(report producer/author: Guojin Securities/Luo Lu, Shao Yikai, Jin Jing)
1. Investment opportunities in the communications industry are in the new generation of ICT industry chain
geopolitical and other macro factors on the 5G and communications sector markets weakened, and meso-industry trends and micro-company operations have become the dominant force that determines future market performance. Since the ZTE embargo incident in 2018, the marginal impact of geopolitics on the communications sector has gradually weakened after reaching its peak in the Huawei incident in 2019. Including the recent announcement by the US Department of Commerce that it plans to add Hengtong Optoelectronics and Zhongtian Technology to the export control "entity list" to the export control "entity list", the performance of the communications sector will be more reflected in the fundamentals of bottom-up companies and sub-industry.
differentiation is the theme of the communications sector market in 2021. We believe that this differentiation is structural and will continue in 2022. With the continuous integration of ICT and traditional industries, information and communication technology has become the infrastructure of all walks of life. Standing in a longer time dimension, the industry's investment opportunities will gradually shift from the equipment vendor industry chain to the new generation of ICT industry.
Before the emergence of new smart terminals and killer application services, the supply chain of equipment manufacturers was more of a structural market, and the expansion of global market size and domestic substitution were the main lines. More growth investment opportunities will come from scenarios where communications and vertical industries are integrated, including new industry tracks such as AIoT, cloud computing, digital energy, and smart cars.
2. 5G investment has shifted to a long demand-driven period, and more attention is paid to structural opportunities
2021 is the second year of the three-year 5G network construction period, and the core of industrial development has shifted from investment-driven to demand-driven. Overall, the development of the 5G industry is currently slightly lower than expected. We believe that there are two reasons: First, compared with 2/3/4G, 5G is a transformation from the "19" to the "91" model. The main application scenarios are on the B end, and the mature application of the B end is naturally slower than the C end; Second, from the perspective of the end-pipe-cloud industrial architecture, killer terminals and applications on the C end have not yet appeared and are still being cultivated and incubated.
We believe that the first wave of mainstream market driven by operator investment has ended, and the second wave of consumer consumption-driven applications and service markets are still incubating. For most equipment supplier supply chain companies, before the emergence of killer applications and services, they are more of a structural market, and they can focus on the two dimensions of global market expansion and domestic replacement.
5G The capital expenditure cycle of operators in the era has been significantly weakened. Reflecting on the investment intensity (Capex/Revenue) indicator, the curve began to flatten in the 5G era, and no longer had obvious peaks and troughs like the 3/4G era. In 2021, the total number of 5G websites in China will exceed 600,000, which is expected to account for more than 70% of the world's share. According to the 14th Five-Year Plan, the total amount of 5G construction will remain at around 600,000 per year. Overall, we believe that maintaining stable and moderate growth is a relatively reasonable expectation for future operator capital expenditure planning. Of course, as the core infrastructure of new infrastructure, 5G investment in 2022 also has the possibility of exceeding expectations under "moderately ahead".
2.1 The fundamentals of the operator sector show a trend of improvement
Policy and environmental changes: As a monopoly industry under government supervision, operators have pricing power and bargaining power. The regulatory policies in the 5G era are relaxed, and the strong regulatory cycle starting from 2011 is coming to an end; the competitive pressure of oligopoly has weakened, and the 5G era has entered the era of stock operation, similar to the "unlimited traffic package" price war in the 4G era has lost its commercial foundation; as central enterprises become the repositioning of national strategic scientific and technological forces and the deepening of a new batch of mixed-ownership reforms by operators, the upper limit of policy space is expected to be opened.
Industry changes: In the 5G era, the industry cycle weakens, capital expenditure will remain stable for a long time, the peak of investment intensity (Capex/Revenue) has dropped from 3G 41% and 4G 34% to 5G less than 22% in 2021, and the depreciation pressure is gradually declining. In the future, we expect the intensity of capital expenditure of the three major operators to fall slightly and remain at around 20%.
C side revenue The downward trend of ARPU reversed, and the B side became a new growth point.The business development of the three major operators of has accelerated from the transformation from communication services to information service . Taking China Mobile as an example, in the next five years, China Mobile's revenue structure C-end: non-C-end 7:3 (2020) trend 5:5 (2025). It is estimated that by 2025, China Mobile's public cloud/IDC revenue alone will reach 100 billion. Even if there is no killer 5G 2C service in the short term, the downward trend of ARPU value has been reversed.
2.2 Main equipment vendors market share increases and profitability improves
Global operator capital expenditure will still be moderate in 2022, pay attention to structural market opportunities for equipment vendors. According to the forecast of Dell'Oro Group, the global overall telecommunications equipment market will grow by 2% in 2022. We believe that in the context of moderate growth in the industry, more attention should be paid to structural growth opportunities. From the perspective of the main equipment vendor market, regardless of whether the Huawei embargo is lifted or not, the upward trend of ZTE global market share will not change. Huawei is not likely to have a major risk of shutting down the supply of by . Under the assumption of long-term embargo, the market share will gradually fall from 40% to about 30%. Huawei's lost market share overseas will be mainly filled by Ericsson and Nokia. Ericsson's market share is expected to stabilize at around 27% in the next three years. Due to poor performance in the Chinese market, the market share of Nokia is expected to fall back to around 15%.
is expected to be the main equipment vendor with the most certain market share growth in the next three years. Currently, the total 5G base station construction in China has accounted for about 70% of the global 5G market share. ZTE's market share in China will steadily increase, and its wireless market share is expected to increase by 3-5PP in 21 years. We are also optimistic about the company's share expansion after the gradual increase in the overseas 5G market in 21 years. It is expected that the company's global market share will increase by 3-4PP every year in the next three years (21-23). At the same time, from the perspective of industrial laws, as 5G construction passes through the introduction period, the company's profit level will gradually rise.
2.3 The optical communication market bottomed out and rebounded. It is recommended to pay attention to the leading Dutong optical module
Telecom and Dutong optical communication market Q3. The trend has improved, and the optical communication market will remain at a relatively high prosperity level in 2022. In 2021, China's 5G construction showed a low at the beginning and high at the end. The total number of 5G websites in the second half of the year accounted for more than two-thirds of the year. The optical module market in the telecom market increased significantly in the second half of the year.
