smartphone industry figures

Daily Letter | 1 5 May 2013

Canaccord Genuity is the global capital markets group of Canaccord Financial Inc. (CF : TSX | CF. : LSE)

The recommendations and opinions expressed in this research report accurately reflect the Investment Analyst’s personal, independent

and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important information,

please see the Important Disclosures section in the appendix of this document or visit Canaccord Genuity’s Online

Disclosure Database.

Technology -- Communications

Technology -- Wireless Equipment

T. Michael Walkley 612.332.8069

[email protected]

Matthew D. Ramsay 612.332.2208

[email protected]

Siddharth Sinha 612.252.0056

[email protected]

Q1/13 HANDSET MARKET SUMMARY & APRIL SURVEY:

SAMSUNG POISED FOR STRONG H1/13 SHARE GAINS Samsung cements smartphone market share lead in Q1/13: Our wireless store surveys

and recent earnings reports from leading global handset/smartphone OEMs indicated a

normal seasonally soft Q1/13 for smartphones sales after a very strong December holiday

quarter. Our surveys indicated an increasing sales mix of LTE smartphones in developed

markets and ramping sales of affordable 3G smartphones replacing feature phones in

emerging markets, particularly China. Strong global sales of Samsung's broad smartphone

portfolio including very strong flagship Galaxy S III and Galaxy Note II sales resulted in

Samsung increasing its smartphone market share from 28.9% in Q4/12 to 33.0% in Q1/13.

Our April surveys indicated a very strong initial Samsung Galaxy S4 global launch with

Samsung ramping supply of the Galaxy S4 to over 300 carriers in 155 countries the next

several weeks. The S4 ramp combined with our expectations for soft June quarter iPhone

sales should result in Samsung extending its leading smartphone market share in Q2/13. Apple and Samsung dominate value share, competitors struggle: We estimate Samsung

shipped a remarkable 69.7M smartphones during the seasonally softer Q1/13, an increase

from 63.5M smartphones during the strong Q4/12 holiday quarter, resulting in Samsung

capturing an impressive 43% of handset industry profits. Further, despite seasonally softer

iPhone 5 sales and a stronger mix of legacy iPhone 4S/4 sales, we estimate Apple captured

57% of industry profits. In fact, we estimate Apple and Samsung combined to capture a

remarkable 100% of Q1/13 handset industry profits as several competitors such as

BlackBerry, Nokia, and LG posted break-even results. During the June quarter, we believe

softer iPhone sales combined with Samsung Galaxy S4's global ramp should result in

Samsung surpassing Apple for the top share of handset industry profits.

April surveys: Our U.S. April wireless store surveys indicated strong initial sales of the

recently launched Samsung Galaxy S4 and HTC One smartphones in late April. While the

iPhone 5 was a top selling smartphone at all four tier-1 carriers, other top selling products

included the Galaxy S4 and the HTC One at AT&T/Sprint and the Samsung Galaxy S III and

the Galaxy Note II at Verizon/T-Mobile. Our surveys indicated weakening BlackBerry Z10

sales, but our U.K. surveys indicated strong initial Q10 sales but with limited initial supply.

Qualcomm, Avago, RFMD, Skyworks and Peregrine should benefit from LTE smartphone

ramp: We believe the Galaxy S4 global ramp should result in strong sales for RFMD.

Further, while weaker June quarter iPhone sales will impact Avago, Skyworks, Peregrine

and TriQuint near term, we believe these suppliers are well positioned to benefit from

secular trends of increased RFIC content in an increasing mix of LTE smartphones

throughout 2013. Based on results from most leading OEMs, March quarter weighted

average ASPs were above our expectations, and we believe this is most positive for

Qualcomm's QTL revenue due to strong 3G/4G global ASPs and sales trends.


Q1/13 HANDSET MARKET SUMMARY & APRIL SURVEY;

SAMSUNG WELL POSITIONED FOR H1/13 SHARE GAINS

Updated global handset and smartphone unit estimates by OEM; Q1/13 marks first

quarter smartphones outsell feature phones

Based on Q1/13 earnings results from leading OEMs, we believe global handset unit sales

declined from 480M units in Q4/12 to 420M units in Q1/13, representing a normal

seasonal sequential decrease of roughly 13% during the seasonally softer March quarter.

We believe this is the first quarter smartphones outsold feature phones. In fact, we

estimate smartphone sales decreased 4% sequentially to 211M units, and we estimate

feature phone sales declined 20% sequentially to 209M units. With record 3G subscriber

growth in China during the March quarter, we believe affordable Android smartphones

contributed to the first quarter of smartphones sales exceeding feature phone sales.

Our global surveys during the March quarter indicated an increasing mix of LTE

smartphones led by strong sales of the iPhone 5, Samsung Galaxy S III, Samsung Galaxy

Note II and other LTE smartphones. Overall, we believe Samsung will grow its dominant

smartphone market share due to its impressive Galaxy lineup with the Galaxy Y selling into

the channel for under $100, the Galaxy S III mini now sub $300, the Galaxy S III now

around $400, and the Galaxy S4 likely to dominate high-end smartphone sales for the next

two quarters or more. Figure 1 below is our total combined feature phone and smartphone

estimates by OEM, and Figure 2 shows our smartphone estimates by OEM.

Figure 1: Handset (feature phone and smartphone) unit sales estimates and market share by OEM (millions)

Canaccord Genuity Handset Unit Sales Estimates by OEM (millions)

2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E

Global OEMs

Nokia 417.1 82.7 83.7 82.9 86.3 335.6 61.9 64.2 65.7 71.0 262.7 231.9

Nokia market share 25.9% 21.2% 21.0% 19.5% 18.0% 19.8% 14.7% 14.9% 14.5% 14.0% 14.5% 12.3%

Samsung 341.6 97.2 100.9 108.7 115.2 422.0 115.5 120.5 126.5 144.3 506.8 566.8

Samsung market share 21.2% 24.9% 25.3% 25.6% 24.0% 24.9% 27.5% 28.0% 28.0% 28.5% 28.0% 30.1%

Apple 93.1 35.1 26.0 26.9 47.8 135.8 37.4 25.0 29.0 49.5 140.9 187.6

Apple market share 5.8% 9.0% 6.5% 6.3% 10.0% 8.0% 8.9% 5.8% 6.4% 9.8% 7.8% 9.9%

Motorola Mobility 41.4 8.7 7.2 6.0 5.7 27.5 2.9 2.6 2.7 3.0 11.3 7.9

Motorola Mobility market share 2.6% 2.2% 1.8% 1.4% 1.2% 1.6% 0.7% 0.6% 0.6% 0.6% 0.6% 0.4%

Sony (Sony Ericsson) 34.2 7.2 7.8 8.8 8.7 32.5 8.9 9.1 9.2 10.0 37.1 37.5

Sony market share 2.1% 1.8% 1.9% 2.1% 1.8% 1.9% 2.1% 2.1% 2.0% 2.0% 2.1% 2.0%

LG 88.1 13.7 13.1 14.4 15.4 56.6 15.4 15.6 16.0 17.6 64.6 64.2

LG market share 5.5% 3.5% 3.3% 3.4% 3.2% 3.3% 3.7% 3.6% 3.5% 3.5% 3.6% 3.4%

BlackBerry 52.8 11.1 7.8 7.4 6.9 33.2 6.0 7.1 7.4 6.8 27.2 25.9

BlackBerry market share 3.3% 2.8% 2.0% 1.7% 1.4% 2.0% 1.4% 1.6% 1.6% 1.3% 1.5% 1.4%

HTC 44.6 6.9 9.2 7.7 6.6 30.3 4.8 7.7 8.1 8.3 28.8 33.8

HTC market share 2.8% 1.8% 2.3% 1.8% 1.4% 1.8% 1.1% 1.8% 1.8% 1.6% 1.6% 1.8%

Huawei 55.2 10.5 10.8 12.1 18.6 52.0 17.2 18.1 19.0 21.8 76.1 86.8

Huawei market share 3.4% 2.7% 2.7% 2.8% 3.9% 3.1% 4.1% 4.2% 4.2% 4.3% 4.2% 4.6%

ZTE 80.5 20.5 18.4 21.2 25.4 85.5 19.1 19.0 19.9 22.9 80.9 87.5

ZTE market share 5.0% 5.2% 4.6% 5.0% 5.3% 5.0% 4.5% 4.4% 4.4% 4.5% 4.5% 4.6%

Total Other OEMs 364.5 97.4 113.9 128.7 143.4 483.3 130.9 141.7 148.3 151.0 572.0 555.7

