The festive season is upon us, ushering in a period of heightened consumer activity, particularly in the realm of electronic productsThis year, alongside competitive pricing strategies deployed by manufacturers, consumers are also set to benefit from government-led financial incentives, often referred to as "red envelopes." Recent announcements indicate that subsidies are being extended to individual consumers purchasing digital products such as smartphones, tablets, smartwatches, and fitness bandsThis new initiative aims to invigorate consumer spending and has resulted in a notable upswing in the shares of companies within the A-share market, particularly in the consumer electronics sector, evidenced by strong performances observed on January 6th, when several stocks in this category experienced robust growth.

Market analysts have highlighted that, in recent times, the substantial subsidies from the government have markedly uplifted sales in the automobile and home appliance sectors

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Now, as these incentives expand from automobiles and appliances into the consumer electronics domain, expectations abound that there will be a significant release in market demand for electronic goodsProducts that tend to be more price elastic and fall into the high-end category are likely to see accelerated sales, thereby positively impacting the performance of publicly listed companies in the consumer electronics supply chain.

The guiding hand of policy is paving the way for a resurgence in the consumer electronics marketNotably, a new policy enabling the exchange of old appliances for new ones has resulted in an invigorating trend, especially within the home appliance industryData revealed a remarkable increase in retail sales for household appliances and audio-visual equipment, marking a year-on-year growth of 20.2% and 22.2% in October and November, respectively.

As innovative technologies, including artificial intelligence, continue to empower and reshape the landscape, the demand for consumer electronics is slowly being unleashed

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Indicators suggest that the market demand for smartphones in 2024 is projected to show significant improvement when compared to the same timeframe in 2023. Specifically, during the first ten months of 2024, the domestic market's smartphone shipment reached an impressive 250 million units, marking an 8.9% increase year-on-year, with sales of 5G smartphones hitting 214 million units, which represents a 13.6% increase.

The momentum in the consumer electronics industry has resulted in a recovery in the financial performance of many companies engaged in this sectorFor instance, the Shenzhen Stock Exchange boasts 246 electronic industry companies, which collectively reported revenues totaling 1.37 trillion yuan in the third quarter of 2024, reflecting a year-on-year growth of 13.43%. Additionally, these companies achieved a net profit attributable to shareholders of 58.3 billion yuan, a staggering 51.11% increase compared to the previous year.

Diving deeper into the financial performance metrics, 194 out of these 246 electronic firms reported revenue growth, comprising 78.86% of the total, with over 58 companies recording growth exceeding 30%. On the profit side, 199 firms turned a profit, which accounts for 77.73% of the cohort, while 147 companies experienced a surge in profits year-on-year, amounting to 59.51%. Notably, 98 companies also managed to increase their net profits by over 30%, and 42 firms reported profits doubling over the previous year.

Among these successful entities, Lens Technology, which has been capitalizing on its backlog of orders from major North American clients since July 2024, has been operating at full capacity across all segments

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This has significantly driven their performance, as showcased by a 37% year-on-year revenue increase and a 44% net profit increase in the first three quarters of 2024. They have observed their gross margin elevate, with the third quarter alone recording a gross margin of 21.4%, marking a one percentage point annual uplift and a nearly five-point jump sequentially.

Luxshare Precision, another key player in the industry, provides comprehensive product delivery services ranging from components to system solutions for leading global brandsBenefiting from stable growth in traditional computer peripheral products and new launches from prominent overseas clients, Luxshare's performance has seen steady enhancement, with their revenue increasing by 14% and net profit climbing by 23% in the first three quarters of 2024, indicating expectations for a 20%-25% rise in net profit for the entire year.

Anker Innovations, known for its own brand development and sales of mobile device accessories and smart hardware, reported a remarkable increase in revenue, achieving 16.449 billion yuan, which is a 39.56% growth year-on-year

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The net profit amounted to 1.472 billion yuan, reflecting a 21.29% rise, with non-recurring net profit demonstrating growth of 41.13%. In the third quarter alone, revenue saw a surge of 44.05%, translating into a net profit increase of over 52%, demonstrating a clear upward trajectory.

The supplementary policies introduced by the government, especially designed to spur consumerism in the smartphone market, are a crucial pivot pointOn January 3rd, the government released plans to extend subsidies to encompass electronic information, safety production, and facility agriculture sectorsThis initiative includes new subsidies encouraging personal purchasing of smartphones, tablets, and wearable technology, promising to unleash vibrant activity within the market.

Predictions from industry research firm CINNOResearch indicate that with the effective rollout of these trade-in policies, the smartphone market is projected to maintain stable growth, with 2025 sales expected to reach 312 million units—marking a 4% growth year-on-year.

Consumer electronics manufacturers are optimistic about the invigorating effects of the government subsidies on market dynamics

Honor, a prominent tech brand, expressed that the national subsidy program presents a rare opportunity for terminal manufacturers, stimulating revival in the market and motivating brands to innovate in technology advancementsHonor emphasized the importance of continuously enhancing core competencies to meet future market challenges, especially in a time characterized by limited growth opportunities.

Vivo also echoed a similar sentiment, asserting that while temporary sales spurred by these subsidies might uplift immediate numbers, sustained long-term performance is contingent upon ongoing technological improvements and shifting consumer preferencesTheir perspective embodies a critical understanding of the cyclical nature of market demand in the technology sector, where trends can quickly fluctuate.

Meanwhile, BOE Technology Group, a leader in panel manufacturing, reported a robust revenue increase of 14% and an incredible 224% surge in net profit during the first three quarters of 2024. Their strong performance can be attributed to the old-for-new policy, which saw a 9% increase in television panel shipment volumes