(report producer/author: Guojin Securities, Luolu)
has obvious structural characteristics. The communications sector continues to show strong structural characteristics: since the beginning of this year (as of July 26), the sector has fallen by 1.8% overall, but some sub-sectors still perform quite well. The three sectors of optical fiber cable, network specifications and network quality, and cloud video, fell by more than 10%, while the three sectors of optical communication, satellite communication navigation, and Internet of Things rose by between 8% and 18%.
Looking to the future, we believe that the structured market in the communications industry will exist for a long time, which is determined by the external environment in which the communications industry is located and the changes in the industry itself. First of all, the cyclicality of the communications industry in the 5G era has been significantly weakened. On the one hand, the core driving forces of the industry are changing. In the 2/3/4G era, the policy-led investment model has gradually evolved into demand-led in the 5G era, and the fluctuations in the capital expenditure cycle led by policy-led in the past will significantly weaken.
On the other hand, the communications industry itself is also differentiating into two parts: "old" and "new". is the traditional communication equipment industry chain and new economic parts such as the Internet of Things and cloud computing. The "old" tends to be cycled, while the "new" tends to be growth.
Whether it is the differentiation of sector market conditions and the continuous decline of institutions' holdings in the communications sector , it reflects the industry objective trends of external integration, internalization and value chain transfer in the communications industry. ICT and traditional industries are constantly integrating, and information and communication technology has become the infrastructure of all industries, accelerating the digitalization process of various industries and enterprises.
The evolution path of Huawei's well maps the changes in the entire communications industry. As the world's largest communications equipment manufacturer, Huawei has focused on pipeline business in the past 30 years and has the largest operator business in the world. This business ceiling is obvious. Without new killer applications and services, it will remain at a scale of US$50 billion in the future. At the same time, Huawei takes advantage of the spillover of its communication capabilities to lay out new tracks such as smart terminals, corporate businesses, smart cars, and digital energy to gain new growth.
From the perspective of Huawei's business evolution path, looking at the future investment strategy of the communications industry, from 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 scale and domestic substitution were the main lines. More growth investment opportunities will come from new industry scenarios such as AIoT, cloud computing, and smart cars that have gradually differentiated from the communications industry.
Looking forward to the future, the integration and differentiation of the industry and the reconstruction of the supply chain will continue, and the communications sector will still be a structural market in the future. Embracing certain industry trends and growing together with excellent companies is the best way to deal with external macro uncertainty. Focusing on the three main lines of 5G, cloud computing, and the Internet of Things, we are optimistic about the investment opportunities of low valuations and high growth ICT leading companies in various sub-sectors.
2. 5G investment is turning to demand-driven, and structural opportunities and growth opportunities coexist
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 pressure of oligopolistic competition has weakened, and the 5G era has entered the era of stock operations, and the price war of "unlimited traffic packages" similar to 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 is expected to be opened.
Industry changes: In the 5G era, the industry cycle weakens, capital expenditure will remain stable for a long time, and the peak of investment intensity (Capex/Revenue) has dropped from 3G 41% and 4G 34% to 5G less than 23% in 2021, and the depreciation pressure is gradually declining.
C side revenue ARPU downward trend reversed, and the B side became a new growth point. Take Zhongmobile as an example. In the next five years, Zhongmobile'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. No matter what kind of valuation (PE, PB, EV/EBITDA), the three major operators, especially H-shares, are still in a global depression, and investors are advised to actively make arrangements.
2.2 Main equipment vendors with global expansion capabilities are still 5G preferred investment targets
Regardless of whether Huawei's embargo is lifted or not, ZTE Global market share upward trend will not change. Huawei's business will not have a major risk of shutting down the supply of . Under the assumption of long-term embargo, the market share will gradually decline 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. Nokia's market share is expected to fall back to around 15% due to poor performance in the Chinese market.
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, and the market share of ZTE in China will steadily increase, and the 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). It is optimistic that the company will become the biggest beneficiary of the rebalancing of global equipment manufacturers' market share in the 5G era.
2.3 The optical communication market continues to be in high prosperity. It is recommended to pay attention to the resonance of demand of the leader in Dutong optical modules
5G+data centers. We believe that the optical communication market in the future will maintain a high prosperity. It is expected that the global optical module market size will have an annual compound growth rate of more than 15% from 21 to 22. Affected by the operator's centralized procurement rhythm, 5G construction shows a low at the beginning and high at the end. It is expected that the total number of 5G website construction in the second half of the year will account for more than two-thirds of the year. The telecom market optical module market will increase significantly in the second half of the year. Looking at the whole year, 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. 400G has begun to increase in volume, and annual shipments are expected to increase by 200%+ year-on-year; 200G has begun to start volume, and annual shipments are expected to reach one million.
2.4 Application side pays attention to the commercial progress of VR/AR and 5G messages
VR/AR The singularity is coming. We believe that AR/VR services will become the killer 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. This year, Oculus Quest 2 shipments are expected to exceed 10 million, which will be a critical event that is of great significance to the industry. Previously, Facebook's Zuckerberg proposed that about 10 million people need to use and purchase VR content on a platform to enable developers to continue to develop and make profits; and once this threshold is exceeded, the content and ecosystem will achieve leapfrog development.
Some people question that if there is no mobile VR device hit, it is difficult to see shipments of similar mobile phones to 100 million. We believe that the first is: even if mobile and fixed scenarios are 8:2, from the perspective of global market size, non-mobile VR devices are still a very huge market. Second: Shipping volume reaches tens of millions. It itself shows the objective existence of demand. The emergence of hot mobile VR equipment in the future is only a matter of technology and time.
In 2022, both Apple and Sony will launch new VR devices, including Oculus's new generation QuestPro, which may also be released. In the medium and short term, we are optimistic about upstream chips in the industrial chain ( Qualcomm / Rockchim Micro , etc.) and domestic ODM/OEM manufacturers (Golland Co., Ltd.). In the long term, we recommend paying attention to the driving effect of the development of the VR/AR industry on the new wave of traffic dividends for operators and communication infrastructure.