Outlook In 2022, the growth of optical modules in the telecommunications market will be relatively moderate, and the main increment will still come from the data center market, especially overseas markets. Benefiting from the promotion of metaverse construction and supply chain mitigation, according to Dell'Oro's forecast, global data center capital expenditure is expected to grow by 17% in 2022; data center capital expenditure of Top 4 cloud service providers ( Amazon , Google , Meta and Microsoft ) is expected to exceed US$20 billion in 2022.
2.4 Application side pays attention to the progress of the VR/AR industry chain
VR. The rapid development is still taking time for AR. We believe that AR/VR services will become the killer-level business in the 5G era, and the next generation of general computing platform after mobile phones and tablets, driving the development of the entire 5G industry chain. Qualcomm CEO said in November 2021 that Oculus Quest 2 shipments are expected to reach 10 million, which will be a node event of great significance to the industry. Tens of millions of scales mean that content and ecosystems will achieve leapfrog development. In the next five years, we optimistically predict that VR will maintain rapid growth.
In the long run, the ceiling of VR equipment should be benchmarked against tablets, and the ceiling of AR equipment should be benchmarked against smartphones. Since it still takes time to solve the problems such as display, power consumption, algorithms, and cloud communication encountered by AR development, we expect that it will take 3-5 years to mature AR devices.
3. Cloud computing: marginal improvement in prosperity, pay attention to new applications and structural investment opportunities
3.1 The overall economic development of the cloud computing industry has improved significantly
2021 Since Q3, the tracking data of the cloud computing industry chain has shown that the marginal improvement in prosperity has improved significantly, among which the growth rate of capital expenditure of overseas cloud computing giants is more optimistic than that of domestic .Xinhua has achieved continuous monthly revenue from January to October this year, with positive year-on-year growth of and positive year-on-year, and its revenue growth rate in October increased by as high as 88.61%. 3Q21 Overseas cloud manufacturer FAMGA capital expenditure increased by 36.81% year-on-year. Meta (formerly Facebook) said it will continue to increase capital investment, and capital expenditure will reach US$29-34 billion in 22 years, an increase of more than 50% year-on-year. The overall growth rate of capital expenditure of domestic cloud manufacturers maintained positive growth (YOY 9.69% in Q3). Against the backdrop of stricter domestic policy supervision, cloud manufacturers' investment remains resilient. According to IDC data, the global server market revenue in Q2 reached US$23.6 billion, with shipments of nearly 3.2 million units, maintaining stability year-on-year. The overall trend of digital transformation remains unchanged, with new technologies and application scenarios such as 5G, AI, big data, and edge computing emerging one after another. 21Q3 Under the high base last year, the upstream and downstream data of the industrial chain remained stable and rose. We expect that the downstream demand will remain high in Q4 this year and the first half of next year.
3.2 IaaS: The growth rate of domestic leading cloud giants has slowed down, the product matrix of the second-tier manufacturers continues to be improved
Didi delisted, the leading Internet companies were punished by antitrust, and the public cloud market Matthew effect may slow down. The information security alarm is sounded due to Didi's serious illegal and irregular use of personal information. In recent years, the government's emphasis on information security has been continuously increasing and has risen to the national strategy. On July 10, the "Cybersecurity Review Measures" was revised, with the increase in triggering conditions and a wider scope of recognition. For the sake of information security and policy orientation, downstream cloud computing customers may take more prudent procurement decisions, and domestic cloud manufacturers have a natural advantage over international cloud giants. As the government continues to increase its anti-monopoly efforts, the growth rate of domestic leading cloud manufacturers may slow down.
industry cloud market space is vast, and second-tier cloud computing manufacturers such as Kingsoft Cloud continue to improve their product matrix and vigorously develop industry cloud. Kingsoft Cloud Q3 industry cloud achieved revenue of 727 million yuan, Y/Y 77.67%, far exceeding public cloud (Y/Y 28.7%). The core customer base of public cloud has been steadily increasing, the customer matrix is constantly improving, the revenue sources are diversified, and new customers are added to Pinduoduo. The industry cloud focuses on the three high-value vertical industries of finance, medical care and public services: the financial field has covered 60% of China's top 10 banks, and Q3 provides big data middle platform construction for many financial institutions; in the medical field, it helps to build the first cloud platform in China to realize provincial image data sharing (Jiangsu Province Image Cloud ); in the public service field, it has helped to build a total of hundreds of regions in new infrastructure, and has once again been shortlisted for the Beijing-level government cloud , reflecting that the company has been widely recognized by customers in the government cloud section. Neutral cloud service providers enjoy the dividends of digital economy development, and edge clouds are expected to become a new driving force for growth. Under the slowing pattern of Matthew effect, the company's market share is expected to further increase.
3.3 IDC: Industry clearance is intensifying, and under the background of new energy policy, it is recommended to super-equip upstream equipment vendors
energy consumption dual control promotes IDC supply-side reform, and leading manufacturers are expected to seize the opportunity of market clearance. The domestic front-line areas are in short supply. The country implements dual energy control policies, and advance layout of new energy and improving energy control and operation and maintenance capabilities are the key to enterprises' revenue growth. The country has introduced a series of policies for IDC's green transformation, and has stricter requirements for data center energy consumption indicators. In November, the Ministry of Industry and Information Technology issued the "14th Five-Year Plan for Information and Communication Industry Development", which clearly stated that the PUE of large domestic data centers should be reduced to below 1.3 by 2025. The "dual carbon" strategy will accelerate the optimization of the industry structure, and leading manufacturers are expected to seize the opportunity of market clearance, and the industry concentration is expected to increase. New applications such as
Metauniverse will drive the demand for higher computing power (from underlying chips to AI servers and data centers). Meta, Microsoft, Nvidia and other technology giants have all laid out the metaverse. Nvidia launched a real-time simulation and collaboration platform for enterprises at the GTC conference in November. Its essence is a digital twin after technology strengthening: users can work collaboratively in the virtual world, design and manufacturing of automobiles, manufacturing, and architecture, so that multinational teams can complete a series of complex processes such as design, simulation, and optimization before realizing the production of new products to improve efficiency.Currently, there are customer examples such as BMW Group, Walmart, Ericsson , which have given the realization of the meta-universe concept to a certain extent.
