South Korean wireless network parts supplier KMW is expected to post lower sales in 2020 compared to initial analyst forecasts in the aftermath of the COVID-19 pandemic, according to sources and public data collected by TheElec.
The government was pressuring local telcos __ SK Telecom, KT and LG Uplus __ to invest more this year but slower-than-expected growth in 5G subscribers is making the telcos hesitant to proceed aggressively in building more networks, a person with direct knowledge of the matter told The Elec.
A big investment by the three is unlikely to occur in the first half of 2020, while their plans for the second half will be dependent on how US and Japan proceed with their 5G investment plans, they said.
SK Telecom, KT and LG Uplus has previously said they plan to invest 4 trillion won in 5G infrastructure within the first half of the year. But in their first quarter conference calls, KT and LG Uplus lowered their CAPEX by 4% while SK Telecom didn’t announce such plans but is expected to lower theirs at a similar rate.
KMW, a component supplier to network equipment makers Nokia and Samsung Electronics, was initially slated to benefit from the high investment volume.
Before the outbreak of COVID-19, analysts has expected sales of over 1 trillion won, or around $800 million. But some has lowered their outlook in light of the slower-than-expected investments due to the virus.
Eugene Investment analyst Park Jong-sun, in his latest report published in May, estimated an annual revenue of 807.1 billion won. It is far lower than Park’s initial estimate of 1.025 trillion won made last year in December.
Kim Hong-sik, an analyst at Hana Financial Investment, in his report this month estimated sales of 1.07 trillion won. Still, it is lower than his initial estimate of 1.19 trillion won published in March.
According to another person knowledgeable on the matter, the South Korean government is expected to make another big announcement in 5G in June. However, it is unclear if it will lead to more investment by the telcos, they added.
KMW posted 77.5 billion won in sales in the first quarter, with 96% of them coming from component supplied in the making of wireless equipment.
It supplies Massive MIMO Radio to Nokia, with the Finnish giant accounting for 70% of its sales in the first quarter. It also supplies to China’s ZTE and South Korea’s Samsung, which accounted for 6.7% and 4.4% of the sales, respectively, for the quarter.
Telcos investment drive post-COVID-19 will decide KMW’s annual performance.
KMW is co-developing remote radio head for 4G radio stations together with Samsung Electronics.
Samsung is planning to supply them to US carriers, which will provide KMW with much needed sales growth in the second half of the year, if it pulls through.