Although the commercial use time of 5G messages has been repeatedly delayed, we believe that 5G messages will still become the first 5G-scale application to be implemented.5G messages are the precise supply of 4G to 5G transition period. Operators match their power and capabilities, and as industry leaders, the most likely to promote business success. In the future, operators will have three steps to connect to the ecology and service. The near-term view is expected to increase the 40 billion space of the traditional SMS market to a scale of 100 billion; the vision is to integrate new ICT technologies such as cloud, big data, and AI, and operators' 5G message business will achieve the transformation of the message platform, with a market space of up to 300 billion.
3. Cloud computing: The prosperity continues to improve, and the competitive landscape changes under market and policy changes
3.1 The overall prosperity of the cloud computing industry continues to improve
Cloud computing Industry chain data shows that 2021 is still a period of rapid development of the cloud computing industry. upstream BMC chip manufacturer Shangxinhua Technology has achieved monthly revenues from January to June this year, and has increased by positively year-on-year compared with positive month-on-month; BAT, the leading domestic cloud computing manufacturer, resumed positive year-on-year growth (11%) in Q1 this year, and overseas FAMGA capital expenditure increased by 40% year-on-year; according to IDC data, the global server market revenue in Q1 reached US$20.9 billion (12% year-on-year growth), and shipments were close to 2.8 million units (8.3% year-on-year growth). The overall trend of digital transformation remains unchanged, with new technologies and new application scenarios such as 5G, AI, big data, and edge computing emerging one after another. In 2021, H1 still saw growth in the upstream and downstream data of the industrial chain under the high base last year. We expect H2 to maintain a high downstream demand.
3.2 IaaS: Competition enters the deep water zone, network security may affect procurement decisions, and opportunities for central manufacturers are coming
public cloud market Matthew effect is significant, and multi-cloud deployment and hybrid cloud strategies provide development opportunities for the second-tier cloud computing manufacturers. According to Gartner and IDC data, the share of CR4 in the IaaS market of global cloud computing vendors rose from 48.9% in 2015 to 76.1% in 2020; the share of CR3 in the IaaS market of China's cloud computing increased from 51.6% in 2021 to 73.2% in 2021Q1. hybrid cloud takes into account agile security. It can not only obtain the computing resources of public cloud services, reduce computing and operation and maintenance costs, but also deploy core business and data locally. It will remain the preferred strategy for large-scale enterprises for a long time in the future. Multi-cloud deployment can effectively avoid the impact of an accident in a certain cloud service provider that affects the company's own business. From a global perspective, the adoption rate of multi-cloud deployment strategy in 2020 reached 93%, of which 87% of hybrid cloud adoption rate. The respective ecosystems of my country's Internet industry are obvious. Second-tier cloud computing manufacturers such as Kingsoft Cloud and Ukede can still benefit from multi-cloud deployment and hybrid cloud strategies. With the positioning of independent cloud computing service providers, they can gain growth opportunities with differentiated competitive advantages.
The cloud bonus on the Internet has come to an end, and private cloud may become the main battlefield for competition in the future . Unlike the European and American market environment, traditional Chinese companies still have concerns about security when going to the cloud, and large companies already have exclusive computer rooms. We believe that private and public clouds in the Chinese market will open in the longer term. IaaS competition has entered the 2.0 era, the dividends of Internet companies to go to the cloud have basically ended, and competition in the private cloud market has become the main theme. According to the industrial chain survey, the penetration rate of cloud computing in my country's traditional enterprises is only 4%, far lower than that of the Internet industry and has a broad market space. Compared with Internet customers, the private cloud customer service chain is long, the business structure is complex, and the high customization leads to lower price transparency than that of public clouds. Currently, each manufacturer has competitive advantages in different regions and is far from reaching the Red Sea competition stage.
Didi was removed from the shelves and the leading Internet companies were punished by antitrust. The Matthew effect may slow down. is seriously using personal information illegally due to Didi's serious use of personal information, which sounds the alarm for information security. In recent years, the government's emphasis on information security has been continuously increased and has risen to the national strategy. On July 10, the "Cybersecurity Review Measures" was revised, and the triggering conditions increased and the scope of recognition was wider. 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.
3.3 IDC: Under the background of "dual carbon", the energy center has become a new expansion direction. The overall supply of the data center industry is insufficient. The increase in data volume is still the core driving force for demand. It is predicted that the proportion of IDCs in non-core cities will increase in the future. The data volume in China and the world reached 31.6% and 27.8% in 2015-2019, respectively, and maintained a rapid growth of around 30% in the future, reaching a scale of 48.6ZB and 175ZB in 2025, respectively. As of the end of 2020, the data volume carried by cloud data centers and edge data volumes are close to 5:5. It is predicted that the proportion of data carried by cloud data centers will drop to about 20% after 2025, and nearly 80% of the data will be scattered on the edge, requiring more data centers in non-first-tier cities to be carried.
The market consensus view is that the IDCh industry mainly relies on resource endowments, and IDC manufacturers with resource advantages such as land, water and electricity in core first-tier cities will ultimately benefit. We believe that in the future, the development of IDC's geographical location will produce two expansion paths: 1) Grasp the core location advantages of first-tier cities and gradually extend to surrounding second-tier cities; 2) Close to places with better natural conditions or can use renewable energy, such as Guizhou, Ulanqab, Heyuan , Zhangbei, Heyuan , to reduce operating costs.
