iPhone 3D VCSEL orders is expected to decline from 85% in 2017 to just 45% by 2019. This drop is attributed to the growing role of Finisar as a key supplier of back-end 3D VCSEL components, which could indirectly affect the stability of the company's operations. As a result, European investors have downgraded their rating for the stock, moving it from "neutral" to "inferior to the broader market." The target price has also been revised downward, from 270 yuan to 205 yuan.
This change in sentiment has already impacted the stock price. On the day of the report, the stock opened higher but soon fell sharply, dropping over 5.7% to 253.5 yuan by the afternoon.
According to the report, the three new iPhones launched in the second half of 2018 will still rely on front-end 3D sensing systems. However, the upcoming designs in the second half of 2019 are expected to incorporate rear 3D camera sensing technology, further reducing the demand for front-end VCSEL components. This shift in product design is likely to contribute to the declining market share of iPhone-related 3D VCSEL orders.
In the Android market, an increasing number of brand manufacturers are adopting similar 3D sensing technologies, creating potential for rapid growth. However, this opportunity comes with challenges, as more integrated component manufacturers are entering the space, intensifying competition.
Additionally, the expansion of the epitaxial wafer’s usable area may reduce the demand for wafer processing. According to European foreign investment analysis, only 40-50% of current VCSEL epitaxial wafers meet the stringent standards required for iPhones, leading to increased demand for specialized processing. However, as manufacturing processes improve in terms of yield and uniformity, the need for such high-level processing may decrease, indirectly affecting the growth of related industries.
Due to the ongoing decline in sales within the VCSEL sector, European analysts have revised their earnings forecasts for the company. They now expect a 7-11% reduction in both 2018 and 2019 earnings per share. Specifically, the 2018 earnings per share are estimated at 12.4 yuan, while 2019 is projected to see a drop to 15 yuan.
Overall, the report signals a cautious outlook for the company, driven by shifting market demands and increased competition in the 3D sensing space. Investors are advised to closely monitor future developments in both the iPhone and Android markets.
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