Author: Wei Shun
Source: Stock Market Dynamic Analysis
2019 is the first year of technology investment, and in 2020, the themes of big technology are still rising one after another, individual stocks doubling, and all sub-sectors of big technology are moving towards an upward trend. At the end of last year, some securities firms sorted out the investment clock of technology hardware. The order of investment in big technology should be integrated circuit manufacturing, packaging, power semiconductors, passive components, LEDs, PCBs, panels, module manufacturing and whole machine manufacturing. If you look closely at the market, the integrated circuit industry chain has reached its climax. Judging from the sector rotation, power semiconductors, passive components, panels and other links are still in their infancy.
This kind of judgment sounds comfortable, but it lacks some basis. However, from the perspective of the industry, passive components do have the logic of brewing a wave of price increases. Similar to the panel section, on the one hand, it benefits from the surge in demand in the downstream 5G and electric vehicle industries, and inventory sales are coming to an end; on the other hand, the capacity structure of the top companies in the industry has shifted and the supply side has contracted, and giants such as Guoju show signs of supply price control. The key is that after experiencing overcapacity from 2018 to 2019, the overall sector is already at the bottom.
inventory declined. The country's huge price increase
passive components are the name of some electronic components in the Taiwan electronics industry. It is commonly known as passive devices in the mainland. It refers to circuit components that do not affect the basic characteristics of the signal and only allow the signal to pass without changing. The most common passive components are resistors, capacitors and inductors. The three accounts for about 90% of the total output value of passive components, among which the capacitor market is the largest, accounting for about 40% of the total electronic components.
0 The wave of price increase of passive components in early 2018 is still vivid in my mind. The logic of the price increase of passive components in the last round is similar to that of the panel industry. They are all due to changes in the industry demand structure, causing a gap in production capacity in the original field, which leads to price increase expectations. At that time, the shift in the production capacity of MLCC giants such as Murata and TDK to the high-capacity, ultra-miniature automotive and mobile phone fields just left room for growth for the second and third camp enterprises.
Whether it is a panel or a passive component, it is a cycle of cycles. The previous round of price increase in panels was in 2017, and the previous round of price increase in passive components was in early 2018, which was about half a year away from the panels. The recent wave of panel price increases has arrived, and the price increase of passive components is also ready to move. From the supply side, there are two main logics for the rise in passive components prices:
First, the inventory cycle of large factories has dropped significantly. The healthy inventory level of the passive components market is 3-4 months, but the inventory of capacitors has been reduced to 70 days in the fourth quarter of last year.
Second, Guoju closed the trading system and controlled the price increase of goods. The global passive component market is controlled by Taiwanese manufacturers, among which TSMC and Guoju account for the largest proportion. In November last year, Qilixin, a resistor manufacturer under Guoju, announced that at least 30% of the products were not in stock in a customer's order, and suppliers were unwilling to ship at low prices. Its subsidiary Wangquan announced that it would stop taking orders. Subsequently, Guoju closed the trading system and cleared the unfinished orders. Customers need to place orders again after the platform is opened. All orders will be traded according to the subsequent price of the website. This move is considered a precursor to price increases. By the end of December, its distributor Guoyi issued a price increase notice, with the price of resistors rising by 10%-15%, and the price returned to the first quarter of 2019.
Recently, Wangquan announced that benefiting from the recovery of the resistor and inductor market, orders have been fully shipped in the first quarter, the delivery time for thick-film resistors will be extended to 4-5 months, and the inductor will be extended to 3-4 months, and the product price will rise by 15%.
Considering that the Spring Festival in the mainland this year is early and the shortage of manpower causes tight production capacity, the market expects that some products may still be expected to increase in February, and the recovery of production capacity will not be eased as soon as possible after the third quarter.
Soar in demand in 2020
All price increases are nothing more than the imbalance of supply and demand, and the demand side brings greater opportunities.From the perspective of demand, the consumption of passive components is linked to the functions of electronic smart terminals. Usually, the more functions, the more parts consumed. Among passive components, mobile phones and automobile electronic consumption accounts for nearly 40%. In 2020, demand in the two markets will change greatly in the future.
Take the capacitor, which accounts for the largest proportion, as an example. The growth rate of mobile phones has slowed down in recent years, but the diversified development of functions has brought new increments. Iphone X demands more than twice the MLCC than the Iphone 4S. With the arrival of 5G in the next few years, the demand for passive mobile phones may increase by 50% or even double, and what is added up will not be a 2-3-fold increase. In terms of electric vehicles, automotive electronics is an incremental cake. According to statistics, a pure electric vehicle demands 6 times that of traditional fuel vehicles. At present, pure electric vehicles are an industry with a clear trend, and the demand for passive components will accelerate in the future.
From the perspective of industry scale, the market size of passive component in 2016 reached US$24.24 billion, and is expected to reach US$32.89 billion in 2021, with a compound growth rate of 6.29%. As industries such as 5G and electric vehicles gradually increase in volume, the market for passive components will achieve multiple growth in the future.
Overall, it can be seen that the expectation of this round of price increases is actually driven by the shrinking supply of industry giants. It is not clear whether Guoju is really controlling the quotation of production or just a fake shot. After all, the price increase is only announced by its distributors and subsidiary companies, and we need to focus on the quotation of the giants in the future. But one thing is clear, that is, after experiencing overcapacity from 2018 to 2019, the entire industry is currently at the bottom, and downstream demand this year is very strong, and there is full momentum for upward.
main target analysis
From an investment perspective, there are actually not many A-share companies focusing on passive components, and their production capacity is mainly mid- and low-end. Specific targets include Fenghua Hike , Sanhuan Group, Torch Electronics, Hongyuan Electronics, Fara Electronics , Shunluo Electronics , etc. Among them, Fenghua Hike is the absolute leader. The speculation in 2018 has more than doubled the company's stock price. If the industry really starts in the end, just buy it. At the same time, we can focus on the second-tier white horse stock Fara Electronics . It has been deeply engaged in thin-film capacitors for more than 50 years and is a domestic leader in this sub-sector. It has no problems in technology, has strong profitability and a high dividend ratio for many years. In the future, it will benefit from the rapid growth of electric vehicles.
5G mobile phones have the greatest innovation in RF , which will directly drive the demand for RF inductors, especially high Q value miniaturized inductors. At present, the 0201 inductor is the mainstream of mobile phones, while the penetration rate of the 01005 inductor continues to increase and will be widely used in the 5G era. Shunluo Electronics ranks among the forefront of the industry in inductance technology and is one of the few manufacturers in the world that can mass-produce 01005 inductors. The benefits will be obvious. The stock price is already on the upward trend. Unfortunately, the valuation is too high, and performance expectations cannot be fulfilled and it is easy to step on the mine.
In addition, Torch Electronics and Hongyuan Electronics used to focus on the military MLCC market, but now it has gradually moved to civilians. Of course, there is uncertainty in whether the performance can be released, but the stock price and valuation of individual stocks are relatively low compared to Fenghua Hi-Tech , so it will be relatively comfortable to buy.
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(Editor: Xiaogu)
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