technology iteration and industrialization process will continue to drive software and hardware investment in related fields. To realize the scene depicted by the metaverse, needs to digitally simulate a large number of scenes in the physical world, just like the Internet in the 3D world, which puts higher requirements on chip performance, data throughput, and data centers, and will continue to drive related software and hardware investment. According to IDC data, China's meta-universe-related IT spending will reach nearly US$200 billion in 2025, with a compound growth rate of 2021 to 2025. Among them, AI expenditure will reach US$16.3 billion, accounting for 8%; big data expenditure will reach US$25.5 billion, accounting for 13%; cloud computing expenditure will reach US$81.4 billion, accounting for the largest proportion, accounting for about 42% of the total expenditure. The construction of the metaverse will promote the iteration of high-end optical modules such as 400G/800G and accelerate the increase in high-end products. The future high-end optical module market space is worth looking forward to. Leading manufacturers (such as Zhongji Xuchuang and Xinyisheng ) account for more than 50% of their overseas revenue, which is expected to benefit first in the wave of overseas metaverse.
3.4 Server: The growth rate of China's server market exceeds the global market, and factors such as supply chain have changed the industry's competitive landscape
Server market has recovered, and public computing infrastructure investment and policies have promoted high growth in the Chinese market. 2021Q3 The global server market overall rebounded rapidly, with sales in China increasing by 15.1% year-on-year, exceeding the global average growth rate (8.8%), mainly due to the growth in computing power demand driven by macro policies and new technologies. The digital economy was included in the outline of the 14th Five-Year Plan, and it was clearly proposed to lay out the national hub nodes of the national computing power network, launch and implement the "East Digital and West Computing" project, and coordinate the construction of computing power hub infrastructure. Emerging technologies such as cloud, edge computing, software-defined infrastructure and heterogeneous computing for artificial intelligence continue to drive market growth. In the first half of 2021, the accelerated server market size reached US$2.38 billion, an increase of 85.1% year-on-year. Among them, GPU server still dominates, accounting for 91.9% of the market share. IDC predicts that China's accelerated server market will reach US$10.86 billion by 2025.
Supply chain, domestic substitution and other factors have changed the competitive landscape of China's server market. 2021 Q3 Wave Chao server market share increased significantly: by revenue, Q3's global market share was 9.9%, an increase of 0.6 Pct year-on-year; by shipment, Q3's share was 10.0%, an increase of 0.4 Pct year-on-year. New H3 server revenue share in the global market share was 4.6%, an increase of 0.7 Pct year-on-year. The share of overseas manufacturers such as Dell and HPE has declined. Huawei Server's Q3 revenue was 2.9 billion yuan, a year-on-year decrease of 62.3%, and its market share decreased by 3.5 Pct to 1.8%, ranking dropped to ninth. We believe that Huawei has given up its market share due to the influence of upstream components supply chains, Sino-US trade frictions have intensified, and domestic substitution has accelerated. The market share of domestic manufacturers such as Inspur and H3 Xinhua News Agency is expected to continue to increase.
3.5 SaaS: Domestic substitution and cloud transformation are accelerating, and popular tracks continue to heat up
Domestic substitution and cloud transformation are still core investment opportunities for general ERP manufacturers. general-purpose ERP manufacturers represented by Kingdee and UFIDA seize the opportunities of enterprise cloud transformation, orders are frequently reported, traditional enterprises have increased their acceptance of cloud-native products, and cloud business has constituted the main source of revenue for UFIDA and Kingdee, accounting for more than 50%. They cooperate with leading companies to set benchmark projects, which is expected to break the monopoly of high-end ERP products. UFIDA Network has signed contracts and cooperation with many central enterprises and leading enterprises, such as National Development Investment Group , Aerospace Science and Technology Group, China Post , etc. Many benchmark projects of Kingdee have been successfully implemented, such as Huawei HR Phase I project and Yunnan Zhongyan ERP platform. In the future, with the accelerated release of domestic substitution demand and the demonstration role of benchmark projects, and strengthening cooperation with ecological partners such as channels, consulting, and delivery, the proportion of cloud business revenue will continue to increase and performance will gradually be released.
Policy drives industrial software, network security, financial technology , tax informatization, energy informatization, autonomous driving and other sub-tracks continue to be in high prosperity. The Ministry of Industry and Information Technology issued key policies such as the "14th Five-Year Plan for Software and Information Technology Service Industry Development Plan", the "14th Five-Year Plan for Big Data Industry Development Plan", and the "14th Five-Year Plan for Integrated Informatization and Industrialization" to clarify that by 2025, informatization and industrialization will achieve integrated development on a wider range, deeper and higher level, and the pace of digital transformation of manufacturing will be significantly accelerated. Under the background of the "dual carbon" policy, the popularity of energy and power informatization continues to increase.
4. Data center energy: bit management watts, creating new opportunities under high computing efficiency and low energy consumption
4.1 bit management watts, high computing efficiency and low PUE have become the general trend of the IDC industry
. Against the background of global data surge and " carbon peak , carbon neutrality", the data center field ushered in a period of technological and commercial changes. At present, ICT technology is constantly integrating into data center infrastructure and integrated system design, achieving high computing efficiency and low PUE has become the core trend of the IDC industry. The innovation integration of Watt technology, thermal technology, energy storage technology, cloud and AI technology, etc. accelerates the digitalization of data center energy and realizes bit management Watt.
The essence of a data center is to convert power into computing power, and efficiently convert power into computing power requires IT equipment to improve computing efficiency; on the other hand, high power density and low PUE standards will also further improve the requirements for data center heat dissipation and refrigeration systems. We estimate that the market size of data center infrastructure construction will reach US$310.5 billion by 2025 and US$403.6 billion by 2030. Among them, the CAGRs of servers, storage, refrigeration systems, and distribution systems for ten years are 6%, 6%, 20%, and 12%, respectively.
The initial construction expenditure of data center infrastructure mainly includes two parts: physical infrastructure and IT equipment procurement. Among them, the physical facilities are mainly composed of distribution systems, refrigeration systems and other (installation, labor costs, etc.). According to the Schneider investment cost calculator, taking the construction of 2000kw, a single cabinet power density of 8kw, and mainly air-cooled and heat dissipation (N+1) redundant data centers, as an example, the construction cost per kilowatt is about US$4,600, and the distribution, refrigeration and construction account for 47%, 20% and 33% respectively. We believe that the market demand for hardware equipment mainly comes from the replacement of new data centers and existing data centers, which brings a total of 14,544MW of new IT load demand, corresponding to the physical infrastructure market space of US$66.9 billion.