Market Share 22.6% 24.9% 28.6% 30.3% 29.9% 28.5% 31.2% 32.9% 32.8% 29.8% 31.6% 29.5%

Total Global Handset Units 1,613 391 399 425 479.9 1,694 420 430 452 506 1,808 1,886

YoY % Change 11.9% 2.4% 6.6% 5.6% 5.6% 5.0% 7.4% 7.9% 6.4% 5.5% 6.7% 4.3%

QoQ % Change -14.0% 2.0% 6.5% 13.0% -12.5% 2.5% 5.0% 12.0%

Source: Company Reports and Canaccord Genuity Estimates


Figure 2: Smartphone and feature phone unit sales and market share estimates by OEM (millions)

Canaccord Genuity Smartphone Unit Sales Estimates by OEM (millions)

2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E

Global OEMs

Apple 93.1 35.1 26.0 26.9 47.8 135.8 37.4 25.0 29.0 49.5 140.9 187.6

Apple market share 18.8% 22.4% 15.9% 15.3% 21.8% 19.0% 17.7% 11.4% 11.8% 16.3% 14.4% 14.6%

Samsung 95.2 44.5 50.5 56.3 63.5 214.7 69.7 81.9 93.0 111.5 356.1 511.2


Nokia 77.3 11.9 10.2 6.3 6.6 35.0 6.1 7.8 8.8 11.2 33.9 51.9


BlackBerry 52.8 11.1 7.8 7.4 6.9 33.2 6.0 7.1 7.4 6.8 27.2 25.9


HTC 44.6 6.9 9.2 7.7 6.6 30.3 4.8 7.7 8.1 8.3 28.8 33.8

HTC market share 9.0% 4.4% 5.6% 4.4% 3.0% 4.2% 2.3% 3.5% 3.3% 2.7% 2.9% 2.6%





LG 20.2 4.9 5.3 7.0 8.6 25.8 10.3 10.8 11.9 13.7 46.7 55.8

LG market share 4.1% 3.1% 3.2% 4.0% 3.9% 3.6% 4.9% 4.9% 4.8% 4.5% 4.8% 4.3%

Huawei 20.0 5.1 7.6 8.6 10.8 32.2 10.3 10.8 11.9 14.2 47.1 61.1


ZTE 14.9 5.2 5.4 6.8 9.2 26.6 9.0 9.7 11.1 13.9 43.7 59.7

ZTE market share 3.0% 3.3% 3.3% 5.0% 4.2% 3.7% 4.3% 4.4% 4.5% 4.6% 4.5% 4.6%

Total Other OEMs 36.2 21.5 28.4 34.8 46.3 131.1 46.1 47.0 52.9 60.9 206.9 256.1

Market Share 7.3% 13.7% 17.4% 19.9% 21.1% 18.3% 21.9% 21.5% 21.5% 20.1% 21.1% 19.9%

Total Global Smartphone Units 494.2 156.4 163.3 175.5 219.7 714.8 211.0 219.3 245.9 303.0 979.2 1,288.8

YoY % Change 66.6% 53.6% 47.9% 45.6% 36.0% 44.6% 34.9% 34.3% 40.2% 37.9% 37.0% 31.6%

QoQ % Change -3.2% 4.4% 7.5% 25.2% -3.9% 3.9% 12.2% 23.2%

Canaccord Genuity Feature Phone Unit Sales Estimates by OEM (millions)

2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E

Global OEMs

Nokia 339.8 70.8 73.5 76.6 79.7 300.6 55.8 56.4 56.9 59.8 228.8 179.9


Samsung 246.4 52.8 50.4 52.4 51.7 207.4 45.8 38.6 33.6 32.7 150.7 55.6






LG 67.9 8.8 7.8 7.4 6.8 30.8 5.1 4.7 4.1 3.9 17.9 8.4

LG market share 6.1% 3.8% 3.3% 3.0% 2.6% 3.1% 2.4% 2.2% 2.0% 1.9% 2.2% 1.4%

Huawei 35.2 5.4 3.2 3.5 7.8 19.9 6.9 7.3 7.1 7.6 28.9 25.6


ZTE 65.6 15.3 13.1 14.4 16.2 58.9 10.1 9.3 8.8 9.0 37.3 27.8

ZTE market share 5.9% 6.5% 5.6% 5.8% 6.2% 6.0% 4.8% 4.4% 4.3% 4.4% 4.5% 4.7%

Total Other OEMs 328.3 75.9 85.4 93.8 97.0 352.2 84.8 94.7 95.4 90.2 365.1 299.6

Market Share 29.3% 32.4% 36.3% 37.6% 37.3% 36.0% 40.6% 44.8% 46.3% 44.4% 44.0% 50.2%

Total Global Feature Phone Units 1,118.8 234.6 235.5 249.2 260.3 979.5 208.9 211.1 206.0 203.2 829.3 596.9

YoY % Change -2.3% -16.3% -10.7% -11.6% -11.2% -12.4% -10.9% -10.3% -17.3% -21.9% -15.3% -28.0%

QoQ % Change -20.0% 0.4% 5.8% 4.4% -19.7% 1.1% -2.4% -1.4%

Source: Company Reports and Canaccord Genuity Estimates


Samsung gains smartphone market share during Q1/13; anticipate further

share gains in Q2/13 with the Galaxy S4 ramp and broad smartphone portfolio

Given Samsung's strong global brand, broad portfolio of smartphones across a wide price

range, and very strong flagship Galaxy S III and Galaxy Note II smartphone sales, we

believe Samsung grew its overall leading unit market share and leading smartphone

market share position during Q1/13. In fact, we estimate Samsung increased its position as

the top selling handset OEM with 27.5% of the global handset unit market share in Q1/13

from 24.0% in Q4/12. Further, we believe Samsung was the top selling smartphone OEM

and grew its smartphone unit market share to 33.0% in Q1/13 from 28.9% in Q4/12. In

fact, we estimate Samsung shipped an incredible 69.7M smartphones in the seasonally

softer March quarter, an increase from strong December holiday quarter sales of 63.5M

smartphones. Due to our expectations for softer Q2/13 iPhone sales during Apple's

transitional June quarter combined the strong ramp of the Galaxy S4 to over 300 carriers

in 155 countries, we believe Samsung will grow its overall global handset and smartphone

share during Q2/13.

After a very strong December quarter for iPhone sales post the iPhone 5 launch, we

estimate Apple's global unit market share declined during Q1/13 to 8.9% versus 10.0% in

Q4/12, and we estimate Apple's global smartphone unit market share declined to 17.7%

versus 21.8% in Q4/12. Given our expectations for a transitional June quarter for iPhone

sales before a potential iPhone 5S refresh later in the September quarter, we believe Apple

could lose material global handset and smartphone market share to Samsung and other

Android OEMs during Q2/13 and Q3/13.

Android share gains in Q1/13 due to strong Samsung and local Chinese OEM

sales; expect further Android share gains in Q2/13

Due to strong sales of Samsung's high-volume Android smartphones and ramping

affordable Android smartphone sales from local Chinese OEMs in emerging markets, we

estimate Android increased its overall market share during Q1/13 to 70.5% versus 66.9%

in Q4/12. Given our expectations for softer iPhone sales in the June quarter and given the

strong global ramp of leading flagship Android smartphones from Samsung, HTC, LG and

other Android OEMs as well as ramping affordable 3G Android smartphones from local

Chinese OEMs, we anticipate Android will increase its dominant market share during

Q2/13 to roughly 75% of total smartphone sales.

After a strong December quarter of share gains for iOS due to the iPhone 5 ramp, we

estimate iOS' overall smartphone market share declined during Q1/13 to 17.7% versus

21.8% in Q4/12. Given our June quarter iPhone estimates of 25M units, we believe iOS will

lose further smartphone market share to Android and other competing mobile OS

platforms during Q2/13.

With BlackBerry shipping the BB10 OS based Z10 and introducing the Q10 with a physical

QWERTY keyboard, we estimate modest BlackBerry smartphone share gains during the

June quarter given initial sales into the channel combined with pent-up demand by loyal

BlackBerry customers. However, we believe the carrier pricing for the new Q10

smartphone versus competing high-end smartphones creates a tough environment for

BB10 sales to turnaround BlackBerry's long-term business trends. Further given

BlackBerry's small smartphone market share and declining subscriber base, we struggle to

envision how BlackBerry can sustain a completely different mobile ecosystem with limited

carrier support, developer interest, or applications base. As such, we believe BlackBerry


will struggle to create a long-term competitive ecosystem with the new BB10 OS and

estimate its smartphone market share could decline below 3% exiting 2013.

