Smartphone Growth Trend Continues Despite Macro Weakness
TWST: What are the major investment themes you are watching in the wireless space right now?
Mr. Garcha: I think there are two to three themes that are very important in the wireless space right now. I think the first one is the continued growth of the smartphone industry. Smartphone volumes last year were 450 million units; they grew 55%, but we don't think they have maxed out yet. We think that industry will continue to grow from these levels over the next two to three years and that it will will more or less double by 2015, reaching 1 billion units. So I think there's going to be very strong continued smartphone growth. The second thing is the question of within that smartphone growth, how the various ecosystems will play out. You obviously have a very strong competitor with Apple (AAPL), with how the iPhone is progressing, and the iPhone will continue to increase its market share going forward. But you also have Android, which is going to continue to grow as well. Android has about half of the market, literally about 50% of the market, today. I also think, and we published some research on this very recently, we now have a potential recovery in the Windows platform, and Nokia (NOK) is trying to drive that. The question then is who suffers in that environment. We think certain Android vendors are on the weaker side. We think HTC (2498.TW), Motorola Mobility (MMI) and Sony Ericsson (ERIC) are maybe on the weaker side, and we also think that Research In Motion (RIMM) has some real difficulties in terms of turning around their business. So I think the first couple of points will be, number one, smartphone growth and the continued volatile and changing competitive dynamics within it.
I think that the second thing, which kind of impacts wireless mobility, has to do with how the computing market is changing. You have consistently had very strong tablet or iPad growth in the last couple of years, and our secular view is that last year, I think 60 million tablets were sold. We think that number will be 100 million in 2012 and 300 million by 2015, and this will account for 40% we think of all computing products going forward. The additional thing here is that you've got the issue with respect to how the tablet market is going to impact not only mobile computing, but telephony as well. That is certainly another issue.
I think the third thing, at least in the wireless sector, is in terms of spending levels along the networks running into constrains. You also have this balanced issue whereby the overall wireless carrier market - and by that, I mean the AT&Ts (T) and Verizons (VZ) of this world collectively - the question of their revenue issues for the infrastructure providers. We also look how that industry actually grows in revenue terms going forward.
TWST: In your opinion, are they going to continue to grow, or is that going to be difficult for them to do going forward?