In the future, the increase in rack power density and the proportion of hardware equipment expenditure will increase, and the market space of refrigeration systems and distribution systems will rise from US$13.4 billion and US$31.4 billion in 2020 to US$78.7 billion in 2030, respectively, with CAGRs of 20% and 12% respectively.
4.2 The field of temperature control has entered a period of technological innovation. In the process of land grabbing
The temperature control system is second only to IT equipment's energy consumption source, and controlling temperature control energy consumption is a breakthrough to reduce data center PUE. In December 2020, the "Guiding Opinions of on Accelerating the Construction of a National Integrated Big Data Center Collaborative Innovation System " proposed that the operating power utilization efficiency of large and super-large data centers will be reduced to below 1.3. The energy consumption of data centers is mainly composed of IT equipment, temperature-controlled air conditioners, power distribution and lighting. When the PUE is reduced from 1.92 to 1.3, the energy consumption of the air conditioner system will decrease from 38% to 17.5%. Reducing the energy consumption of the air conditioner system will become the key to reducing the overall PUE.
high-density large-scale data center construction is accelerating, the cooling market is undergoing reconstruction, and liquid cooling and evaporative cooling technologies are expected to replace the traditional air-cooling market. As the single unit of the data center becomes larger and larger, large and super-large data centers are constantly emerging. The application of high-power density rack servers, blade servers and other high-thermal density equipment has led to an increase in the power consumption of a single cabinet in the computer room. The sharp increase in heat per unit area forces data center heat dissipation technology to innovate, and the market structure has changed from air-cooling to liquid-cooling.
Efficient heat exchange improves heat dissipation efficiency, and the market share of liquid-cooled data centers has gradually increased. Currently, the domestic data center has a market size of computer room air conditioners of 6 billion yuan, and the market share of air-cooling and cooling has dropped from 67.1% to 59.4%.Liquid cooling technology uses liquid as a heat transfer medium to guide heat sources and take away heat, and has obvious advantages in high-power density data centers. From the perspective of market demand and sales, air-cooled refrigeration is still the mainstream model in room air conditioning , but refrigerated water-cooled refrigeration shows a rapid growth trend. From 2016 to 2019, the market share of air conditioners in refrigerated water-type machine rooms increased from 24.5% to 33.4%.
domestic computer room air conditioning market has many strong ones, and Weidi has a stable leading position in technology. In 2019, the domestic computer room air conditioning market Weidi technology market share was about 30%, and Jialitu , Aite.com, Imikon, Huawei and Yingweik each accounted for 10%. Weidi Technology was formerly the Emerson Network Energy business. It has been deeply engaged in the field of digital infrastructure for many years and has ranked first in the domestic computer room air conditioning market for 16 consecutive years. Globally, Weidi Technology has a broad customer base and currently operates more than 1 million air-conditioning products online. In the future, the replacement of existing data center products will have a scale advantage.
emerging evaporative cooling market Huawei leads the way, and domestic traditional temperature control companies continue to improve their brands. In the future, it is expected to rely on their technological advantages to gain greater growth space . Compared with liquid cooling, indirect evaporative cooling materials have lower costs and broader market application space in the short term. As a Huawei supplier, Invik's indirect evaporative cooling technology is in the industry and has launched XFlex modular indirect evaporative cooling unit; Shenling environmental data service air conditioners are jointly designed and manufactured with Huawei, mainly supplying them to Huawei; Yimikang's subsidiary companies and Huawei jointly develop intelligent base station thermostats, which can save energy up to 20%-90%, and are mainly used in overseas businesses.
Thanks to the acceleration of data center computer room construction, the revenue of temperature control enterprises is on the rise; in the future, under the large-scale trend of data center construction, the indirect evaporative cooling market will be opened, and enterprises with technologically leading advantages will have a lot of room for growth. Under the trend of large-scale and high-density construction of
IDC, the market demand for temperature control in the computer room will continue to increase. On the one hand, leading enterprises will consolidate their position by relying on customer resource advantages and technical accumulation; on the other hand, the increase in IT power density in data centers has prompted iterative computer room cooling technology, and liquid cooling and indirect evaporative cooling are expected to be replaced by their low PUE and high-efficiency refrigeration advantages.
4.3 Data Center UPS is developing towards lithium batteryization and modularization
Data Center high-density evolution trend, IT equipment circuit integration has increased, and high-voltage DC power supply technology is expected to become the mainstream power supply and distribution technology in high-density data center IT computer rooms. As the guarantee of the data center power supply system, UPS uninterruptible power supply is considered from the perspectives of life cycle , safety and reliability, elastic capacity expansion, lithium batteryization and modular UPS will become the future development direction.
Data center energy storage construction opens up UPS growth space. On July 14, 2021, the Ministry of Industry and Information Technology issued the "Three-Year Action Plan for the Development of New Data Centers (2021-2023)", which proposed to support the exploration of the use of lithium batteries, hydrogen storage and flywheel energy storage as diversified energy storage and backup power supply devices in data centers, and strengthen the promotion and application of power battery cascade utilization products.
Domestic UPS sales in 2020 were 10.382 billion yuan, and it is expected to maintain an upward trend with a 13% annual compound growth rate in the future, reaching 20 billion yuan in 2025. In the future, with the expansion of data center scale, IDC will become the main driving force of the UPS market.
modular UPS architecture supports elastic expansion of data centers, and accelerates the penetration of market applications. has different IT services, in order to match IT equipment with different power densities, modular UPS can support the evolution of IT equipment with CAPEX with optimal life cycle, achieve flexible deployment, on-demand expansion, and realize installment investment. Overall, the growth rate of modular UPS in 2020 reached 9.5%, higher than the overall growth rate of 6.2%. With the advantages of high efficiency and energy saving, rapid delivery and continuous expansion, GGII analysis believes that the application proportion of modular UPS in the next three years is expected to exceed 50%.