Finally, our smartphone OS market share estimates indicate modest share gains for the

Windows Phone 8 mobile OS due to the ramp of affordable Nokia Lumia smartphones,

particularly the Lumia 620 in China, SE Asia and Europe. In fact, we estimate Windows

Phone 8 gained only modest smartphone share during Q1/13 to 4.7% versus 3.7% during

Q4/12. During Q2/13, we estimate modest share gains for Windows Phone 8 given our

expectations for continuing iOS share losses combined with Nokia ramping its affordable

Lumia 520 and 720 smartphones into mid- and low-tier international markets. In fact,

Nokia guided Lumia unit volumes should increase sequentially during the June quarter by

a greater percentage than the 27% sequential increase in the March quarter. However,

with Windows capturing less than 5% of the smartphone market in 2012, we believe

Microsoft and its hardware partners face another year of heavy investment in an attempt

to drive Windows smartphones to become a viable third ecosystem.

Figure 3: Smartphone operating system unit market share estimates

Canaccord Genuity Smartphone OS Estimates (millions)

2011 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2Q13E 3Q13E 4Q13E 2013E 2014E

Android 252.8 90.7 110.7 125.4 147.0 473.7 148.7 165.0 183.8 214.4 711.9 907.6

Android market share 51.2% 58.0% 67.8% 71.4% 66.9% 66.3% 70.5% 75.2% 74.7% 70.8% 72.7% 70.4%

Apple (iOS) 93.1 35.1 26.0 26.9 47.8 135.8 37.4 25.0 29.0 49.5 140.9 187.6

iOS market share 18.8% 22.4% 15.9% 15.3% 21.8% 19.0% 17.7% 11.4% 11.8% 16.3% 14.4% 14.6%

Microsoft Windows Mobile Phone 9.7 5.3 6.9 6.0 8.2 26.5 10.0 12.2 16.1 18.8 57.0 106.2

Microsoft market share 2.0% 3.4% 4.2% 3.4% 3.7% 3.7% 4.7% 5.6% 6.5% 6.2% 5.8% 8.2%

BlackBerry (BB and QNX) 52.8 11.1 7.8 7.4 6.9 33.2 6.0 7.1 7.4 6.8 27.2 25.9


Symbian 76.2 9.8 6.2 3.4 2.2 21.6 0.5 0.3 0.1 0.1 1.0 0.0

Symbian market share 15.4% 6.3% 3.8% 1.9% 1.0% 3.0% 0.2% 0.1% 0.0% 0.0% 0.1% 0.0%

Total Other OSs 9.6 4.4 5.6 6.4 7.6 24.1 8.4 9.8 9.6 13.4 41.1 61.3

Market share 1.9% 2.8% 3.5% 3.6% 3.5% 3.4% 4.0% 4.5% 3.9% 4.4% 4.2% 4.8%

Total Global Smartphone Units 494.2 156.4 163.3 175.5 219.7 714.8 211.0 219.3 245.9 303.0 979.2 1,288.8

YoY % Change 66.6% 53.6% 47.9% 45.6% 36.0% 44.6% 34.9% 34.3% 40.2% 37.9% 37.0% 31.6%

QoQ % Change -3.2% 4.4% 7.5% 25.2% -3.9% 3.9% 12.2% 23.2%

Source: Company reports and Canaccord Genuity estimates

Going forward, we anticipate share shifts in Q2/13 with iOS losing smartphone share to

Android as well as incremental market share gains for Windows Phone 8 and BB10 from

current small levels. Therefore, we estimate iOS smartphone market share will decrease to

an estimated 11.4% in Q2/13 versus 17.7% in Q1/13 with Android's smartphone market

share increasing from 70.5% in Q1/13 to 75.2% in Q2/13.

Apple (57%) and Samsung (43%) combine to capture 100% of handset industry profits

(“value share”); Samsung poised for Q2/13 value share gains

In Figure 4 on page 6 we calculate the quarterly share of handset industry sales and profits

by OEM by quarter. Apple and Samsung continue to dominate the share of industry profits.

In fact, due to operating losses from smaller scale competitors trying to compete, Apple

and Samsung's combined share of industry profits have exceeded 100% in previous

quarters. While Apple and Samsung continue to dominate the share of industry profits,

improving cost structures and results from other OEMs have reduced Apple and Samsung's

combined share to 100% from levels above 100% the past several quarters.


Figure 4: Quarterly share of industry sales and profits for leading OEMs

Mobile Device Sales Market Share by leading OEMs

Quarterly Mobile Device Sales by OEM ($USD)

2011 Q112 Q212 Q312 Q412 2012 Q113

Apple iPhone Sales 61,006 22,690 16,245 17,125 30,660 86,720 22,955

Apple sales market share 31% 41% 33% 31% 43% 37% 36%

Nokia Mobile Device Sales 33,204 5,587 5,092 4,664 5,071 20,414 3,751

Nokia sales market share 17% 10% 10% 8% 7% 9% 6%

Samsung Mobile Device Sales 47,638 16,490 17,940 23,490 25,183 83,104 27,317

Samsung sales market share 24% 30% 36% 42% 36% 36% 43%

BlackBerry Mobile Device Sales 15,007 2,858 1,609 1,691 1,572 7,730 1,540

BlackBerry sales market share 8% 5% 3% 3% 2% 3% 2%

Motorola Mobile Device Sales 8,986 2,194 1,967 1,778 1,514 7,453 1,018

Motorola sales market share 5% 4% 4% 3% 2% 3% 2%

Sony (Sony Ericsson) Mobile Device Sales 7,363 1,207 2,108 2,321 1,868 7,504 1,943

Sony sales market share 4% 2% 4% 4% 3% 3% 3%

LG Mobile Device Sales 10,259 2,139 1,999 2,168 2,570 8,876 2,960

LG sales market share 5% 4% 4% 4% 4% 4% 5%

HTC Mobile Device Sales 15,758 2,297 3,018 2,498 2,058 9,871 1,473

HTC sales market share 8% 4% 6% 4% 3% 4% 2%

Total Mobile Device Sales for Leading OEMs 199,221 55,462 49,978 55,735 70,497 231,672 62,957

Operating Profit Value Share by OEM by Quarter

Quarterly Operating Income by OEM ($USD)

2011 Q112 Q212 Q312 Q412 2012 Q113

Apple operating income 26,723 10,437 6,985 6,216 12,264 35,903 8,034

Apple mobile device operating margin 44% 46% 43% 36% 40% 41% 35%

Apple value share 65% 74% 71% 59% 72% 69% 57%

Nokia operating income 2,347 -167 -462 -344 68 -905 5

Nokia mobile device operating margin 7% -3% -9% -7% 1% -4% 0%

Nokia value share 6% -1% -5% -3% 0% -2% 0%

Samsung operating income 7,078 3,725 3,663 5,038 5,031 17,458 6,019

Samsung mobile device operating margin 15% 23% 20% 21% 20% 21% 22%

Samsung value share 17% 26% 37% 48% 29% 34% 43%

BlackBerry operating income 2996 480 -308 -227 -175 -230 17

BlackBerry mobile device operating margin 20% 17% -19% -13% -11% -3% 1%

BlackBerry value share 7% 3% -3% -2% -1% 0% 0%

Motorola operating income (loss) -126 -85 -168 -199 -152 -604 -179

Motorola mobile device operating margin -1% -4% -9% -11% -10% -8% -18%

Motorola value share 0% -1% -2% -2% -1% -1% -1%

Sony (Sony Ericsson) operating income (loss) -287 -391 -104 -70 -37 -602 19

Sony mobile device operating margin -4% -32% -5% -3% -2% -8% 1%

Sony value share -1% -3% -1% -1% 0% -1% 0%

LG operating income (loss) -254 27 -26 -4 52 48 123

LG mobile device operating margin -2% 1% -1% 0% 2% 1% 4%

LG value share -1% 0% 0% 0% 0% 0% 1%

HTC operating income 2329 173 272 175 20 640 1

HTC mobile device operating margin 15% 8% 9% 7% 1% 6% 0%

HTC value share 6% 1% 3% 2% 0% 1% 0%

Total Operating Income for leading OEMs 40,808 14,200 9,852 10,585 17,071 51,708 14,040

Source: Company reports and Canaccord Genuity estimates

With Samsung growing its overall market share in both smartphones and overall mobile

phones during Q1/13, we estimate Samsung captured an impressive 43% of handset

industry profits versus 34% in Q4/12. Further, despite seasonally softer iPhone 5 sales and


a stronger mix of legacy iPhone 4S/4 sales, we estimate Apple still captured 57% of

industry profits, but Apple's share of industry profits declined from 72% in Q4/12.

