quartz crystal oscillator : TWS, 5G, and loT demand drives the industry's volume and price increase
Core view:
. Quartz crystal oscillator: the most widely used time and frequency components
quartz crystal oscillator is the core product in the field of quartz crystal components. Its core function is a high-precision frequency source. It is widely used in consumer electronic products, communication equipment, mobile terminals, network equipment and automobiles. It is the basic components of the electronic industry. From the perspective of industry scale, according to CSA data, the global market size of quartz components (resonators, oscillators, etc.) is about US$3 billion, and the overall market size remains relatively stable.
. Demand side: Downstream high prosperity such as TWS/5G/IOT, high-end products such as miniaturization, high frequency, and temperature compensation are in strong demand
quartz crystal oscillator downstream application fields are electronic products, and demand growth mainly depends on the overall growth of electronic products. From a structural perspective, emerging applications such as 5G base stations, 5G terminals, TWS headphones, IoT (Wifi, Bluetooth, NB-Iot, etc.), in-vehicle (in-vehicle communication, ETC, TPMS, etc.) in downstream application fields have a high prosperity, with a high year-on-year growth rate of shipments. Emerging demand drives product upgrades, and high-end crystal oscillator products such as high-frequency, miniaturization, and temperature compensation (TCXO, thermally sensitive, etc.) are in strong demand.
. Japan dominated the supply of production capacity, overall supply and demand improved, and the industry's profitability was in an upward channel. Similar to the MLCC industry, Japanese companies (Epson, Japan Radio, Kyocera, etc.) had a 50-60% industry share in the overall production capacity, especially in the mid-to-high-end products field. During the sluggish industry demand cycle from 2018 to 19, the industry's small and medium-sized production capacity gradually withdrew. We judge that the industry's competitive structure has been further optimized.
The industry representative company of Taiwan’s crystal oscillator leader Jingtech has recovered positive year-on-year growth for two consecutive quarters since Q2 2019. During the same period, the gross profit margin in a single quarter increased month-on-month for two consecutive quarters. We judge that under the background of high-end (high-frequency/minifiable/temperature compensation) products with high structural prosperity, Japan’s main production capacity will adopt a steady production conversion strategy (traditional production capacity to high-end) to meet the strong demand for high-end products, and the overall supply and demand and profitability of the industry will improve.
. Core basic components need to be broken through urgently, and high-end products are accelerating import substitution. It is recommended to pay attention to Taijing Technology
crystal oscillator is the core basic component. The share of mainland companies in the high-end field is relatively low. We judge that the upstream and downstream of the mainland supply chain will integrate to promote the import substitution of high-end products. It is recommended to pay attention to Taijing Technology and Huilun Crystal , which are currently in the leading position in the industry. Taijing Technology is a leading enterprise in the domestic crystal oscillator industry. The products have passed the certification or shipment of domestic and foreign major customers such as Qualcomm, HiSilicon , MediaTek , Hengxuan, and Jingchen Semiconductor. The company has outstanding advantages in production capacity scale, technical processes, customer resources, self-production capacity, and capacity expansion potential, and is expected to benefit significantly.
Risk warning: Wearable devices are not as good as expected; 5G development is not as good as expected, etc.
Text:
, TWS, IoT, 5G, downstream high prosperity, miniaturization, high frequency and other products have strong demand for products such as miniaturization and high frequency
Crystal resonator is located at the front end of the electronic information industry chain, is an important part of the electronic information manufacturing industry, and has a wide range of applications. It can be roughly divided into the following major fields:
(1) mobile terminal, the most important one refers to smartphones, in addition to this, it also includes smart watches, PDAs, handheld game consoles, handheld POS consoles, etc.
(2) Consumer electronic products, usually including laptops, tablets, cameras, headphones, audio, etc.
(3) Communication network, in which the communication network is usually divided into wired communication and wireless communication. Technical fields covered by wired communication include: optical transmission network, data processing, connection functions, etc.