"Lithium advances and lead withdraws" trend is advancing, and data center power supply and distribution are gradually moving towards full lithium batteryization.Traditional data center power supply systems use lead-acid battery , and the application bottleneck is becoming increasingly serious, with problems such as system fragmentation and complexity, large footprint, and difficulty in fault location. Lithium batteries have the following advantages: 1) The life cycle of lithium batteries is twice that of lead-acid batteries, and there is no need to replace them within 10 years; 2) The short-term large-scale discharge capacity is strong, the energy density is high, about 3 times that of lead-acid batteries, and can save 70% of the area; 3) The intelligent lithium battery system using lithium iron phosphate can be avoided daily inspections, and does not produce oxygen when thermal runaway, and does not catch fire, and has higher reliability; 4) The number of cycles of lead-acid batteries is only about 150 times, and the number of cycles of lithium batteries can reach 5,000 times, and the cycle life is long. According to Gaogong lithium battery data, the current penetration rate of lithium battery UPS is about 3%. We believe that lithium battery UPS is currently in the test cycle. Assuming the cycle is 2-3 years, it is expected that by 2025, the proportion of lithium battery will increase significantly to 30%-40%.
price disadvantage has become the main resistance to lithium battery penetration, and optimizing battery pack design and PACK technology is the key to reducing costs and increasing efficiency. At this stage, domestic UPS lithium batteries mainly have two major technical routes: lithium iron phosphate batteries and ternary batteries. Among them, lithium iron phosphate batteries with good safety and long cycle life are the mainstream. The UPS lithium battery single watt-hour with 5C discharge reaches 2.6-2.7 yuan, and the price of a conventional UPS lithium battery pack (LFP) with electricity is 0.73 yuan/Wh. With the improvement of industry scale and technology, the prices of most materials have been in a downward channel in recent years. However, in 2021, various materials rebounded and rose under the high prosperity of power batteries, and some materials rose by more than 100%, which put pressure on the penetration of lithium batteries in UPS. Under the trend of lithium battery in
UPS, UPS will no longer be a single device unit in the future, but an integrated solution PACK that integrates UPS battery cells, modules, BMS, heat dissipation, and power cable data wiring.
Optimizing battery pack design and PACK process to improve battery efficiency is the core control point of lithium battery UPS. Lithium battery cell manufacturers will become a trend for entering the lithium battery PACK industry. PACK is a key link connecting upstream and downstream, and a key link in lithium batteries from "standardization" to "personalization".
UPS battery market has shifted from single product sales to integrated solution model, and system integrators have achieved rapid growth. industry agents cooperate with system integrators’ customer-oriented channel system to meet customers’ needs for customized lithium battery UPS. Battery cell companies are more familiar with product performance and use self-built PACK production, packaging battery packs, and selling them to downstream customers in packages. Currently, 60-70% of battery PACK are completed by battery cell companies.
We believe that the evolution of the high-density trend of data centers has prompted the power supply and distribution systems to move towards the era of high-voltage DC and lithium battery UPS. With its integration advantages and integration capabilities, Huawei has a solid position in the market leading position in modular UPS and lithium battery UPS, and is expected to lead the penetration of new technologies during the market expansion cycle.
4.4 Prefabricated modularization has become a new direction for data center construction
Prefabricated modularization has become a new direction for data center construction. prefabricated modularization is to split the data center into the core module of the computer room, auxiliary function module and peripheral power module. Each module is prefabricated in the factory and assemble and constructed on the construction site. It has the following advantages: 1. Accelerate the construction of data centers and shorten the construction cycle from 23 months to 9 months; 2. Realize standardized and productized production to effectively ensure delivery quality and later performance; 3. Used for modular UPS, temperature-controlled and heat dissipation products, adapted to a variety of temperature control solutions such as air cooling, liquid cooling, indirect evaporative cooling, and integrated power supply solutions such as smart lithium batteries.
According to 451 research, the global prefabricated modular data center market size is US$4.4 billion in 2020, and the CAGR is expected to be 14.4% in the next five years. In terms of the domestic market, from 2013 to the present, the market size of domestic modular data centers has increased from 3 billion yuan to 6.3 billion yuan. We predict that it will reach a 10 billion market in 2025, with an annual compound growth rate of 11%.
edge computing is the next major driving force of the managed data center market. IDC predicts that the scale of China's edge computing market will reach 29.6 billion yuan in 2021, and the growth rate will continue to expand by more than 60%.According to Global Market Insights, the global edge data center market will grow from the current $4 billion to over $13 billion in 2024, with a broad market space.
edge data center construction requires rapid deployment and flexible installation on the near data end, and IT capacity is designed according to industry application requirements. The modular data center can be flexibly assembled according to customer needs. After the construction cycle is over, horizontal or vertical expansion can be continued to meet the situation of insufficient computing power in the future. Compared with traditional data center construction, we take the construction of a 5000kW data center with a single cabinet as an example. According to Schneider's calculations, considering the early capital expenditures such as construction equipment, construction, building materials, etc., prefabricated modularity can save about 40%. (Report source: Future Think Tank)
modular data center market is fragmented and fragmented, and companies with cost advantages and customized solutions capabilities are expected to stand out. According to Frost Sullivan data, in 2020, the top five manufacturers accounted for 46% of the market share, of which Huawei accounted for 21%. The other manufacturers Viti, Ait.net Energy, Schneider, Kehua Hengsheng and Shuguang Energy Conservation are both in the second echelon, with market share of around 5%-7%, and the competition pattern is still unclear. In the future, with the rise of edge data centers, the advantages of rapid construction and delivery of modular data centers will be reflected in the future, and market demand will continue to be strong, and controlling transportation costs and early construction materials costs will become the key to determining profitability.
edge computing application scenarios are rich, and edge custom servers are ushering in rapid growth. The combination of edge computing and emerging technologies such as artificial intelligence, 5G, and the Internet of Things, coupled with the demand of industries such as energy, transportation, and manufacturing, the edge customized server market will usher in rapid growth from point to surface, and is expected to become one of the fastest growing sub-markets in the server market in the next five years.