However, we believe Apple's value share of the handset market is even higher than our

estimates in Figure 4 considering Apple's dominant market share of the tablet market, as

some Android OEMs such as Samsung and HTC include tablet sales in reported

smartphone sales and profits.

We estimate Apple and Samsung combined to capture a remarkable 100% of Q1/13

handset industry profits as several competitors such as BlackBerry, Nokia, and LG posted

break-even results to slight profits offsetting ongoing losses from Motorola. During the June

quarter, we believe softer iPhone sales combined strong Samsung Galaxy S4 sales could

result in Samsung surpassing Apple for the top share of handset industry profits. Given the

current competitive dynamics, we believe Apple and Samsung will maintain dominant

value share during Q2/13 and likely throughout 2013 and 2014.

APRIL SURVEY: SAMSUNG GALAXY S4 AND HTC ONE LAUNCH

WITH STRONG INITIAL SALES; GALAXY S4 LIKELY THE TOP-

SELLING SMARTPHONE DURING Q2/13 AND Q3/13

Our U.S. April wireless store surveys indicated strong initial sales of the flagship Samsung

Galaxy S4 and HTC One smartphones at the end of April. Given these smartphones

launched in the later half of April, we believe the iPhone 5 remained the top-selling

smartphone in the U.S. market during the entire month of April. In Figure 5 on page 8, we

provide a summary of our surveys for the leading smartphone sales by OEM at each of the

top four carriers in North America over the past four months.

While the iPhone 5 was a top selling smartphone at all four tier-1 carriers, other top selling

smartphones included the Samsung Galaxy S4 and the HTC One at AT&T/Sprint and the

Samsung Galaxy S III and the Galaxy Note II at Verizon/T-Mobile. Our surveys indicated

disappointing sales trends for the BlackBerry Z10 with sales levels down sharply from the

first week of launch. We estimate roughly 20,000 to 30,000 Z10's are selling per week

combined at AT&T, Verizon, and T-Mobile in the U.S. market. Our surveys indicated

limited consumer interest, modest carrier support, and limited store representative support

for the Z10. Further, given the very strong initial sales, consumer interest, and Samsung's

marketing budget for the Samsung Galaxy S4, we anticipate the Galaxy S4 could emerge as

the top selling smartphone during the June quarter and contribute to ongoing soft Z10

sales. In fact, Samsung recently highlighted potentially limited initial supply for the Galaxy

S4 given the overwhelming global demand. Our recent survey work indicated supply has

already improved and large volumes are ramping into the global channel.


Figure 5: Month-over-month comparison of top selling handset models – past 4 months

Top 3 Smartphones January/13 February/13 March/13 April/13

Apple iPhone 5 ($200/$300/$400) Apple iPhone 5 ($200/$300/$400) Apple iPhone 5 ($200/$300/$400) Apple iPhone 5 ($200/$300/$400)

Samsung Galaxy S III ($200) Samsung Galaxy S III ($200) Samsung Galaxy S III ($200) Samsung Galaxy S4 ($200)

Nokia Lumia 920 ($100) Nokia Lumia 920 ($100) Samsung Galaxy Note II ($300) HTC One ($200/$300)


Samsung Galaxy S III ($200/$250) Samsung Galaxy S III ($200) Samsung Galaxy S III ($200) Samsung Galaxy S III ($100)

Samsung Galaxy Note II ($300) Samsung Galaxy Note II ($300) Samsung Galaxy Note II ($300) Samsung Galaxy Note II ($300)


Samsung Galaxy S III ($200/$250) Samsung Galaxy S III ($100/$150) Samsung Galaxy S III ($100/$150) Samsung Galaxy S4 ($250)

Samsung Galaxy Note II ($300) Samsung Galaxy Note II ($300) Samsung Galaxy Note II ($300) HTC One ($200)

Samsung Galaxy S III ($280) Samsung Galaxy S III ($280) Samsung Galaxy S III ($550) Apple iPhone 5 ($580/$680/$780)

Samsung Galaxy Note II ($370) Samsung Galaxy Note II ($370) Samsung Galaxy Note II ($680) Samsung Galaxy S III ($550)

HTC Windows 8X ($200) Google Nexus 4 ($200) Google Nexus 4 ($458) Samsung Galaxy Note II ($680)

Apple Apple Apple Apple

Samsung Samsung Samsung Samsung

Nokia Nokia Google HTC

HTC Google

Smartphone ASP $100 - $400 $100 - $400 $100 - $680 $100 - $680

Top vendors

AT&T

Sprint

T-Mobile

Verizon

Source: Canaccord Genuity monthly wireless store surveys

Growing global smartphone sales in April with secular trends of smartphone growth in

emerging 3G markets and prepaid channels

Our global surveys indicated increasing overall smartphone sales in April after strong sales

of affordable smartphones during the March quarter, especially in China. Further, our

monthly surveys indicated a continuing secular trend of smartphone share gains versus

feature phones with growing sales of low-end and mid-tier 3G Android smartphones from

Chinese OEMs such as Coolpad, Lenovo, Xiaomi, BBK and other local Chinese brands as

well as for Samsung's broad portfolio of affordable smartphones targeting emerging

markets. In fact, the three leading Chinese carriers reported successive record combined

3G subscriber net additions for the months of January, February and March.

In addition, Qualcomm, on its recent Q2/F2013 earnings call on April 23, highlighted the

success of its Qualcomm Reference Design (QRD) program with over 200 devices based on

QRD program launched to date. Further, with both MediaTek and Qualcomm adding quad-

core chipset support to their respective turnkey programs, we expect a growing trend of

affordable high-end Android smartphones from these local Chinese OEMs. Qualcomm

highlighted Chinese OEM customers are now shipping smartphones based on its quad-core

Snapdragon 8X25Q QRD solution, as well as having a developing pipeline of LTE chipsets

for its reference design program to support the anticipated roll out of LTE in China.

Our global surveys also indicated strong TD-SCDMA smartphone sales as evidenced by

record TD-SCDMA China Mobile subscriber net additions during the December and March

quarters. We believe the strong TD-SCDMA smartphone sales during the March quarter

should benefit HOLD-rated Spreadtrum (SPRD : NASDAQ : $20.61 | HOLD), as stronger TD-

SCDMA sell-through trends during the March quarter could help offset typical seasonally


slower 1H TD-SCDMA sales trends. Further, based on the host of affordable Android and

Windows smartphones announced during the March quarter, we anticipate ramping

smartphone sales in emerging markets during 2013.

Anticipate seasonally stronger Q2/13 smartphone sales versus Q1/13

After a normal seasonally soft March quarter for smartphone sales, we anticipate stronger

smartphone sales during the June quarter. With Samsung ramping its flagship Galaxy S4

globally along with host of new smartphones from Samsung, HTC, LG, Nokia, BlackBerry

and others launching during the June quarter, partially offset by soft iPhone sales during

Apple's transitional June quarter, we anticipate a normal seasonally stronger June quarter

for smartphone sales. With most high- and mid-tier smartphones in Western markets

supporting LTE, we expect a continuing trend of increasing mix of LTE enabled

smartphones in developed markets as well as strong sales of affordable 3G and EDGE

based-Android smartphones replacing feature phones in emerging markets.

Channel check data: In the following sections, we recap Q1/13 earnings results for

handset/smartphone OEMs, discuss our detailed wireless store survey data by OEM, and

discuss quarterly market share estimates, value share estimates, and operating margin

metrics for industry leading OEMs

APPLE (AAPL : NASDAQ : $449.98 | BUY)

Surveys indicate steady iPhone sales but increasing high-tier smartphone

competition; anticipate soft Q2/C2013 due to transitional iPhone quarter

Our April U.S. wireless store surveys indicated the iPhone 5 remained the top selling

smartphone at all four tier-1 carriers. While the iPhone maintained its leading market

share, our surveys did indicate some initial share losses for the iPhone 5 in late April at

AT&T and Sprint post the strong initial sales of the Samsung Galaxy S4, and to a lesser

extent the HTC One. Overall, we estimate iPhone 5 sales during April were slightly lower

than March levels. Our surveys also indicated steady global sales of legacy iPhone 4/4S

models at reduced prices.