(4) Medical electronics, quartz crystals have high frequency stability and are also sensitive to temperature and force. Crystal oscillators are widely used in medical electronic instruments such as pacemakers, CT machines, nuclear magnetic resonance instruments, and blood pressure meters.
(5) Automotive Electronics. In terms of automotive electronics, quartz crystal components are mainly used in automotive guidance, functional control, electronic maps, electronic positioners and car audio systems.
(6) Household appliances, the main use of quartz crystal components in color TV receivers is for subcarrier frequency recovery oscillator, timing, standard conversion and remote control. In terms of audio-visual products, it is mainly used in video recorders, cameras, VCDs, DVDs, CDs, digital video machines and digital radios.
quartz crystal resonator is widely used in the fields of industrial, civil and military electronic products. The demand for quartz crystal resonator at some application terminals is listed in the following table:
quartz crystal oscillator is the most core electronic component in 5G technology, and its function is to provide reference clock signals and receive transmission signals. Since 5G has very high requirements for using network equipment, the data to be processed by network equipment is large, and the equipment circuit needs to issue commands through the use of crystal oscillator and other components to obtain a pulse signal source to work, which means that 5G has high requirements for crystal oscillator stability and reliability. In order to meet the requirements of 5G, if smart products are to be equipped with high-end and fast 5G products, they must be equipped with high-precision small chip crystal oscillator . Due to downstream demand, crystal oscillator is developing towards high frequency and miniaturization.
Among the many downstream, we judge that IOT/5G/wearable/automotive applications are in a high state of prosperity, driving products to continue to upgrade to high frequency, miniaturization, and temperature compensation. The financial data of representative companies in the downstream application fields of various fields can be highly verified (Lexin Technology/wifi, Yiyuan Communications/ltenb-iot, etc.).
With the development of communication technology, mobile communications will enter a new stage in the future. 5G has just started in 2019, and the sales of 5G equipment accounted for less than 1% of the total sales; The 5G industry will accelerate in 2020, and the share of 5G equipment is expected to be close to 10% . The 5G industry is in a stage of accelerated development. In the next 3-5 years, the industry penetration rate will increase rapidly. It is expected that by 2025, the sales of 5G mobile phones will exceed 1 billion.
With the advent of the era of 5G and the Internet of Things, smart wearable devices are in a stage of rapid development. The wearable device market is expected to continue to maintain double-digit growth in the future and continue until 2022. According to Gartner data, it is estimated that by 2021, 505 million wearable devices (including Bluetooth headsets) will be sold worldwide, of which smart watches will be sold close to 81 million, accounting for 16% of the overall wearable device sales.
. Japan dominated the supply of production capacity, overall supply and demand improved, and the industry's profitability was in an upward channel.
The overall market sales of mainland Chinese manufacturers were lower than those of Japan and Taiwan, but the growth rate was higher than that of the world. In 2017, sales accounted for about 10.10% of the world, an increase of nearly 6.1 percentage points from 4.0% in 2010. With the rise of mainland Chinese manufacturers, market competition has gradually intensified. With the help of the cost resources of mainland China's advantages, mainland Chinese companies still have a lot of room for growth in the quartz crystal resonator industry.
Mainland share continues to increase mainly because: (1) Japanese companies have decreased their cost advantages in consumer electronic products, small electronic products and information equipment, and have turned to developing other product markets. Mainland Chinese manufacturers have gradually expanded their market share; (2) As the manufacturing center of global electronic information products, the procurement demand in downstream markets has gradually increased, driving the development of the quartz crystal components industry. It is expected that with the rapid development of Intelligent Internet of Everything in the next few years, with the strengthening of competitiveness of mainland Chinese manufacturers, their market share will continue to rise.
. The core basic components need to be broken through urgently, and high-end products are accelerated to replace imported products. It is recommended to pay attention to Taijing Technology
Taijing Technology's core products are various models of tuning fork crystal resonators (including DIP, SMD) and SMD high-frequency crystal resonators.