According to IDC, the overall market size of China's edge computing servers in 2020 was US$2.655 billion, a year-on-year increase of 16.3%. From 2020 to 2025, the annual compound growth rate of China's edge computing server market will reach 22.0%, higher than the global average growth rate of 19.6%. In terms of shipment quantity, the top three manufacturers in China's edge customization server market in 2020 are Inspur, H3 and Huawei, with the top 3 manufacturers accounting for 53% of the national market share.
edge computing meets the demand for low latency and reduces the transmission cost of massive data from long distances. In the future, it will drive the demand for edge data center site construction and open up the market space for prefabricated modular architecture. Digital infrastructure companies represented by Huawei are deploying modular products, with a fierce competition landscape and the market has not yet been saturated. We should pay attention to manufacturers that have both cost control and scale advantages.
4.5 Data centers evolve from single-domain intelligence to full life cycle digitalization, and the AIOps market ushers in new growth
With the rapid growth of data center scale and the continuous improvement of the digitalization of operations, the importance of data center operations and maintenance in the IT operation market has been significantly enhanced. The Artificial Intelligence (AIOps) platform for IT operations is a software system that combines big data and artificial intelligence or machine learning functions, which can enhance the reliability, optimize analysis and performance monitoring of IT operations and maintenance processes. The global IT Operations Management Software Market (ITOM) software revenue reached US$12.9 billion in 2020 and will reach US$21.4 billion in 2025 at a CAGR of 10.6%.
Digital business transformation is promoting the development of the AIOps market, and AIOps has also become an important force in the intelligent development of data centers. digitization of business operation and maintenance processes has made it more critical and difficult to analyze the growing amount of data. Intelligent operation and maintenance use machine learning to model and analyze the complex operation and maintenance data generated within the data center to achieve automatic control and parameter adjustment. As artificial intelligence enters industry applications, AIOps is a product of the AI era. It can not only reduce personnel costs, but also play an active prediction function within the data center to ensure the stability of IT system operation.
According to Gartner data, the AIOps market size was between US$900 million and US$1.5 billion in 2020 and had a CAGR of about 15% from 2020 to 2025.It is predicted that by 2025, half of the cloud data centers will deploy advanced robots with artificial intelligence (AI) and machine learning (ML) capabilities, which will increase operational efficiency by 30%.
benchmarks against intelligent automobile driving, and data centers are moving towards unmanned and intelligent. Huawei proposed the evolution trend of data center operation and maintenance autonomous driving, extending from L0 manual operation and maintenance to L5 full automatic operation and maintenance in four dimensions: environmental visualization, energy efficiency optimization, fault detection, and resource management. On the one hand, through digital technology, 7x24 inspections can be achieved continuously, greatly improving operation and maintenance efficiency and reducing the skill requirements and dependence on operation and maintenance personnel. On the other hand, relying on sound recognition, image recognition, intelligent sensors, robots, etc., it will greatly improve the accuracy of unmanned inspection in the data center, change passive alarms to predictive maintenance, and minimize the operation and maintenance risks and costs of data centers.
The global IT operation and maintenance software market is currently dominated by overseas companies, and intelligent iteration brings changes in the competitive landscape. The ITOM industry was mainly occupied by four large manufacturers in the past, namely BMC, CA, IBM, and HP, which was called the "Four Big" in the industry. With the maturity and development of cloud computing and AI technologies, the original four major companies are gradually declining. According to the latest IDC data, the top 5 companies in the ITOM industry are: Splunk, Microsoft, IBM, Cisco, and Broadcom (CA). CR5 accounts for more than 1/3 of the market, and the market head effect is obvious.
5.4 Intelligent cars: Intelligence is accelerated, and the current key opportunities are still in the supply chain
major manufacturers mostly devote themselves to the field of intelligent operation and maintenance with the attitude of providing operation and maintenance platforms and cooperating R&D applications: Tencent Smart Life Development Plan signed a contract with China Power, Tupu Software, Deheng Data and Zhixiang Technology, and signed an in-depth cooperation agreement with Kehua Data, which will build some data centers for it and provide ten-year operation and maintenance management services; some Huawei data center products are indirectly supplied by Ankerui, and cooperate with Runjian Co., Ltd. in IDC management and maintenance business, and jointly build an RMS platform in China, Romania, Mexico data centers and Guangtong Youyun; Alibaba Cloud and Guozi Robot and Imikang launched an intelligent robot system to realize the connection between robots and DCIM Together; provide open source data products such as Elasticsearch to Qingchuang Technology, and jointly create an intelligent log center "Sherlock AIOps" cloud version. The dominance of domestic data center operation and maintenance is in the hands of IDC operators. Internet manufacturers are the first to take the pace of intelligent operation and maintenance with their profound technology, which may drive third-party IDC service providers and the three major operators to accelerate the deployment of intelligent operation and maintenance.
5. Internet of Things: Long-term optimistic about investment opportunities for one horizontal and three verticals, and the perception layer benefits are more certain.
5.1 The perception control connection layer benefits for a long period of time, and the short-term fluctuations are not guaranteed to be strong. The strong will always be strong
4 The most certain link in the current Internet of Things track is still the perception connection layer . The growth of intelligent controllers and module manufacturers can verify the benefit logic. Although the gross profit level of related manufacturers has fluctuated greatly due to the impact of upstream raw materials since 20Q3, it can be seen from the performance that the strongest companies are always strong.
The Internet of Things will continue to focus on intelligence and large connections in the next 3-5 years. The core benefits are hardware manufacturers such as sensing, chips, modules, MCUs, and terminals. With the development of the Internet of Things industry, the benefits will continue to shift from the hardware perception layer to the data software application layer. The long logic driven by domestic substitution and deepening intelligence remains unchanged, focusing on domestic leaders and successful business models that enjoy industry certainty.
Performance Verification Perceived Connection Layer Benefit Logic. The top domestic intelligent controller track and module track have maintained a compound growth rate of around 30% in the past five years, and the performance verified the high prosperity of the industry.
Short-term fluctuations in raw material affect changes in gross profit margins, and the leader will respond stably to the strong. .Since 20Q3, upstream chips and other raw materials have been short of supply and prices have risen, and the entire industrial chain has been seriously affected. Through the changes in the gross profit margins of modules and smart controller manufacturers, it can be found that the gross profit margins of major manufacturers have declined significantly since 20Q3, but the gross profit margin and net profit margin of the leader have not changed much. The net interest rate can still be guaranteed when the gross profit margin declines. In the case of raw material fluctuations, the leader has stronger ability to respond to downstream customers' price transmission and upstream order determination based on economies of scale, and the strong will always be strong.
