With the growth of smartphones slowing down, various brands are actively embracing foldable designs. According to the supply chain, foldable products have three characteristics that make them appealing to brand customers. The first is strong shipping momentum that's unaffected by economic conditions and product maturity. The second is a long product lifecycle. The third is a pricing structure with long sustainability.
Fositek, an affilated company of cooling module maker Asia Vital Components (AVC), is a hinge manufacturer with a focus on foldable products. Fositek chairman Tsu Mo Huang pointed out that smartphone sales have shrunk due to the economic environment, but the demand for foldable phones is strong. For instance, Fositek already has six production lines (including three fully-automatic lines and three manual lines) and is still unable to meet the demand. It's already constructing a new production line, with mass production expected for December.
Huang observed that foldable smartphones are targeting the high-end market, which is less affected by economic conditions. Both Fositek's Chinese and US customers show strong sales momentum. Additionally, the lifespan of foldable smartphone products is much longer than that of regular smartphones. "They are still sold on the market after two years. Other products may only be on sale for 9–12 months." he stated.
Moreover, the pricing of foldable smartphones tends to have slower and longer price cut cycles. Huang observed that while other products may need price cuts after two to three months of sales, the price of foldable smartphones remains stable. These characteristics are why more and more brands are adopting foldable smartphones. Besides smartphones, notebook manufacturers are also excited to explore foldable designs.
Huang stated that notebook customers released a foldable notebook two years ago, thinking it was only a product with marketing features. However, it unexpectedly sold out within a month. arketing features. They are now designing new foldable notebooks and compared to the previous target of the high-end business market, they are now focusing on the female consumer market because females find the folded size of the products most appealing.
Additionally, customers are evaluating the design of 3-fold products that are shaped like lightning bolts. Traditionally, the folds are either outward, inward, or up-and-down. Yet, there are already customers thinking about 3-fold designs to make the sizes even smaller. Huang stated that adopting both lightweight design and folding will be an opportunity and challenge for component manufacturers.
He pointed out that the number of hinge parts used in foldable notebooks can be as high as 800, making complexities and tolerance control challenging. However, compared to smartphones, which undergo folding tests of 100,000 times, foldable notebooks endure fewer folding cycles. Additionally, smartphones need to be lightweight, which means their component count may only be higher.
Recent foldable smartphones continue to move towards a slim design, with various brands all simplifying designs and reducing the number of hinge components. This not only reduces weight by reducing the number of parts but also lowers costs. However, Huang's view seems to differ from this trend. He believes that in the long run, the number of parts for foldable smartphones may increase from the current 100 or so to 300.
Regardless, hinge design is a key factor for foldable products and companies are actively building moats through patent. Fositek emphasized that, as of April 2023, Fositek and its subsidiaries have obtained a total of 463 patents, including 196 invention patents, 260 utility model patents, three new design patents, and four design patents. There are also 155 patents pending.
AVC chairman Spencer Shen pointed out that foldables not only have a deep and broad patent moat but also have a long track. All companies are expanding the proportion of foldable products in their lineups. According to estimates by DIGITIMES Research, global foldable smartphone shipments are estimated to reach 24.6 million units in 2023 and grow to 35.5 million units in 2024. By 2028, it could surpass the 100 million threshold and reach 140 million units, accounting for 9% of all smartphones.
Fositek has a registered capital of NT$604 million. In the first half of 2023, its revenue was NT$2.302 billion, with a post-tax net profit of NT$254 million. Revenue in September was approximately NT$567 million, a 66.17% YoY increase and setting a monthly revenue record in recent years. The cumulative revenue from January to September was NT$3.866 billion, a 1.65% YoY increase. It is expected to go public soon.
Article translated by Jack Wu
