Chinese smartphone components supplier AAC Technologies Holdings warned on Wednesday the novel coronavirus pandemic may drag down the global demand for smartphones in the short-to-medium term and deal a heavy blow to the company’s earnings in the first quarter of the year.
The Shenzhen-based company, which supplies haptics and acoustics components to smartphone makers, including Apple, posted a 42 percent year-on-year plunge in net profit to 2.22 billion yuan ($314.3 million) for the 12 months ended December. Its revenue dropped 1.4 percent year on year to 17.88 billion yuan, the company said in a filing to the Hong Kong stock exchange.
Despite dampened consumer sentiment and a bleak business outlook for the short-and-medium term, the company (AAC Technologies Holdings) is betting big on the potentially huge opportunities from the launch of the much-awaited 5G smartphones
The pandemic struck on the heels of a 2.3 percent decline in overall global smartphone shipments to 1.37 billion units last year, compared with 2018 when shipments recorded a 4.1 percent year-on-year drop.
AAC said it will not distribute a final dividend in order to maximize liquidity to weather the storm. It declared an interim dividend of 40 HK cents per share in September last year, compared with an interim dividend of HK$1.43 per share and a final dividend of HK$1.03 per share in 2018.
Despite dampened consumer sentiment and a bleak business outlook for the short-and-medium term, the company is betting big on the potentially huge opportunities from the launch of the much-awaited 5G smartphones.
Global 5G smartphone shipments reached 19 million units last year, accounting for 1.4 percent of the overall smartphone shipments, according to a report by market intelligence firm IDC. By the end of this year, global 5G smartphone shipments are expected to grow exponentially to 199 million units, contributing to 15 percent of the overall smartphone shipments worldwide. By 2021, the figures are projected to swell to 400 million units and 28 percent, respectively.
Major smartphone makers are racing to recover from the COVID-19 shock.
Apple plans to reopen its brick-and-mortar outlets outside of China in the first half of next month, following US President Donald Trump’s comments on Tuesday that he would try to put the country's enterprises back on track by Easter.
The world’s top smartphone vendor by volume in the last quarter of 2019 said earlier this month it’ll close all its retail stores outside China indefinitely in response to the coronavirus crisis.
The company warned last month it may not reach its previous March quarter revenue guidance due to both supply-chain and demand issues in China. The picture has since shifted with production normalizing and Apple's retail stores in China reopening. But the rapid global spread of the virus has raised questions about the near-term demand for its flagship iPhones.
AAC’s share price surged 4.28 percent to HK$40.20 on Wednesday, with the benchmark Hang Seng Index advancing 3.81 percent, or 863.70 points, to close at 23,527.19.