In-line March quarter iPhone sales, but soft June quarter guidance

Consistent with our March quarter global surveys indicating seasonally softer iPhone 5

sales combined with a stronger mix of legacy iPhone 4S/4 sales, Apple reported iPhone

unit sales of 37.4M which was in line with our 37.0M expectation. iPhone's share of

smartphones sold at AT&T decreased from 84% in the December quarter to 80% in the

March quarter, and iPhone's smartphone share at Verizon decreased from 63% of total

smartphone sales in the December quarter to 56% in the March quarter. Consistent with

our surveys over the March quarter indicating a stronger mix of lower-priced legacy

iPhone 4/4S combined with certain price cuts across the iPhone portfolio later in the March

quarter, we calculate iPhone ASPs of $619 (excluding accessories and including deferred

revenue) in the March quarter, down from $651 in the December quarter.

Based on Apple's weak guidance for the transitional June quarter implying softer iPhone

sales and an increased mix of lower-ASP iPhone 4/4S models, we estimate 25M iPhone

unit sales during the June quarter, down a steep 33% from March quarter levels and down

48% from peak 2012 December quarter levels. Based on our expectations for a refreshed

iPhone near the end of the September quarter, we anticipate a gradual ramp in iPhone

sales through Q4/F13 and estimate iPhone unit sales of 29M in the September quarter. We


believe Apple could launch a refreshed iPhone 5 in the September quarter along with a

more mid-tier-priced competitive iPhone for pre-paid-oriented international markets in

early F2014 or ahead of the Chinese New Year holidays.

Apple remains compelling long-term investment, and soft Q3/F2013 guidance

represents a buying opportunity

We believe Apple's industry-leading software and its leading hardware expertise will lead

to a strong multi-year product cycle for its key products. Based on the after-market price of

$450.00 per share, Apple is trading at approximately 6x our F2014 estimate after backing

out the $153 in cash per share. Given Apple's aggressive $100B cash return program and

with Apple announcing a $17B bond offering to facilitate this program combined with

Apple's compelling valuation, strong brand, iOS ecosystem, and installed base it can

leverage for new product launches in 2H/C2013, we believe the current share price

represents a compelling entry point. Please see our April 23 earnings report titled “$100B

cash return to investors helps offset weak June quarter guidance” for further details on our

Apple thesis. We reiterate our BUY rating our $560 price target.

QUALCOMM (QCOM : NASDAQ : $63.77 | BUY)

Well positioned with smartphone OEMs for strong F2013 results driven by an

increasing LTE smartphone mix and 3G smartphone growth in emerging markets

Our April surveys indicated a continued increasing mix of LTE smartphones. We believe

Qualcomm is well positioned to gain meaningful LTE baseband and apps processor chipset

content share in Samsung's recently announced flagship Galaxy S4 smartphone versus its

predecessor, the Galaxy S III, due to a much higher mix of LTE-enabled Galaxy S4 SKUs. In

addition, we believe Qualcomm is similarly well positioned for June quarter smartphone

volume ramps at other leading OEMs including HTC, Sony Mobile, BlackBerry, Nokia and

other OEMs that have LTE product portfolios using Qualcomm's industry leading LTE

multimode baseband chipsets.

Snapdragon 600 applications processor ramping in volume, but has initia l low

gross margin; core MSM margins and market share remain strong

We believe Qualcomm is shipping the MDM 9X15 LTE modem into the Galaxy S4 along

with the Snapdragon 600. Since the Snapdragon 600 or APQ8064T is an applications

processor-only chipset, sales of this solution are not counted as an MSM. MSMs or Mobile

Station Modems represent chipsets with a wireless modem. When Qualcomm reports MSM

units, we believe only the MDM 9X15 is counted as an MSM shipping into the Galaxy S4

and not the Snapdragon 600 applications processer. Therefore, the ramping sales of the

Snapdragon 600 into the high volume Galaxy S4 contributed to the higher calculated MSM

ASPs during the March quarter and are consistent with Qualcomm's guidance for a

sequential improvement in MSM ASPs during the June quarter. We anticipate an 8%

sequential increase in MSM ASPs during the June quarter.

However, we believe the Snapdragon 600 initially has a very poor gross margin versus

Qualcomm's overall QCT product portfolio, and the ramping volume of the Snapdragon 600

is contributing to the weaker QCT gross margin outlook despite the increased MSM ASP

guidance. We believe Qualcomm was willing to accept a lower gross margin for the

Snapdragon 600 in order to win content share in the high volume Galaxy S4 to drive

incremental operating income while sacrificing operating and gross margins. We also

believe the scale benefits from shipping the Snapdragon 600 in the high volume Galaxy S4


that could ship up to 100M units should enable Qualcomm to achieve stronger margins on

future application processor only sales to new customers and to new end markets such as

applications processor only tablets.

Overall, we believe Qualcomm is well positioned to extend its leading 3G and 4G chipset

market share during F2013. We also believe an increasing mix of LTE smartphones

combined with strong 3G growth in emerging markets should result in stable CDMA device

ASPs and solid growth for QTL during F2013. See our Qualcomm note today titled

“Leading OEM ASP analysis indicates improving QTL ASP trends in H2/F13” for more

details on global 3G/4G device ASP rends. Longer term, we also believe Qualcomm is well

positioned to post strong earnings growth due to stable royalty rates, strong market share

gains for integrated chipsets, and continued strong growth of 3G smartphones in emerging

markets to drive an increasing TAM for QCT and QTL. We reiterate our BUY rating and

$85 price target, and Qualcomm remains our top large-cap pick for C2013

NOKIA (NOK : NYSE : $3.30 | HOLD)

April store surveys indicate weaker Lumia U.S. sales versus March levels with overall

U.S. Windows Phone 8 smartphone sales weaker vs. iOS and Android

Our April wireless store surveys indicated weakening sales of Lumia smartphones at

AT&T/Verizon/T-Mobile. Further, our surveys indicated the HTC 8X continued to outsell

the Lumia 820/22 at Verizon with overall Windows Phone sales trailing iPhone and

Samsung Galaxy S III sales at Verizon and T-Mobile by increasing margins. However, our

international surveys indicate growing sales of affordable Lumia smartphones such as the

Lumia 620 in mid- and low-tier international smartphone markets. We also anticipate a

strong ramp into the channel for the affordable Lumia 520 and 720 smartphones during

the June quarter.

Weak Mobile Phone division sales result in break-even Q1/13 D&S operating margin

despite 27% sequential increase in Lumia sales volumes

Consistent with our belief Nokia had lost feature phone market share during the March

quarter due to increased competition from Chinese OEMs and from Samsung's new REX

products, Nokia reported Q1/13 Mobile Phones unit sales of 55.8M that were below our

59.7M estimate and well below the consensus estimate of 64.9M. Further, sales of Nokia's

profitable higher-end Asha smartphone series declined 46% sequentially from 9.3M to

5.0M units resulting in Mobile Phones ASPs declining to €28.5 from €31.0 in the December

quarter. With Nokia management indicating the Mobile Phone division still had channel

inventory exiting Q1/13 at levels slightly above target levels and given our expectation for

intensifying competition, we anticipate only a modest 1% sequential increase in June

quarter Mobile Phone shipments to 56.4M units, or below normal seasonality. While we

were impressed with Nokia's recently introduced QWERTY Asha 210 handset, we believe it

will take a concerted effort on Nokia's part to quickly introduce new feature phones and

Asha products to reverse the currently tough competitive trends and maintain sustained

profitability.

Nokia's Smart Devices business reported Lumia sales of 5.6M units, above our 5.3M

estimate, and Nokia guided Lumia unit volumes should increase sequentially during the

June quarter by a greater percentage than the 27% sequential increase in the March

quarter. The solid Lumia sales guidance is consistent with our April surveys that indicate

gradually improving consumer traction for Lumia smartphones, particularly in mid- and

low-tier international smartphone markets with strong sales of the Lumia 620. We also


anticipate a strong ramp into the channel for the affordable Lumia 520 and 720

smartphones during the June quarter.

