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Securities Research Reports / Sector Research:
titaniumMaterials are rapidly making inroads into the mobile phone industry, opening up new opportunities in the market for specialised cutting tools
— Special Research Series on the Cutting Tools Industry, Part One
Key Investment Points
Titanium alloys, with their low density and high strength, are being rapidly adopted in the consumer electronics industry
Titanium alloys are characterised by their low density, high strength and excellent corrosion resistance. Given the trend towards ever-thinner and lighter smartphones, these materials are expected to be adopted more rapidly in the consumer electronics sector. Until now, titanium alloys have been used primarily in industries such as aerospace and medical devices, had not been adopted in the consumer electronics sector due to high costs and processing difficulties. However, with advancements in 3D printing and machining technologies, titanium alloys now hold vast potential for application in areas such as high-end smartphones. Currently, the iPhone 15 Pro/Pro Max and the Xiaomi 14 Pro Titanium both utilise titanium alloy for their frames, whilst foldable smartphones such as the Magic V2 also employ titanium alloy in their hinge mechanisms.
Titanium alloys are difficult to machine and require specially designed cutting tools
Due to the inherent properties of titanium alloys, machining them is particularly challenging. This is primarily because titanium alloys have low thermal conductivity, which can lead to significant heat build-up during the machining process; furthermore, their low modulus of elasticity accelerates tool wear during machining and compromises machining accuracy. To achieve satisfactory machining of titanium alloys, special attention must be paid to the design of the cutting tool’s material, coating and structure. Typically, tungsten-carbide-based cemented carbide is selected as the tool material, supplemented by physical vapour deposition (PVD) coatings, whilst the microgeometry of the cutting edge is also crucial for cutting efficiency and tool life. As can be seen from the above, the materials used for titanium alloy machining tools exhibit diverse characteristics, as do the coatings and structural designs; these factors represent the key distinctions between different tool manufacturers.
The consumer electronics sector is showing signs of recovery, opening up opportunities in the cutlery market
In the third quarter of 2023, global smartphone sales stood at 304 million units, representing a 13% increase compared with the previous quarter and a slight rise compared with the same period last year. In the third quarter of 2023, 5.7 million iPhone 15 Pro units were sold, whilst 4 million iPhone 15 Pro Max units were sold. In addition, the Xiaomi 14 Pro performed particularly well, with sales reaching 1.44 million units within just 10 days of its launch. According to our calculations, the cost of cutting tools for machining a single high-end mobile phone is approximately 25 yuan. Based on forecasts for the sales of mainstream mobile phones incorporating titanium alloys in 2024, we estimate that the market size for titanium alloy machining tools in the mobile phone sector will reach 2.92 billion yuan in 2024.
Investment advice
Titanium alloys offer the advantage of being lightweight, whilst also possessing high strength. With advances in machining technology and the trend towards ever-thinner and lighter mobile phones, titanium alloys are likely to be incorporated into high-end consumer electronics such as mobile phones. However, due to the inherent properties of titanium alloys, which make them relatively difficult to machine, specialised tool designs are required. This presents an opportunity to tap into the market for high-end cutting tools, and it is recommended that this area be monitored closely. Companies involved include Dingtai High-Tech, Ouke Yi, Huarui Precision and Zhongwu High-Tech.
Risk Disclosure
The results of introducing titanium alloy materials have not met initial expectations; the economic recovery in the consumer electronics sector has deviated from initial projections; and the competitive landscape in the cutting tool industry has deteriorated.
Analyst: Wu Qi Di
Practising Registration Number: A01
Research Assistant: Cheng Zhi
Practising Registration Number: A08
Comparison of the Mechanical Equipment Index and the CSI 300 Index Trends
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