Under the background of "dual carbon" electricity costs have risen to a high probability event. The core of IDC's business is to convert electricity into computing power, accurately selecting locations and strengthening refined operations to reduce power costs and improve PUE are the overall development trends of the industry. At the UN General Assembly in 2020, my country proposed to strive to peak carbon dioxide emissions by 2030 and strive to achieve " carbon neutrality " by 2060. On the one hand, the closer carbon emission target constraints under the carbon neutrality policy and the external pricing brought about by carbon emission rights trading may push up the power generation cost of traditional fossil energy, and the use of green energy will increase the early investment in new energy power generation equipment installation, old equipment renovation, energy storage equipment, etc.; on the other hand, the advance direction of renewable energy technology caused by carbon neutrality may further promote the decline in the cost of renewable energy generation.
3.4 Server: The upward turning point is becoming clearer and clearer
Benefiting from the overall high prosperity of the industry, the server market revenue and shipments have double growth. The server is the core computing device of the data center, accounting for more than 60% of the data center scale. According to the 2021Q1 server market data released by IDC, the global server market revenue in Q1 increased by 12% year-on-year to US$20.9 billion, and the server shipments reached 2.8 million units, an increase of 8.3% year-on-year. Intel DCG revenue was 6.455 billion yuan, a year-on-year decline of 9%, mainly due to the decline in chip unit price and the high shipment base catalysis of the new crown epidemic last year, but compared with the increase in Q1 growth, H2 is expected to resume positive growth; AMD's computing and graphics revenue was US$2.1 billion, a year-on-year increase of 46%; BMC chip manufacturer Xinhua's revenue from April-June 21 increased by 8% and above month-on-month. As the revenue of upstream server chip manufacturers resumes growth, the demand for downstream government and enterprises continues to improve, and a short-term correction may end, ushering in an upward turning point. In the recent bidding for China Telecom servers, Huawei gave up some markets due to chip supply issues. Competitors such as Inspur Information , ZTE , Unigroup may benefit and are expected to replace the original Huawei market share.
3.5 SaaS: The market concentration is low, and both general and vertical manufacturers can deploy
In 2020, my country's SaaS market size was 49.82 billion yuan, an increase of 31.6% year-on-year in 2019. It is estimated that my country's SaaS market size will be 66.6 billion yuan by 2021. Traditional software vendors, entrepreneurial SaaS manufacturers and Internet companies are the main participants in my country's SaaS market. They compete and cooperate with each other, and their strategies have their own focus. Taking Internet manufacturers as an example, with the help of "cloud nail integration", Tencent provides comprehensive support to the ecosystem through SaaS accelerator, and it still focuses more on the basic IaaS and PaaS cloud computing services. Traditional ERP manufacturers represented by Kingdee and UFIDA have deepened the transformation of cloud business, and adjusted their organizational structure, partnerships, assessment and personnel transfers to increase the proportion of SaaS products in the overall revenue scale. Entrepreneurial manufacturers have an advantage in some sub-sectors.
China SaaS market concentration is low, and traditional ERP software vendors and vertical SaaS companies that have transformed into cloud computing can all make arrangements. China's SaaS market overall industry concentration was relatively low in 2020, with the top ten markets accounting for only 34%. In terms of type, the concentration of vertical categories is higher than that of general categories. The market is scattered and has low concentration. The competitive landscape in different application markets is a good opportunity to make arrangements.
Traditional ERP manufacturers have high recognition in customer interface, large TAM market for general software, and broad space. has broad development prospects with the deepening of SaaS transformation, the improvement of cloud-native product strength, the improvement of ecological construction, and the improvement of future profitability. UFIDA has proposed five major ecological plans. Relying on the YonBIP strategic PaaS platform, from acquiring Dayi Cloud to join hands with Meituan , and to the recent acquisition of Yuzi Mobile to expand its low-code openness capabilities on the mobile side, the company's ecological construction continues to accelerate, and it is expected to truly transform from a product-oriented enterprise to a platform-oriented and ecological enterprise; Kingdee officially splits the original Kingdee Cloud Cangqiong into Paas and SaaS, builds an enterprise-level cloud-native PaaS platform, strategically invests in RPA manufacturer Yisaiqi, and provides 2 billion ecological strategic investments in fund in the next five years, and opens core technologies and ideas of dynamic field models within the year, and joins ecological partners to fight the large enterprise market.
ERP should be highly integrated with customer business processes and is by no means a simple IT tool. Vertical areas with strong product strength are expected to further increase market share and customer unit price . The vertical field has a core competitiveness that is different from general ERP manufacturers, so the industry concentration is higher than that of general ERP manufacturers. Taking Mingyuan Cloud as an example, the company has been deeply engaged in the real estate industry for nearly 20 years. Based on its rich professional knowledge in the real estate industry and its judgment on industry trends, the company has continuously updated its solutions, combined with the industry practices learned by serving customers, continuously optimized solutions and strengthened its industry influence. ERP and SaaS market share continues to lead, average customer price continues to increase, and customer stickiness and high renewal rate.
3.6 AI: Audiovisual technology has entered a mature stage, and the implementation of business models and refinement scenarios have become the focus of competition
AI The turning point of the industry has emerged, and the technology has entered a mature commercial period. 2021 Global Artificial Intelligence Conference shows that the industry has generally fully utilized deep learning and fully educated the market, from AI companies in the past focusing on R&D and looking for customers for products, to now when customers have needs. However, more AI companies are still dominated by project-based ideas, hoping to provide customers with more AI capabilities and solutions. Currently, there are two types of relatively mature business models: 1) For example, iFLYTEK , which integrates technology into products, provides solutions by industry and scenario, and has clear business layout and significant advantages in the education industry. Products such as Xuezhi.com use subscription fees, and have strong future revenue certainty. 2) For example, ByteDance monetizes data resources and pushes them accurately to improve user traffic and usage time.
single technology is significantly homogeneous, and its competitiveness is mainly reflected in the richness and specific details of the implementation scenario. AI, as a basic technology, empowers thousands of industries and is optimistic about the specific application of AI technology in industries such as automobiles, medical care, finance, industrial Internet, and energy. In addition, the integration of multiple technologies can enrich the user experience. Taking iFLYTEK and SenseTime as examples, they have advantages in the fields of voice and vision, but they both launched multimode voice technology, integrating voice and visual algorithm capabilities to improve recognition accuracy. The autonomous driving AR minibus exhibited by SenseTime provides passengers with the "third space" entertainment enjoyment through the stacking AR capabilities.