However, we anticipate weaker higher-end Lumia sales during the June quarter due to

intensifying Western market competition with the launch of the Samsung Galaxy S4. Long

term, we believe Windows must capture 15% or more of the smartphone market with

Nokia capturing nearly half of the Windows market share in order for Devices and Services

to return to sustained profitability with its current cost structure. With Windows capturing

less than 5% of the smartphone market in 2012, Nokia and Microsoft face another year of

heavy investment in an attempt to drive Windows smartphones to become a viable third

ecosystem. Please see our April 18 earnings report titled “Solid cost execution and strong

NSN results offset weak mobile phone sales” for further details on our Nokia thesis. We

maintain our HOLD rating and our $3.50 price target.

BLACKBERRY (BBRY : NASDAQ : $15.63 | SELL)

U.S. surveys indicate soft Z10 smartphone sales; U.K. surveys indicate solid initial Q10

demand but limited supply

Our U.S. wireless store surveys indicated BlackBerry Z10 sell through trends remained soft

during April despite Blackberry increasing advertising spending levels. In fact, we estimate

Z10 weekly sales combined for Verizon, AT&T, and T-Mobile are roughly half the rate of

the launch week at each of these carriers, as we estimate weekly combined Z10 sales for

these three leading U.S. carriers at roughly 20,000 to 30,000 units. Our surveys indicated

limited consumer interest, modest carrier support, and limited store representative sales

support for the Z10. Several carrier sales representatives positioned the Z10 as a mid-tier

smartphone versus the high-end Samsung Galaxy S4 or the iPhone 5.

Our global surveys indicate mixed BlackBerry sell through trends with weakening sales of

the Z10 over the past month but strong initial demand for the limited supply Q10. Our U.K

surveys post the recent Q10 launch indicated strong initial sales. However, we believe the

Q10 may have initial production issues or intentionally limited supply at the launch to drive

consumer excitement for the devices. Our surveys indicated most U.K carrier stores

received less than 15 units for the initial day of the launch with many stores selling out of

the devices or the majority of the initial allocation during the first few days of availability.

Further, our initial surveys in Canada indicated very limited initial supply of the Q10 into

the recent launch.

Anticipate stronger near term results but long-term thesis unchanged

With new BB10 smartphones facing increased high-end competition from the Samsung

Galaxy S4 and the HTC One, we anticipate Z10 sales could further weaken in the consumer

retail channels. However, we anticipate a strong ramp in Q10 sales over the next several

months should more than offset the slowing Z10 sales. While we anticipate stronger near-

term results from BlackBerry as higher margin BB10 smartphones sell into the channel, we

do not believe BlackBerry can achieve sell-through market share levels to return to

sustained profit levels and we maintain our bearish view for longer-term BB10 sales

trends. Please see our separate BlackBerry note published today titled “Slowing Z10 sales

trends, solid initial Q10 demand but supply limited” for further details on our BlackBerry

thesis. We maintain our SELL rating and $9 price target.


HTC (2498 : TWSE : NT$279.50 | HOLD)

Solid initial HTC One sales post launch, but Samsung Galaxy S4 likely to limit

HTC One sales trends

Our U.S. April wireless store surveys indicated strong initial consumer interest and very

positive sales representative reviews for the recently launched flagship HTC One

smartphone at AT&T and Sprint. While we believe the HTC One is a very compelling

smartphone, we believe the delayed HTC One faces a very competitive high-end global

smartphone market dominated by the Samsung Galaxy S4. While the HTC One was the #3

top selling smartphone at both AT&T and Sprint, the Galaxy S4 also launched at the same

two carriers and was more popular. We believe Samsung's massive global scale, marketing

muscle, and strong volume ramp of the Samsung Galaxy S4 could limit HTC One sales.

Consistent with our surveys, we estimate HTC's smartphone sales decreased 31% y/y to

4.8M units during the March quarter due to the delayed HTC One smartphone launch and

ongoing intense smartphone competition impacting sales. In fact, we estimate HTC's global

smartphone unit market share declined to 2.8% in Q1/13 from 3.0% in Q4/12. HTC guided

to a strong sequential Q2/13 increase in sales to NT$70B due to the HTC One finally selling

in volume to the market after initial production issues. However, HTC is also sharply

increasing marketing expenses to support the launch, and overall Q2/13 gross and

operating margin guidance was below our expectations. While we believe the HTC One is a

compelling high-end smartphone, we maintain our HOLD rating due to increasing

competition from the Samsung S4 launch and growing low-end Android competition.

Please see our May 2 report titled “Q1/13 in-line with pre-announcement; HTC One ramp

drives strong Q2/13 guide” for more details on our HTC thesis. We maintain our HOLD

rating and NT$240 price target.

GOOGLE/MOTOROLA

Surveys indicate soft RAZR MAXX HD sales at Verizon and overall declining

Motorola smartphone sales

Our April wireless store surveys indicated weaker Droid RAZR MAXX HD sales at Verizon

versus March quarter levels. With the Droid RAZR MAXX HD no longer a top selling

smartphone at Verizon, we believe sales of this smartphone have progressively declined

from peak levels in October. Our surveys also indicated soft sales for the Motorola Atrix HD

at AT&T and the Motorola RAZR M at Verizon, with sales of these devices adversely

impacted by recently launched flagship Android smartphones.

Motorola’s Android share and value share declines

We estimate Motorola Mobility sold 2.5M smartphones during Q1/13. We believe total

Motorola smartphone sales decreased sequentially during the March quarter due to softer

sales of the ageing RAZR MAXX HD at Verizon, and we estimate Motorola Mobility's global

smartphone unit market share declined in to 1.2% in Q1/13 from 2.1% in Q4/12. From

Google's March quarter results, we estimate Motorola Mobility had mobile device sales of

$1.02B and an operating margin of roughly -18% with sales lower and losses higher

sequentially. Therefore, we estimate Motorola Mobility's value share of handset industry

profits was -1% in Q1/13.


LG

Improved LTE product portfolio drives improved performance

LG shipped an estimated 15.4M total handsets during the seasonally soft Q1/13. This

volume was flat sequentially from the 15.4M units shipped in the seasonally strong Q4/12,

and these strong March quarter shipments resulted in LG's global market share increasing

sequentially to 3.7% from 3.2%. With an increased focus on smartphones, LG's

smartphone sales mix increased from 56% of total units sold in Q4/12 to 67% in the March

quarter. Therefore, we estimate LG sold 10.3M smartphones during Q1/13 versus 8.6M in

Q4/12. We believe strong sales of LG's high-end Optimus G smartphone, strong Nexus 4

sales, and strong mid- and low-tier Optimus L series smartphone sales drove the improved

performance.

LG highlighted selling over 1M cumulative Optimus G smartphones in January and

highlighted selling over 10M cumulative LTE smartphones in March. Further, with LG

announcing the Optimus F series of affordable smartphones, we believe LG is well

positioned to grow overall smartphone market share in 2013 through its broad

smartphones portfolio. In fact, given LG's improved smartphone product offering and focus

on LTE enabled smartphones, we have modeled LG's smartphone market share increasing

from 3.6% in 2012 to 4.8% in 2013. Due to increased focus on more profitable

smartphones, LG increased its handset industry value share modestly from break-even

results over the past four quarters to 1% share of industry profits in Q1/13.

SONY

Improved results due to strong refreshed Xperia series sales

Due to strong global sales of the refreshed Sony Xperia series smartphones including the

flagship Xperia Z, we estimate Sony sold 8.9M smartphones during the March quarter

versus an estimated 8.7M smartphones during the December quarter. As such, we estimate

handset sales increased 4% sequentially to $1.94B in the March quarter. Further, with

stronger revenues and strong sales of its flagship Xperia Z smartphone, we estimate Sony's

handset business operating margins improved sequentially from -2% in Q4/12 to roughly

1% in Q1/13.

SAMSUNG

Very strong Galaxy S4 launch; solid sales of the reduced-price Galaxy S III

Our April U.S. wireless store surveys indicated strong initial sales in the U.S. for Samsung's

flagship Galaxy S4 smartphone at AT&T and Sprint during the last week of April with very

strong consumer interest and very positive sales representative reviews. In fact, given the

very strong initial sales, consumer interest, and Samsung's marketing budget for the

Samsung Galaxy S4 combined with the anticipated soft June quarter for iPhone sales, we

believe the Galaxy S4 could emerge as the top selling smartphone during the June quarter.

