Big Chinese smartphone brands bullish revenue growth targets for 2016-2017 could cause oversupply of unsold phones, warned a Morgan Stanley analyst.

Component manufacturers will be increasingly under pressure next year, a Barron's report cited Jasmine Wu, an analyst at Morgan Stanley forecasting.

Huawei Mate 9 smartphone model. (Huawei/LEDinside)

In her research report, she pointed out Huawei, Oppo, and Vivo set very high shipment targets this year, and were aiming for volume growth of 31% to 123% year-on-year (YoY). Targets for 2017 were also above double digits of 21% to 114%, with some trying to secure crucial components, such as OLED panels, or memory to reach their targeted share gains.

To make matters worse, Chinese smartphone OEMs concentrated new phone model releases during third quarter to fourth quarter of 2016 to avoid competition from top smartphone brands Apple and Samsung. This led to severe competition that has halved product life cycle from six months to less than three months, moreover there is little differentiation between OEM flagship phone models. A TechNews report pointed this indicates that smartphone production volume in 2017 might fall short of expectations, and component suppliers that aggressively expanded capacities during first half of 2016 now will face greater uncertainties.

Market rumors pointed out Mediatek backed fingerprint recognition IC manufacturer Goodix recently acquired a large order from a top foreign manufacturer, but other companies have been less optimistic of future developments. Swedish fingerprint recognition device manufacturer Fingerprint Cards (FPC) slashed its 2016 revenue guidance, according to a report from Huatai Research.

FPC lowered its revenue outlook in 2016 from SEK 7.2 billion to 7.5 billion (US $770 million to US $810 million) down to SEK 6.6 billion to SEK 6.8 billion.

This is equivalent to 28% revenue decline during fourth quarter, which was mostly caused by adjustments in inventory, component shortages and escalated competition. FPC lost its market shares throughout 2016, and lost some of its orders to Goodix. Large fingerprint recognition module manufacturer Shenzhen O-film Tech noted despite shipment growth, FPC market share in the fingerprint recognition device supply market plummeted from 90% to 50%.