Data quality is the core pain point, and federated learning and automated learning may be potential breakthroughs in AI technology. Artificial intelligence among the three elements (data, algorithms, and computing power) data quality is the biggest pain point at present. Taking the industrial Internet as an example, the technical threshold is not high-end in terms of platform capabilities. The key lies in early data collection and cleaning, security, and ecological reserves.
4. The Internet of Things is in the early stage of rapid growth, and continue to pay attention to the investment opportunities of one horizontal and three verticals
4.1 Perceived Connection Layer Performance Verification IoT Growth, Pay attention to policies, industries, and capital trends
Perceived Connection Layer Performance Verification High Prosperity, and the Internet of Things is in the early stage of rapid growth. : By counting the performance of domestic modules and smart controller listed companies in the perception layer and connection layer, it is not difficult to find that domestic smart controller manufacturers and module manufacturers are in a stage of rapid growth. In the past three years, the compound growth rate of revenue and net profit attributable to shareholders has maintained a growth rate of about 30%. Although the "chip shortage" problem continues, the revenue and net profit of leading modules and smart controllers achieved extremely high growth rates in 21Q1, and the profit level exceeded the performance before the epidemic. According to Wind's consistent expectations, the revenue and net profit attributable to shareholders of smart controllers are expected to maintain a growth rate of about 30% in the next three years, and the revenue and net profit attributable to shareholders of modules are expected to maintain a growth rate of 30%-50% or above, which will be slightly higher than the growth rate of smart controller manufacturers, which once again verifies the logic of the transfer of IoT benefits from the perception layer to the connection layer and the platform layer application layer.
operators' IoT revenue has grown steadily, and the scissors gap has gradually narrowed. The Internet of Things business of the three major operators of has grown steadily, achieving nearly 16 billion in IoT business revenue in 2020, of which China Mobile Internet of Things business revenue was 9.5 billion yuan, China Telecom was 2.169 billion yuan, and China Unicom was 4.22 billion yuan, with year-on-year revenue growth rates of 7.4%, 16.1% and 38.8% respectively. Like mobile Internet services, the Internet of Things has also had a clear "scissors gap" feature in the past years, that is, the number of connections has grown very fast, but the revenue growth rate is declining. As the connection scale effect gradually emerges and operators further explore the value of IoT business, this "scissors gap" gradually closes.
IoT connection is still in the early stage of low value. The monthly ARPU value of mobile phone users of operators ( average revenue per user ) basically remains at the level of 40-60 yuan, but the revenue per user of the Internet of Things is not high. The monthly ARPU value of the Internet of Things business of the three major operators is within 2 yuan. However, through the proportion of the total revenue of the Internet of Things business, the proportion of revenue of the Internet of Things business has increased significantly year by year. Global IoT connectivity is still in its infancy and the user value is low. In the future, operators will continue to explore business transformation, and will continue to explore new B-end G-end services in the direction of cloud network integration, industrial Internet, digital transformation, etc. As the number of connections expands and application expansion, there is an upward trend in value.
In addition to seeing the overall high performance of the Internet of Things perception connection layer, we believe that the future development of the Internet of Things needs to continue to pay attention to the three major trends of policy, industry and capital.
Policy trends: Support the development of the Internet of Things in multiple directions. The Ministry of Industry and Information Technology, the State Council and other departments continue to issue policies to support the development of the Internet of Things, and the Internet of Things has become a national development focus. In July, the "Action Plan for Innovation and Development of Industrial Internet (2021-2023)" and the "Action Plan for "Staying Sailing" for 5G Applications (2021-2023)" were successively released. At the same time, in the "14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Outline of the Long-Term Goals for 2035", the development requirements for the Internet of Things and related specific industries such as the Internet of Vehicles, smart homes, artificial intelligence, etc. In the future, the support policies for multiple applications of the Internet of Things will become an important driving force for the development of the industry.
Industry trends: Giants enter. Huawei launched the distributed Hongmeng system in June, which is expected to further promote the construction of domestic Internet of Things ecosystems; Xiaomi , Baidu, 360, OPPO, Skyworth have all come to build cars.
We believe that the future trend of Hongmeng system and the creation of the ecosystem will have a significant impact on the domestic Internet of Things ecosystem. The Hongmeng system is an important strategic layout of Huawei in the context of the crisis of supply cutoff in mobile phones and the Internet of Things. Based on its distributed operating system, it can be installed and used on 128K-128G devices, providing the possibility for the real implementation of Internet of Things .The full-scene " super terminal " experience of C-end consumers is good, but can we build an ecosystem with a more open mind, like Google that year, creating the Android ASOP mobile phone ecosystem, abandoning short-term interests and creating a super system in the era of IoT? Can it win the trust of competitors, such as Xiaomi, can its IOT equipment be updated to the Hongmeng system? Will policies, domestic substitution, etc. in the future become considerations for Hongmeng’s acceleration? The openness of the Hongmeng system and the ecological cooperation model will become an important consideration for whether the Hongmeng operating system can increase volume. Here we will also discuss it:
mobile phone manufacturer: The current largest mobile phone access volume belongs to Huawei mobile phones. Huawei supports the Hongmeng system update of multi-version mobile phones, and is expected to complete the Hongmeng system update of 200 million mobile phones by the end of the year; compared with Huawei mobile phones, the possibility of other mobile phone manufacturers such as Xiaomi, OPPO, and VIVO embracing Hongmeng is still relatively small in terms of current industry observation, but there are still possibilities for driving factors such as policies and domestic substitution in the future.
appliance manufacturers: Currently, Midea has a close digital cooperation with Huawei, becoming the first home appliance manufacturers to embrace Hongmeng, and supports all categories of products to be equipped with Hongmeng system. Joyoung , Fangtai , etc. have also had certain cooperation with Huawei Hongmeng, because we believe that home appliance manufacturers will become the first Internet of Things ecological players to embrace Hongmeng system based on business transformation and product innovation needs. It is expected that nearly 100 million IoT devices will be equipped with Hongmeng system by the end of the year.