Samsung recently highlighted limited initial supply for the Galaxy S4 given the

overwhelming global demand. Our U.S. surveys also indicated solid sales of the reduced

price Samsung Galaxy S III at Verizon/AT&T/Sprint as well as at T-Mobile. In addition to

strong Galaxy S4 and Galaxy S III sales, our surveys indicated overall strong sales of

Samsung's broad smartphone portfolio including mid-tier and low-tier smartphones.


Solid Q1/13 smartphone sales and well positioned for Q2/13 share gains

We estimate Samsung shipped 115.5M units in Q1/13 versus 115.2M units in Q4/12 and

shipped an incredible 69.7M smartphones versus 63.5M in Q4/12 and 44.5M in Q1/12. In

fact, due to very strong sales of the Galaxy S III and Galaxy Note II along with its broad

portfolio of mid-tier Android smartphones, Samsung cemented its place as the top

smartphone OEM during Q1/13. We estimate Samsung's smartphone market share

increased from 28.9% in Q4/12 to 33.0% in Q1/13. Due to Samsung's broad portfolio that

includes feature phones at lower price points, Samsung strengthened its leading overall

handset unit share with 27.5% global share of handsets sold in Q1/13 versus 24.0% in

Q4/12.

Further, despite very strong growth of affordable Android smartphones from Chinese

OEMs, we estimate Samsung maintained its dominant Android smartphone share with

roughly 40% of total Android units sold in Q1/13. We anticipate these trends will continue

in Q2/13, as we anticipate stronger Samsung smartphone sales versus March quarter levels

given strong global demand for the Galaxy S4 combined with Samsung launching a host of

new high-, mid- and low-tier smartphones during the quarter. With the Galaxy S III now

selling into the channel at roughly $400, the Galaxy S III mini at sub $300 levels, and the

Galaxy S4 likely the top selling high-end smartphone during the June quarter, we believe

Samsung has a very compelling mid-tier and high-end smartphone lineup to capture

material market share and profit share during Q2/2013.

CHINESE OEMS: HUAWEI, ZTE, & EMERGING “BRANDS”

Strong sales from Chinese smartphone OEMs

We estimate our collective “other OEMs” group that is comprised of Chinese OEMs enjoyed

strong sales of affordable 3G Android smartphones during the March quarter in emerging

markets, especially in China. The three leading Chinese carriers reported successive record

combined 3G subscriber net additions for the months of January, February and March. In

addition, Qualcomm, on its recent Q2/F2013 earnings call on April 23, highlighted the

success of its Qualcomm Reference Design (QRD) program with over 200 devices based on

QRD program launched to date. Further, with both MediaTek and Qualcomm adding quad-

core chipset support to their respective turnkey programs, we expect a growing trend of

affordable high-end Android smartphones from these local Chinese OEMs. On its Q2/F2013

earnings call, Qualcomm highlighted that these OEMs are now shipping smartphones

based on its quad-core Snapdragon 8X25Q QRD solution.

Our global surveys also indicated strong TD-SCDMA smartphone sales as evidenced by

record TD-SCDMA China Mobile subscriber net additions during the December quarter and

then again during the March quarter. We estimate cumulative smartphone shipments from

our “other OEMs” group were essentially flat at 46.1M smartphone units in Q1/13 after

strong December quarter sales of 46.3M units. This results in our “other OEMs” group

slightly increasing their combined smartphone unit market share from 21.1% in Q4/12 to

21.9% in Q1/13.

Further, we estimate the larger branded Chinese OEMs, Huawei and ZTE, had a strong

Q1/13, benefiting from the same secular trends of growing affordable smartphones

penetration in emerging markets as well as from growing sales of their high- and mid-tier

flagship smartphone brands. We estimate ZTE shipped 9M smartphones in the March

quarter and captured 4.3% smartphone unit market share versus 9.2M smartphone units

and 4.2% smartphone unit market share in Q4/12. We believe Huawei shipped an


estimated 10.3M smartphones in the March quarter and captured 4.9% smartphone unit

market share versus 10.8M smartphone units and 4.9% smartphone unit market share in

the December quarter.

AVAGO TECHNOLOGIES (AVGO : NASDAQ : $31.88 | BUY)

Well positioned for strong Wireless division sales due to LTE smartphone ramp;

lowering July quarter estimates due to later anticipated timing for iPhone

refresh

We believe our April wireless store surveys are consistent with Avago's Q2/F2013 or April

quarter Wireless division guidance for a high single digit sequential decline in sales due to

the near-term product transition at leading customer Apple partially offset by ramping

FBAR sales into smartphone from other leading OEMs such as Samsung. With the

increasing mix of LTE smartphones and Avago's proprietary FBAR filter technology best

suited for increasingly complex LTE smartphone filtering requirements, we anticipate

strong Wireless sales growth in H2/C2013 with leading LTE smartphone customers such as

Apple, Samsung, and other OEMs. As discussed above, we believe Qualcomm's LTE

solutions are gaining material share of the LTE smartphone market, and we believe

Avago's FBAR solutions have strong alignment with Qualcomm's LTE solutions.

However, our analysis of recent earnings reports from Apple and component suppliers into

the iPhone indicate Apple could launch a refreshed iPhone 5S this fall or later in Q3/C2013

versus our prior summer launch expectations. Our previous Avago published model

assumed an earlier iPhone 5S refresh, and we are updating our Avago estimates based on

our updated iPhone estimates. Please see our Avago note published today titled “Updating

estimates for an anticipated later fall iPhone 5 refresh” for further details on our Avago

thesis. We reiterate our BUY rating but lowered our price target from $43 to $42.

SKYWORKS (SWKS : NASDAQ : $22.36 | BUY)

Well positioned with C2013 LTE smartphone ramp and increased mix of higher

margin analog sales

We believe our April wireless store surveys indicating an increasing mix of LTE

smartphones and our expectations for June quarter iPhone weakness are consistent with

Skyworks' June quarter guidance for softer revenue growth but higher gross margin. We

believe Skyworks' softer-than-seasonal revenue guidance is due to softer iPhone sales

partially offset by strong sales ramping into tier-1 LTE smartphone platforms, including up

to 8 sockets in some SKUs of the Samsung Galaxy S4. Further, we believe the strong pro

forma gross margin guidance of 43.5%-44.0% is due to an increased mix of higher margin

design wins ramping in leading smartphone platforms.

In fact, given Skyworks' R&D breadth, we believe Skyworks' diverse analog portfolio is well

positioned to grow Skyworks' content within its traditional handset base and expand

Skyworks' share in markets such as wireless infrastructure, 802.11ac WiFi, and many

M2M verticals. As such, we anticipate an increased mix of higher margin analog sales in

both the Handset and HPA businesses over the next several quarters, and this is consistent

with management's guidance for roughly a 48% gross margin on incremental sales. Please

see our Skyworks note published April 25 titled “Diverse socket wins yield slight Q2/F13

beat, LT margin expansion opportunities” for further details on our Skyworks thesis. We

reiterate our BUY rating and $27 price target.


RF MICRO DEVICES (RFMD : NASDAQ : $5.60 | BUY)

Ramping LTE smartphone design wins combined with strong 3G China sales

should enable RFMD to grow much faster than the RFIC market in C2013/14

Our April wireless store surveys indicated very strong initial Samsung Galaxy S4 sales at

AT&T and Sprint as well as strong global demand. In fact, Samsung highlighted potentially

limited Galaxy S4 initial supply given the overwhelming global demand. Our analysis

indicated strong blended RFIC content share for RFMD in the Galaxy S4 with roughly $2-

$3 of content versus under $1 in the Galaxy S III. Therefore, we believe RFMD's strong

Q1/F2014 or June quarter guidance is consistent with the ramp of the Galaxy S4 along

with RFMD's increased content share in this high-volume product. We also believe RFMD

is gaining share in other LTE smartphones, contributing to the strong overall RFIC sales

growth versus the market.

Our market analysis also indicates ramping sales of affordable 3G smartphones from

Chinese OEMs powered by Qualcomm QRD, MediaTek and Spreadtrum turnkey solutions.

We believe RFMD has strong RFIC share with this Chinese OEM base, particularly in TD-

SCDMA smartphones. Further, with limited iPhone exposure versus other RFIC

competitors and strong design momentum for its Phenom, PowerSmart and switch

solutions with leading smartphone platforms, we believe RFMD will gain RFIC share

throughout C2013. Further, improved capacity utilization, new CMOS PAs, and an overall

improving mix of new products ramping on leading smartphone platforms should drive

strong margin leverage. Overall, we believe RFMD is well positioned to grow much faster

than the RFIC market in F2014/15. Please see our RFMD note published April 24 titled

“Strong results and guidance; margins should expand as design wins ramp” for further

details on our RFMD thesis. We reiterate our BUY rating and $7.50 price target.