Domestic substitution and the deepening of downstream intelligence, the industry's high prosperity and long-term logic remains unchanged. takes the German Dai Ao Group, the leader in overseas smart controllers, as an example. Its smart controller business dropped from 558 million euros in 2017 to 477 million euros in 2020. The company's revenue in Europe, North America, Mexico, China and other markets has declined, and its revenue has continued to grow negatively for three years. In comparison, the revenue of major domestic smart controller manufacturers, especially the double leaders, Hetai and Tuobang Co., Ltd., has increased rapidly, and their revenue in 2020 has been confirmed to exceed that of overseas leaders. According to TSR and IoT Analysis, the top three module manufacturers in global shipments in 2017 were Sierra Wireless, Telit and Gemalto, and the sum of shipments of the three accounts for 59% of global shipments. By 2020, the top three module manufacturers in the world's shipments were Yiyuan Communications, Guanghetong and Rihai Intelligent, and the sum of the shipments of the three accounts for 55% of the world. The sum of shipments of Sierra Wireless, Telit and Thales (acquired Gemalto) in 2020 accounted for only 16% of the world, which has formed a significant gap with domestic module manufacturers. The trend of smart controllers and modules advancing east and retreating west is clear, and the domestic substitution will be further deepened.
networking is accelerating and intelligence is still in the early stages, and downstream demand is increasing. The current application of intelligent controller is large-grain market mainly in automotive electronics, household appliances and power tools, and modules are used in multiple scenarios that need to be connected, and the overall downstream demand has increased rapidly. Taking smart home appliance manufacturers as an example, the CAGR of smart home appliance manufacturers in the past three years was around 50%. my country's penetration rate of smart connected vehicles was ahead of the world, with 48.8% in 2020 and is expected to rise to 75.9% in 2025. The downstream networking and intelligence are deepening, and the upstream connection layer will continue to benefit. (Report source: Future Think Tank)
5.2 Home Internet: Intelligence deepens, and we are optimistic about upstream hardware and platform companies
Home Internet development is not as expected, but the trend of intelligence deepening remains unchanged. The current smart home penetration rate in the home Internet is still relatively low. Compared with the US's smart home penetration rate that has reached 32% in 2018, my country's smart home penetration rate has just exceeded 10% in 20 years. According to IDC data, the compound growth rate of smart home shipments from 2017 to 2020 was 20.81%. The current penetration rate of smart homes is around 10% at the node when the introduction period is turned to the growth period. If the explosion period comes, the penetration rate will quickly increase to 30%. Although the current development of home Internet is not as expected, intelligence is still deepening. According to IDC's forecast, my country's smart home equipment shipments are expected to reach 540 million units in 2025.
brand division is still an obstacle to whole-house intelligence. In the short term, smart single products and multi-product interconnection opportunities are broad, and medium- and long-term platform-type companies have broad space. Currently entering smart home companies are mainly traditional home appliance manufacturers Midea and Haier, Internet technology companies Xiaomi, Huawei, etc., as well as new startups such as Oribo and Broadlink. Although traditional home appliance manufacturers have cooperation cases with Huawei Hongmeng System, the obstacles to realizing whole-house intelligence are still the problems of smart home brands separating and closure of the ecosystem.
The more feasible model for realizing whole-house intelligence in the future is multi-brand smart single products + third-party platforms and solutions. In the long run, the ecosystem of hardware terminal manufacturers is relatively closed, with the main purpose of realizing the interconnection of their own products. Third-party platform companies like Tuya Smart are more independent and do not bind to separate brands. They allow different brands and various smart products to access the platform and interact with each other. Users can control multi-brand smart products in the whole house through an application to connect users and manufacturers with a more open architecture.According to data from the Institute of Information and Communications Technology, in 2020, the Tuya platform added 117 million new connected devices, an increase of 94%. In the future, as more and more brands settle in, it is expected to become an important smart home platform company after forming a network effect.
Investment advice: The hardware perception layer and the transmission connection layer are still the current hot spots. We believe that the focus of the home Internet field in the next three years will still be on the layout of hardware entrances and smart connections to the whole house. The MEMS sensing chips, MCU chips, smart home controllers, local and wide-area communication chips and wireless modules in the hardware perception layer are worthy of attention. In the long run, third-party platform companies such as Tuya Intelligent can successfully establish massive connections to form a network effect, which will have great room for development.
5.3 Satellite Internet: Domestic satellite manufacturing capacity expansion and the launch process accelerates, and the upstream benefits first
orbital resources are scarce, and large-scale construction of satellite Internet is on the string . The construction of low-orbit satellite constellations has important strategic significance for my country's national defense and security, 6G communication revolution, and the development of the Internet of Things economy. However, the construction of low-orbit satellite constellations is a battle for space resources. According to experts, it is estimated that the low-Earth orbit can accommodate about 60,000 satellites. SpaceX has currently sent 1,844 starlink satellites to the low-Earth orbit, and plans to send a total of 42,000 starlink satellites by 2024. Judging from SpaceX's current production capacity, its plan is not a false statement. The Ku frequency band suitable for satellite communications is now overcrowded, and countries will fiercely compete for the Ka frequency band.
20 satellite launch has significantly accelerated, and China ranks second in the world. According to data from the Alliance of Worry Scientists, as of January 1, 2021, the total number of satellites in orbit around the world was 3,372, and the maximum number of satellites in orbit in the United States was 1,897. China surpassed Russia to rank second, with a number of 412 satellites in orbit. Judging from the number of new satellites launched in the world each year, benefiting from the development of small satellites, the world has entered the period of accelerated satellite launch since 2017. After exceeding 200 for the first time since 2017, it officially entered the period of satellite launch explosion in 2020, with 1,212 satellite launches in 2020.