Ecological Construction: Huawei’s Harmony OS connect ecosystem built on Hongmeng system includes three categories: application partners, ecological product partners, and ecological solution partners. Application partners develop and adapt to Hongmeng system APP. Ecological product partners complete the development and production of smart hardware products. Ecological solution partners provide solutions, module production, chip design and other services for smart hardware products, accelerate product launch, and whether the ecosystem can grow rapidly and form a benign scale effect is the key.
Capital trends: The world's first IoT cloud stock will be listed, and more high-quality companies will emerge in the field of the Internet of Things. Tuya Intelligence successfully went public in early 2021, becoming the world's largest IoT cloud stock; Xiaomi has made an IoT ecological investment layout through "investment + incubation". We believe that in the future, more outstanding companies in the Internet of Things will move from the primary market to the secondary market, which is worth following and paying attention.
The world's first IoT cloud stock: Tuya Intelligent empowers end users, OEM manufacturers/brand device manufacturers and developers by providing global IoT PaaS services, industry SaaS applications, and cloud value-added services. Tuya Intelligence can help corporate customers reduce development costs and shorten product commercial time to market. The low-code/ code-free development tool can better help IoT platform developers to develop applications quickly, bringing end users a cross-product and brand consistency experience, and solving the pain points of the current separation of IoT products.
Tuya Intelligent IoT PaaS business dominates, and the future scale effect will bring considerable revenue. quarters, the demand for industry SaaS launched by the company in March 2020 was strong, with a year-on-year growth of more than 100% in each quarter; the Internet of Things PaaS grew rapidly, except for the impact of the epidemic and the Spring Festival in 20Q1, the business revenue achieved a high long-term rate of more than 75%, and the year-on-year increase of 227.3% in 21Q1. Tuya has opened the era of IoT cloud services, which can solve the pain points of existing IoT use, build its own ecological model, and rank first in the number of major IoT PaaS platforms empowering devices in the world.
The organizer of the Internet of Things ecosystem: Xiaomi uses its strong supply chain and brand traffic capabilities to provide ecological enterprises with funds, resources, and methodology to help ecological enterprises develop. Xiaomi has invested 100 hardware ecological companies around mobile phones in 5 years since 2014, launched the mijia brand in 2016, officially laying out the smart home and consumer life fields. In 2019, it officially set "mobile phone + AIoT" as the company's dual-engine strategy. At this point, Xiaomi's "1+4+N" pattern has been basically established.By investing in incubating ecological enterprises, Xiaomi has rapidly expanded its product categories in the field of IoT hardware and quickly built its unique Xiaomi IoT ecosystem.
Xiaomi has run the business model of expanding the Internet of Things field. Xiaomi itself only focuses on "1+4" products, namely mobile phones, routers, TVs, notebooks, and speakers. Other IoT peripheral products are handed over to the ecological chain company for production through participation and not controlling shares. While helping the ecological chain company grow, it helps itself quickly expand the IoT hardware product category and quickly layout the Internet of Things connection portal through low-priced hardware strategies; at the same time, it opens the IoT platform to support third-party hardware manufacturers to use Xiaomi IoT platform standards and unified APIs to access the Mijia APP to achieve interconnection with existing platform products. As of Q1 2021, Xiaomi’s IoT connections have reached 351 million units, and the number of users of more than 5 Xiaomi’s IoT products is 6.8 million. Users can deploy whole-house smart connections at an ultra-low price, intelligently connect the original equipment through smart switches, and purchase home appliances that have been deployed with Xiaomi smart connections, etc., and can directly experience the smart connections of homes. Xiaomi’s strategic layout of connectivity first and then intelligent Internet of Things has enabled Xiaomi to quickly establish its own Internet of Things ecosystem and lay a solid hardware entrance and user base for the whole-house intelligence in the future.
At the same time, Xiaomi is making layouts in other fields of the Internet of Things, including but not limited to semiconductor chips, commercial aerospace, satellite communications, etc. According to the first quarter report of Xiaomi Group , as of March 31, 2021, Xiaomi has invested in more than 320 companies, with a total book value of RMB 51.9 billion, a year-on-year increase of 60.8%. Xiaomi and Lei Jun invested in ecological chain companies through Shunwei Capital, Tianjin Jinmi, Xiaomi Yangtze Industry Fund and other institutions. Xiaomi ecological chain companies, China Mi Technology, Stone Technology, Monster Charging, etc., have been listed one after another. There are also many excellent unicorn companies with valuations of more than one billion US dollars. In the future, more excellent Internet of Things companies will enter the secondary market, which is worthy of continuous attention.
The scale of the Internet of Things industry is over 20%. According to IoT Analytics data, by the end of 2020, the number of Internet of Things connections has exceeded the number of non-IoT connections. GSMA data shows that the global IoT industry scale was US$343 billion in 2019, reaching US$1.12 trillion by 2025, with a compound growth rate of more than 20%. In 2025, the global Internet of Things connections was approximately 24.6 billion, with a compound growth rate of nearly 13%. As the number of connections increases rapidly, the Internet of Things network effect appears, and the subsequent cloud and data platform business revenue will become the next explosion point.
We believe that the Internet of Things industry is still in the early stages of rapid growth. The Internet of Things industry chain extends and lengths, and the perception connection layer first benefits. IoT industry chain is divided into four levels: 1) application layer fragmentation; 2) platform layer Matthew effect appears; 3) network layer coexistence; 4) perception layer integration trend. The next five years will be five years for the Internet of Things to make the connection, and 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 of will continue to shift from the hardware perception layer to the data software application layer.