TRIQUINT (TQNT : NASDAQ : $5.97 | HOLD)

Near-term weaker iPhone sales impacts 1H/13 sales, but 2H/13 sales should

improve with iPhone product launches and growing BAW filter sales

We believe our April surveys indicating softer iPhone sales versus March quarter levels is

consistent with TriQuint's soft June quarter guidance primarily due to its high customer

concentration with Foxconn or Apple. Further, our surveys indicate ramping LTE

smartphone sales from other leading OEMs such as Samsung, and we believe this is also

consistent with TriQuint management's guidance that Q2/13 Mobile sales should increase

Q/Q. We believe this guidance implies a material increase in non-iPhone sales that is

consistent with our belief strong BAW filter sales are leading to share gains in LTE

smartphones for TriQuint. In fact, TriQuint management guided to a significant recovery in

2H/13 sales and anticipates a pro forma profit for full year 2013 despite significant losses

in 1H/13.

With stronger sales to other smartphone customers offsetting softer iPhone related sales

during the June quarter, we believe TriQuint is well positioned for improving growth

trends in 2H/13 and 2014 once new Apple products launch, especially if TriQuint

maintains or gains content in Apple's new products. Please see our TriQuint note published

April 25 titled “iPhone weakness weighs on Q1 results and Q2 guidance but company

maintains strong 2H/13 sales ramp expectations” for further details on our TriQuint thesis.

We maintain our HOLD rating and $6 price target.


PEREGRINE (PSMI : NASDAQ : $9.85 | BUY)

Ramping LTE smartphones should drive strong long-term sales growth, but near-

term weaker iPhone sales impacts 1H/13 sales

Similar to TriQuint, we believe Peregrine's soft June quarter guidance is primarily due to

Peregrine's limited near-term visibility given its high customer concentration with Apple

and the iPhone 5. While we anticipate stronger 2H/13 sales for Peregrine to LTE

smartphones including some content in the refreshed iPhone 5S, we anticipate a gradual

2H/13 recovery in sales levels. Since we anticipate Apple could launch a more affordable

3G-only iPhone for price-elastic international markets that could result in reduced average

dollar-content share per iPhone for Peregrine, we believe Peregrine loses more content

share than TriQuint on a higher mix of 3G only iPhone SKUs.

However, we believe the growing mix of LTE smartphones, particularly those supporting

carrier aggregation in 2014, positions Peregrine for strong long-term growth trends

consistent with management's 20%-30% longer-term annual sales growth targets. Overall,

we believe industry trends with a growing mix of LTE devices supports our longer-term

BUY thesis. Please see our Peregrine note published April 30 titled “Solid Q1/13 results and

Q2/13 guidance; anticipate 20%-30% longer-term growth” for further details on our

Peregrine thesis. We reiterate our BUY rating and $13 price target.


Figure 6: Global handset market snapshot

2007 2008 2009 2010 2011 2012 2013E 2014E Top 8 OEMs Smartphone Share

Smartphone Units 127 139 172 297 494 715 979 1,289 2007 2008 2009 2010 2011 2012 2013E 2014E

YoY Growth 9% 24% 72% 67% 45% 37% 32% Nokia 47% 43% 39% 34% 16% 5% 3% 4%

BlackBerry 11% 16% 20% 16% 11% 5% 3% 2%

Global Feature Phone Units 1,026 1,083 1,039 1,145 1,119 980 829 597 Apple 3% 10% 15% 16% 19% 19% 14% 15%

YoY Growth 5.6% -4.1% 10.2% -2.3% -12.4% -15.3% -28.0% Motorola 3% 2% 2% 5% 4% 3% 1% 1%

Samsung 2% 3% 3% 8% 19% 30% 36% 40%

Global Handset Units 1,153 1,222 1,211 1,442 1,613 1,694 1,808 1,886 LG 0% 0% 0% 2% 4% 4% 5% 4%

YoY Growth 6.0% -0.9% 19.0% 11.9% 5.0% 6.7% 4.3% Sonyt 3% 2% 1% 3% 4% 4% 4% 3%

HTC 3% 9% 7% 8% 9% 4% 3% 3%

% Smartphone Mix 11% 11% 14% 21% 31% 42% 54% 68% Other 28% 15% 13% 8% 14% 27% 30% 29%

%age Feature Phone Mix 89% 89% 86% 79% 69% 58% 46% 32% 100% 100% 100% 100% 100% 100% 100% 100%

Top 8 OEMs Global Market Share Top 8 OEMs Global Value Share

2007 2008 2009 2010 2011 2012 2013E 2014E 2007 2008 2009 2010 2011 2012

Nokia 38% 38% 36% 31% 26% 20% 15% 12% Nokia 67% 57% 33% 19% 6% -2%

BlackBerry 1% 2% 3% 3% 3% 2% 2% 1% BlackBerry 5% 15% 21% 19% 7% 0%

Apple 0% 1% 2% 3% 6% 8% 8% 10% Apple 4% 14% 35% 44% 65% 69%

Motorola 14% 8% 5% 3% 3% 2% 1% 0% Motorola -5% -9% -6% -1% 0% -1%

Samsung 14% 16% 19% 19% 21% 25% 28% 30% Samsung 10% 10% 15% 15% 17% 34%

HTC 1% 1% 1% 2% 3% 2% 2% 2% HTC 0% 5% 5% 6% 6% 1%

LG 7% 8% 10% 8% 5% 3% 4% 3% LG 4% 7% 7% -2% -1% 0%

Sony 9% 8% 5% 3% 2% 2% 2% 2% Sony 14% 0% -10% 1% -1% -1%

Other 16% 17% 21% 27% 31% 37% 40% 39% 100% 100% 100% 100% 100% 100%

100% 100% 100% 100% 100% 100% 100% 100%

127 139 172 297494

715

979

1,2891,026 1,083 1,039

1,145

1,119

980

829

597

11%11%

14%

21%

31%

42%

54%

68%

0

500

1,000

1,500

2,000

2007 2008 2009 2010 2011 2012 2013E 2014E

Millio

ns O

f U

nit

s

Global Feature Phone Units

Smartphone Units

% Smartphone Mix

2,679

3,236 3,607

3,901 4,193

184

289

436

633

890

377

407

427

443

456

-

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008E 2009E 2010E 2011E

CDMA - Steady Growth

WCDMA - Rapid Growth

GSM - Secular Decline

6%

11%

7%

10% 9%

10%11%

10%12%

10%

SMARTPHONES AS A MIX OF GLOBAL HANDSET UNITSGLOBAL SUBSCRIBERS BY TECHNOLOGY

Source: Company reports, Gartner, Inc., and Canaccord Genuity Estimates


Valuation section

Apple: Our $560 price target is based on shares trading at roughly 12x our F2014 pro

forma EPS estimate.

Avago: Our $42 price target is based on shares trading at roughly 13x our F2014 pro

forma EPS estimate.

BlackBerry: Our $9 price target is based on our sum-of-parts analysis.

HTC: Our NT$240 price target is based on shares trading at roughly 11x our 2014 pro

forma EPS estimate.

Nokia: Our $3.50 price target is based on our sum-of-parts analysis.

Peregrine: Our $13 price target is based on shares trading at roughly 17x our 2014 pro

forma EPS estimate.

Qualcomm: Our $85 price target is based on shares trading at roughly 17x our F2014 pro

forma EPS estimate.

RF Micro Devices: Our $7.50 price target is based on shares trading at roughly 11x our

F2015 pro forma EPS estimate.

Skyworks: Our $27 price target is based on shares trading at roughly 10x our F2014 pro

forma EPS estimate.

Spreadtrum: Our $23 price target is based on shares trading at roughly 9x our 2014 pro

forma EPS estimate.

TriQuint: Our $6 price target is based on shares trading at roughly 11x our 2014 pro

forma EPS estimate.

Investment risks

1. Continued global subscriber growth and recovering emerging market sales

2. Improving global sales mix of smartphones and tablets

3. Healthy handset replacement sales are key variables for our price targets.

4. New law suits or court rulings could change the perceived value of wireless IP

portfolios to be higher/lower than we have assumed in our analysis.


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