Domestic satellite mass production demand is imminent. According to the public information on the ITU official website of the International Telecommunication Union, my country submitted applications for orbit and wireless frequency band use of two giant satellite constellations GW-A59 and GW-2 constellations in November 2020, a total of 2 stages and 7 groups of 12,992 broadband communication satellites. According to ITU regulations, the applied satellite constellation must launch half of the number of satellites within 6 years and complete the launch within 9 years. Pessimistic expectations will be able to launch 75% of satellites in the next nine years, and optimistic expectations will be able to launch 12,992 satellites in total. Assuming that the decommissioning of satellites is not considered, an average of 1,442 satellites must be added to the network every year to ensure the completion of the project. In addition, due to the short lifespan of small satellites in low-Earth orbit, even if my country's satellite constellations are completed, a certain number of satellites will still be launched every year to replace retired and crashed satellites. At present, my country's main satellite constellation plan requires a total of 15,854 satellites. Assuming that the average lifespan of small satellites in low-orbit when the constellation is basically completed is 5 years, my country still needs to supplement 3,100 satellites per year on average, and enterprises with mass-producing satellite capabilities will continue to benefit.
private enterprise satellite factories will help supplement the satellite capacity gap. Currently, Wuhan Satellite Industrial Park has stable capacity for satellite production, with a production capacity of 240 pixels per year. The satellite gap in the GW constellation project is huge, and StarNet Group needs to supplement its production capacity. We can reasonably speculate that companies that are the first to have the capacity to mass-produce satellites will successfully seize this order opportunity and obtain considerable profits. Currently, companies that have announced satellite factories and mass production capabilities include Changguang Satellite, Micro-Nan Starry Sky, Jiutian MSI, Galaxy Aerospace, Zhixing Space, Starry Sky Smart Network, etc., plus the production capacity of Wuhan Satellite Industrial Park, the total capacity will be 1,405 pixels per year after completion of construction.
launch end rocket carrying capacity, recyclability and multiple satellites with one arrow have become the focus. In terms of capacity, the low-Earth orbit carrying capacity of Zhuque 2 launched by Blue Arrow Aerospace and the Zhishenxing 1 launched by Xinghe Aerospace are not less than 5t, far exceeding that of comparable rocket models from other companies. They are highly competitive in the current craze for low-orbit satellite Internet construction.In addition, the carrying capacity of Zhuque 2 and Zhishenxing 1 is ahead of comparable models of rockets in the Sun's 500km synchronous orbit and the Sun's 700km synchronous orbit respectively. In terms of recycling capabilities, according to incomplete statistics, the current recycling and utilization include Zhuque 2, Zhishenxing 1 and Hyperbola 2 introduced by Interstellar Glory. Among them, Blue Arrow Aerospace disclosed that Zhuque 2 is expected to be recycled more than 20 times. In addition, on December 7, Xinghe Power successfully launched Ceres One, successfully sending five commercial satellites into the 500-kilometer solar synchronous orbit, achieving the first continuous success of domestic private rockets and the first new breakthrough of commercial launch of multiple satellites with one arrow.
5.4 Smart cars: Intelligence is accelerating, and the current key opportunities are still in the supply chain
Both electrification and intelligence are accelerating. According to data from the China Association of Automobile Manufacturers, my country's new energy passenger vehicle production this year increased from 185,800 vehicles in January (penetration rate of 9.73%) to 434,000 vehicles in November (penetration rate of 19.45%), and has now exceeded 19% for a single month for April consecutive months. According to forecasts, the penetration rate of autonomous driving is expected to reach 90% in 2025, of which the L2-level loading rate is expected to reach 45%.
Although the landmark products in the smart car industry like "iPhone" have not appeared, judging from the recent new car manufacturing forces and the models released by traditional car manufacturers next year, the intelligent arms race is in full swing. According to China Automobile Research, although the current penetration rate of L1/L2-level intelligent connected vehicles is close to about 30%, it is equivalent to the global penetration level of smartphones in 2011. Global intelligent driving is still in its initial stage. In the future, with the gradual implementation of commercial, high-definition maps and vehicle-road collaboration, and the continuous improvement of the intelligence level of bicycles, intelligent driving will gradually leap from L1/L2 to L3/L4 to L5.
has vast space for autonomous driving, and the overall domestic intelligent driving market size is expected to reach 400 billion in 2025. According to joint estimates of the automobile group, electronic group and communication group of the Guojin Securities Research Institute, the domestic intelligent driving market will be 409.3 billion yuan by 2025, of which the autonomous driving part includes cameras, millimeter-wave radar, ultrasonic radar, lidar and computing platforms. The estimated market size in 25 years is 274.5 billion yuan, accounting for nearly 67%.
The current focus of the autonomous driving industry is still on bicycle intelligence. Traditional vehicle manufacturers, new power manufacturers and technology giants are entering the market to accelerate the reshuffle of the track. The pace of coordinated development of vehicles and roads will be slightly slower than the progress of intelligent bicycles, but it has become the focus of governments in various countries and is another important medium- and long-term opportunity under the main theme of intelligent automobiles. With the issuance of L3-level autonomous driving licenses by Germany as an epoch-making symbol, we believe that automotive intelligence will usher in leapfrog development in 2022, and 2025-2027 will be the peak period for vehicle-road collaboration to be achieved.
Starting from 2020, we have seen technology companies such as Xiaomi, Baidu, and Huawei join the smart car industry, which will accelerate the process of intelligence in the entire China's automobile industry. The vehicle market structure is not determined, and we will see more in the medium and short term. The rise of China's supply chain under the intelligentization of automobiles is recommended to seize investment opportunities from three dimensions.
1) Global expansion opportunities. has the ability to expand globally in some sub-sectors such as batteries, cameras, networked modules and in-vehicle communication equipment, etc. Domestic leading companies have already possessed the ability to expand globally. Once they enter the global core OEM supply chain, their scale can be expanded rapidly, such as Sunny Optics, Weil Shares, Yiyuan Communications, etc.
2) Opportunities for domestic substitution, is in some sub-sectors such as automotive IGBT, MCU, millimeter wave radar, thermal management, and wire control. Some domestic companies are expected to gradually erode the market share of overseas giants in the future through iterative upgrades, such as Star Semiconductor, BYD Semiconductor, Sanhua Intelligent Control, Zhejiang Kong Hui, etc. (Report source: Future Think Tank)
3) New track reshuffle opportunities, has been in some sub-sectors such as computing platforms, lidars, high-precision maps, silicon carbide power devices, etc. The penetration and application of new technologies have just begun. With the transformation of independent brand car companies and the rise of new domestic car-making forces, new world leaders in sub-sectors, such as Horizon, Hesai Technology, etc.
(This article is for reference only and does not represent any of our investment advice.For information about use, please refer to the original report. )
selected report source: [Future Think Tank]. Future Think Tank - Official Website