Huilun crystal main products are piezoelectric quartz crystal components, currently including the research and development, production and sales of surface-mounted (SMD) and dual-in-line (DIP) quartz crystal resonators, SPXO crystal oscillators, TCXO temperature compensation oscillators, and TSX thermistors.
Taiwan Crystal Technology's revenue scale is much larger than that of Taijing Technology and Huilun Crystal. In the past three years, the single-quarter revenue has been around 500 million yuan, while Taijing Technology and Huilun Crystal have been less than 200 million yuan. Taiwan Crystal Technology's gross profit margin is relatively stable, around 24%; Taijing Technology's revenue scale has been increasing year by year in recent years, but the gross profit margin has shown a downward trend; Huilun Crystal's revenue scale trend is flat, with a gross profit margin of 25.6% in 2018 being a high.
(Click on the avatar to follow; Lai Quexing Stock APP and find a medium- and long-term partner; in the stock selection column, there is also a super awesome medium- and long-term stock selection combination~)
Taijing Technology's total product production is increasing year by year, with output in 2018 of 2.78 billion, an increase of 23.51% over the previous year. In 2018, the main business revenue was RMB 548 million, an increase of 7.67% over the previous year's RMB 509 million. The proportion of M series products (i.e. SMD high-frequency crystal resonators) in main business revenue further increased, accounting for 60.75% of main business revenue, an increase of 7.44% over the previous year's main business revenue. The proportion of main business revenue of TF series and S series stations was 26.39% and 2.33% respectively.
In terms of production and sales, with the full implementation of convertible bond projects and the production capacity has gradually been released, the production and sales of M series have both increased compared with the previous year, of which the production volume has increased by 37.93% over the previous year and the sales volume has increased by 36.08%. The production and sales volume of the TF series maintained steady growth compared with the previous year, with production volume increasing by 15.46% over the previous year and sales volume increasing by 9.54%.
The company's revenue in the third quarter of 2019 increased significantly, reaching 160 million yuan; in the past 12 quarters, the company's gross profit margin has gradually stabilized, and remained at around 20% in the past 6 quarters.
Since 2016, the company has increased its research and development of new products, new materials and new equipment. In 2018, R&D investment reached 20 million yuan, accounting for 3.3% of its revenue. The company's capital expenditure in 2017 and 2018 increased significantly compared with the previous years, reaching 390 million yuan and 180 million yuan respectively.
Company has advantages in R&D capabilities, customer resources, cost control and management capabilities.
R&D capabilities: The company has mastered the main process technologies such as cutting, frequency regulation, sintering, sealing and sorting of tuning fork crystal resonator products, and has obtained a series of independent intellectual property rights, creating favorable conditions for the company's sustainable development. Through continuous R&D investment, the company has improved its production efficiency and its products' market competitiveness has been continuously enhanced.
Customer Resources: Through continuous technological innovation and marketing promotion, the company has 17 products in 2018 passed the certification of more than ten well-known domestic and foreign application solution providers such as MTK, Huawei HiSilicon, and Unigroup Zhanrui (Spanish News).
cost control: The automated production of tuning fork crystal resonators has been realized, and the entire process of independent production from crystal wool blocks to finished crystal products has been realized, with obvious scale and cost advantages.
Management ability: accumulated effective experience in refined production management, established a complete systematic professional management system, and had a group of professional technical research and development and production management professionals.
Investment advice:
crystal oscillator is the core basic component, and the share of mainland companies in the high-end field is relatively low. We judge that the upstream and downstream of the mainland supply chain will integrate to promote the import substitution of high-end products. It is recommended to pay attention to the Taijing Technology and Huilun Crystal, which are currently in the leading position in the industry in the mainland; Taijing Technology has outstanding advantages in production capacity scale, equipment self-made, self-produced proportion, and subsequent capacity expansion potential, and is expected to benefit significantly.