4.2 Home Internet: The first mature Internet of Things implementation scenario, whole-house intelligence has become the next hot spot
Home Internet continues to develop and further unify the connection protocol. home Internet concept is larger than smart home concept. In addition to including the smart home front and rear-end market, it also involves IoT platforms and cloud services. However, the current market size of IoT platforms, cloud services and smart home back-end markets is relatively small. Therefore, the current home Internet mainly refers to the smart home front-end market. The concept of smart home was first proposed in 1995. The concepts and products are constantly enriched, and can be mainly divided into smart single products, smart interconnection and active intelligence stages. It is currently mainly in the 2.0 smart interconnection stage.
smart home connection standards are further unified, which is expected to solve the problem of brand barriers.5 In May, the first official version of the Matter (formerly known as CHIP) protocol was jointly developed by the Connectivity Standards Alliance (formerly known as Zigbee Alliance), and the first official version of the Matter (formerly known as CHIP) protocol was released by the Connectivity Standards Alliance ( Google , Apple, Amazon, etc.). As a new smart home connection standard, compared with the original Zigbee protocol connection, the Matter connection protocol breaks the brand barrier. Whole-house intelligence only needs one gateway to complete the connection. The Matter devices in the entire home are in the same and unified managed "device pool". Each smart home platform can obtain access through "hubs" such as smart speakers. Solving the existing IoT connection protocol split problem is expected to solve the pain points of the demand for home IoT terminal interconnection and accelerate the explosion of the IoT market.
Home Internet Industry Chain: Upstream hardware is being promoted, midstream competition pattern "three parts of the world"
Home Internet upstream mainly includes two parts: hardware and software.
hardware part: Home Internet and smart home chips mainly include Zigbee, Wi-Fi, and Bluetooth wireless communication chips. Currently, the largest shipment volume is still overseas chip manufacturers. According to data from the Toubao Research Institute, overseas manufacturers account for 90%, 80%, and 60%, respectively, such as Qualcomm, Nvidia, Intel, etc. Domestic Estimate Technology insists on the research and development and innovation of AIoT chips, and is one of the main suppliers in the field of IoT Wi-Fi MCU chips. It has strong import substitution strength and domestic market competitiveness; in terms of smart controllers, domestic leading companies include Heertai and Tuobang Co., Ltd.; in terms of IoT modules, Yiyuan Communications and Guanghetong categories are fully covered, with obvious scale effect.
software part: The focus of software catalysis is that the industry standards for IoT wireless communication technology will be gradually formed. In May, Google , Apple, Amazon and other giants jointly promoted the release of the Matter protocol, which is expected to solve the problem of the existing IoT connection protocol split; Tuya Intelligent provides IoT PaaS platform, industry SaaS and other cloud services; the release of domestic Harmony OS is also expected to solve the pain points of IoT connection, and the main participants include Huawei and ZTE . Cloud technology is widely used in smart homes, and artificial intelligence technologies such as machine recognition and pattern recognition are also constantly improving the interactive capabilities of smart homes. Domestic layouts include BAT and Huawei.
midstream: mainly includes smart single product manufacturers and platform manufacturers, and three types of enterprises participate in the competition. Traditional home appliance companies, such as Gree, Haier, Midea, etc., have launched a variety of smart home appliances and built a platform ecosystem by cooperating with software service providers. Midea has launched a full-category home appliance equipped with Harmony OS. Internet technology companies, such as BAT, Huawei, and Xiaomi, have laid out their smart home ecosystem through their technological advantages. For example, Xiaomi has implemented the "1+4+N" strategy, with mobile phones as the core and smart TVs, speakers, routers, and laptops as the entrances. By investing + incubating the Internet of Things ecosystem companies, they can quickly form a product matrix and open up the IoT platform; Huawei has launched the "1+8+N" strategy, and the launch of the Harmony OS system is expected to promote Huawei's layout in the Internet of Things. Innovative enterprises are divided into two major camps. One type focuses on the layout of smart products, such as Luke, and the other type provides solutions, such as Oribo.
downstream is a user-oriented sales channel, and omni-channel sales are achieved with the help of online and offline. The specific models of include: e-commerce platforms, O2O sales, smart home experience halls, etc. The downstream of the smart home pre-installation market also includes real estate manufacturers, home decoration companies, operators, etc.
4.3 Satellite Internet: Satellite Group was established, and the concentrated period of mass production and launch is coming soon
Satellite Group was established, and the concentrated period of mass production and launch is coming. satellite Internet has become the best auxiliary and supplement to ground 5G communication systems to bridge the digital divide by providing new networks with broadband Internet access to ground and air terminals. On April 20, 2020, satellite Internet was classified into the scope of "new infrastructure" for the first time. On July 31, 2020, the Beidou-3 global satellite navigation system independently built and operated independently was fully built, opening a new chapter of high-quality service to the world and benefiting mankind.On April 29, 2021, the China Satellite Network Group established by the State-owned Assets Supervision and Administration Commission settled in Xiongan New Area. The satellite network group benchmarked SpaceX, marking the accelerated implementation of my country's satellite Internet industry.
small satellite intelligent production line is officially completed, and the satellite factory has entered the mass production period. In May 2021, the first small satellite intelligent production line independently developed by my country was launched. After the production line is completed, the production efficiency of small satellites will be increased by more than 40%, the demand for a single area will be reduced by more than 70%, the production cycle of a single satellite will be shortened by more than 80%, and the production efficiency of personnel will be increased by more than 10 times, which can meet the needs of 240 total assembly integration test (AIT) of small satellites below 1t. With the improvement of the ability to multi-satellites with one arrow and the decline in launch costs, China will enter a period of concentrated satellite production and launch. Taking StarLink as an example, the average price of satellite development + launch can be controlled within US$1 million.
