2 biggest risks to TCL Communication's smartphone business

Foreign rivals pose huge threat.

According to Maybank Kim Eng, the downside risks to TCL Communication's smartphone business inlcude 1) Foreign brand smartphone makers become aggressive in gaining shares of the entry-level and mid-end smartphone markets; and 2) TCLC boosts smartphone shipments through operators instead of open channels, at the expense of ASPs and gross margins.

Here's more:

Moving to new production plant in Sep 2013. The management anticipates a higher efficiency of smartphone production after moving to a new production plant in Huizhou, China. Currently, handset productions are operating on six different levels.

After moving to the new plant, the productions will be operated on ground level. In addition, the management will continue automating the production process in order to further improve the efficiency.

Mid-end smartphone strategy. The management reiterates the mid-end smartphone strategy, especially in the overseas market where they have a competitive advantage in sales and distribution.

They will continue upgrading and improving the smartphone performance in order to maintain the global shares of the handset market, i.e. launching LTE smartphones and 20 new smartphones models in 2H13F.