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. After the centralized launch of
, subsequent satellite operation services and related supporting manufacturers will benefit. At present, ground terminal manufacturing and satellite applications account for 90% of the satellite industry's revenue. In 2030, broadband services, automobiles, and civil aviation networking services for the C-end are the main sources of global satellite Internet revenue. At present, the satellite communications industry has gradually been deeply integrated with the information technology industry. In the future, satellite communications services will be extended from single resource operation to downstream value-added information services, such as filling the requirements of autonomous driving for network connections, realizing the "full connection" application scenarios of the Internet of Things, etc., and providing high-quality communication solutions for C-end users.
is expected to reach 600-860 billion yuan in the next 9 years. 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 expectation 75% of satellites will be able to launch a total of 2,450 in the next nine years, and optimistic expectation will be able to launch a total of 3,500 in 100%. It is estimated that in the next 9 years, the output value of my country's satellite industry will reach 600 billion-860 billion yuan.
investment strategy suggests manufacturing first and then turn to downstream investment in the industrial chain. We believe that the Internet satellite constellation will be planned to develop and launch satellites, and after completing the preliminary networking service, ground equipment manufacturing and satellite applications will be launched. Based on the above logic, the investment opportunities in the industrial chain will gradually shift from upstream companies in the industrial chain such as satellite development, satellite launch and related component manufacturers to downstream companies in the industrial chain such as ground equipment, satellite operation, satellite application, etc.
4.4 Internet of Vehicles: One of the most important application scenarios of 5G, the market space can reach 2 trillion in the next ten years
Policy leads, and my country's intelligent connected vehicles roadmap is clear. In November 2020, the National Intelligent Connected Vehicle Innovation Center released the "Intelligent Connected Vehicle Technology Roadmap 2.0" intelligent connected vehicles development plan. From 2020 to 2025, my country's L2 and L3 autonomous driving intelligent connected vehicles accounted for 50% of the total sales of automobiles, the assembly rate of new CV2X terminals reached 50%, and highly autonomous vehicles achieved commercial applications in limited areas and specific scenarios; from 2026 to 2030, the sales of L2-L3-level intelligent connected vehicles accounted for more than 70%, and the proportion of L4 autonomous vehicles accounted for 20%, and the equipment of new C-V2X terminals was basically popular; from 2031 to 2035, all kinds of connected vehicles and high-speed autonomous vehicles will be widely operated; after 2035, L5 autonomous vehicles will begin to be used.
front-mounted vehicle networking has become the standard configuration, and the loading rate has gradually increased. According to statistics from the Gaogong Intelligent Automobile Research Institute, the number of 4G vehicle networking installed in 2020 was 9.0453 million vehicles, an increase of 47.57% year-on-year; the front-mounted loading rate was 47.42%, an increase of nearly 18% year-on-year.T-BOX and car modules are important hardware products for automotive front-installation, and have gradually become standard equipment in the automotive market.
Car companies accelerate the penetration rate of new cars connected to the Internet and jointly deploy 5G C-V2X with all parties. Major domestic and foreign vehicle manufacturers are actively promoting the Internet of Vehicles in new cars. FAW, Ford, Changan, Ford and others plan to reach a 100% networking rate in China by 2020. At the same time, vehicle manufacturers accelerate the layout of 5G C-V2X to seize the technological high ground. In April 2019, 13 independent brand car companies in China officially released China's C-V2X commercial road signs, locking in the 2020-2021 time window and promoting the commercial application of the C-V2X industry in China. At this stage, major module manufacturers are accelerating the layout of 5G vehicle communications, and 5G communication modules such as Huawei and Yiyuan Communications have been commercially available.
The Internet of Vehicles is one of the most mature technology, the vastest space and the most complete industrial supporting applications under 5G. It is estimated that the total space in 2020-2030 will be close to 2 trillion yuan. Among them, "smart cars", "smart roads", and "car-road collaboration" are 835 billion, 295 billion yuan and 763 billion yuan respectively. At present, the Internet of Vehicles industry is facing the resonance of the three factors of policy, technology and industry. It is expected that the industrial growth rate will exceed 60% in 2020: at the policy level, the development of the Internet of Vehicles industry is driven by the will of the country, and policies at the three levels of strategy, technology path and system construction are frequently released; at the technical level, the key communication technology of the Internet of Vehicles C-V2X is becoming increasingly mature, and positive progress has been made in all aspects from standardization to R&D industrialization to application demonstration; at the industrial level, the three main forces of technology giants, vehicle manufacturers and cloud manufacturers are deeply laid out, and automobile networking and vehicle-road collaboration have become the current focus, and the industry is accelerating to scale implementation.
Based on the principle of "cost-benefit", the main construction rhythm of the Internet of Vehicles will be switched back and forth between "single intelligence" and "collaborative intelligence". On the vehicle side, we believe that the penetration rate of L1/2/3 autonomous driving will at least double from 2020 to 2025, the value of bicycles will increase by more than 15 times, and the proportion of software value will increase to more than 30%; on the road side, we believe that highways and urban intersections will be the priority direction for the implementation of "smart roads", and the initial construction will be mainly hardware equipment deployment; on the network side, the initial stage of the industry development will focus on establishing connections. With the promotion of 5G large-scale network construction and C-V2X in 2020, vehicle-road collaboration will soon achieve the first wave of large-scale implementation, thereby opening the prelude to the development of the Internet of Vehicles from single-unit intelligence to collaborative intelligence.
We believe that the construction of three dimensions of smart cars, smart roads and vehicle-road collaboration will be coordinated. From a rhythm perspective, the current vehicle-road collaboration C-V2X industry chain is particularly worthy of attention. In addition, we judge that bicycle intelligence will continue to develop, and the general trend of increasing penetration rate of L1/L2/L3.
5. Intelligent driving: Intelligence is the biggest opportunity, and the current main opportunity is in the supply chain
5.1 Huawei has entered the smart car industry, and the industrial value chain is facing the reconstruction of
Intelligence is an unprecedented big opportunity in the next 30 years. Automotive intelligence is one of the most important scenarios in the era of intelligence. The automotive industry will repeat the transformation from feature phones to smart phones to a certain extent, and both the industrial supply chain and the value chain will face reconstruction. At present, ICT technology and the automotive industry are undergoing a deep integration, and computing and intelligence will become the new strategic control points of the industry.
"Intelligence" is the core keyword and main line of our investment in the era of smart cars. Huawei's entry is the most important node event in the modern history of the automotive industry. We believe that a deep understanding and analysis of Huawei's strategy, product and business layout in the field of smart cars will help us better grasp the investment opportunities in the coming era of automotive intelligence.
Huawei focuses on the five major areas of intelligent driving, smart cockpit, smart networking, smart electric, and car cloud services, which are also the most important incremental market brought about by future automotive intelligence. We estimate that the total incremental market size of China's passenger car market will grow from 200 billion in 2020 to 1.8 trillion in 2030, with a compound growth rate of 25% in 10 years. The average incremental value of bicycles brought by intelligence will increase from 10,000 yuan to 70,000 yuan. Focusing on the main line of intelligence, we believe that we need to grasp the three waves from supply chain to vehicle manufacturers to applications and services.
5.2 Intelligent driving: Focus on layout of perception + decision-making layer, computing platform and lidar growth strongest
Intelligent driving system is the core incremental part of smart cars different from traditional cars. It can be divided into perception layer, decision-making layer and execution layer. Huawei currently has layouts. perception layer (eye, ear): mainly includes sensors such as camera, millimeter-wave radar, lidar, etc. to realize the perception of the environment. Decision-making level (brain): including chips and computing platforms, etc., are responsible for processing information, and make predictions, judgments and issuing instructions based on the information. The execution layer (hands and feet: including braking, steering, etc., is responsible for executing instructions and making braking, steering, lane change and other actions. The incremental components market brought by intelligent driving is mainly in the perception layer and decision-making layer, and the execution layer is more about upgrading and adaptation.
We estimate that the incremental space of intelligent driving (sensing and decision-making layer) in the Chinese passenger car market will reach 220.8 billion yuan by 2025 and reach 500 billion yuan by 2030. Among them, the decision-making layer has the highest value, accounting for more than 50%. From the perspective of growth rate, computing platforms and lidars have the best growth potential, with a compound growth rate of more than 30% in the next ten years.
5.3 Smart cockpit: In-vehicle infotainment system as the core, focusing on suppliers with competitive advantages in the core hardware, operating system/software fields
Intelligence will completely change the traditional business model, and selling cars will no longer be the end point of value monetization but a new starting point. The cockpit is the center of intelligent interaction between people and cars. In the entire scene of people, cars and home, the consistent experience of multiple scenarios is the key to the intelligence of the cockpit.
The smart cockpit mainly includes IVI (in-car entertainment system + central control screen), LCD instrument panel, HUD, built-in driving recorder, rear LCD screen, streaming media rearview mirror and other related components. Among them, the in-car infotainment system is the core element for achieving differentiated customization.
We believe that the smart cockpit is the most mature application in the process of intelligent driving. It is expected that the market size will reach 100 billion yuan by 2025 and 152.7 billion yuan by 2030. Among them, the proportion of in-car entertainment systems is the highest About 60%. Smart cockpit hardware and software have begun to differentiate. As the process matures, the cost of hardware such as screens decreases, and software collaboration such as in-vehicle entertainment increases with the value of bicycles with rich functions. In the future, investment can focus on Tier 1 suppliers with integrated advantages and competitive advantages in core hardware, operating system/software fields.
smart cockpit field, vehicle manufacturers, traditional Tier 1, and Internet giants are approaching Tier 0.5 system integrators. The future trend is to cross-border multi-field integration and opening up, and value gradually shifts to software/algorithm, applications and services. Currently, focus on Tier 1 suppliers with integrated advantages and competitive advantages in core hardware, operating system/software fields.
5.4 Smart electric: The penetration rate is rapidly increasing under the policy drive. It is recommended to pay attention to charging piles and automotive power semiconductors Investment opportunities for industrial chains in incremental markets such as physical and other
"Three Electrics" is the core part of the new energy vehicles that distinguish traditional fuel vehicles. We predict that the market size of the "Three Electrics Systems" of passenger cars in China will be 95.7 billion yuan in 2020, reaching 268.5 billion yuan in 2025, and reaching 617.9 billion yuan in 2030, with a compound growth rate of more than 20% from 2020 to 2030.
suggests paying attention to investment opportunities for industrial chains in incremental markets such as charging piles and automotive power semiconductors
We believe that the demand for high power density and motor permanent magnet synchronization has prompted the electric drive system to be highly integrated, and the demand for IGBT and silicon carbide power devices continues to increase, while highly coupled power Rate devices have promoted the upgrade of cooling systems. In addition to batteries, Huawei has in-depth layout in all core links of smart electric. Although it has a competitive relationship with domestic related companies, the market is far from saturated in the early stages of industry development, and investors should pay more attention to speculative opportunities for rapid increase in industry penetration.
5.5 Intelligent networking: The general trend of installation in the Internet of Vehicles, modules and T-Boxes may break through small and medium-sized companies
We believe that in-vehicle modules, gateway modules, and T-Box are the main in-vehicle components that realize in-vehicle communication functions. According to estimates, the value space of the China passenger car market in the future will reach 27.6 billion yuan by 2025 and 40.8 billion yuan by 2030, of which the annual compound growth rate of in-vehicle modules and in-vehicle T-Box10 will be above 10%.
5.6 Car cloud service: Car cloud service has broad prospects. With full-stack service, Huawei is expected to come to the forefront
Huawei has made relatively late in the field of car cloud service, mainly providing four major incremental car cloud services, namely autonomous driving, high-precision maps, Internet of Vehicles, and V2X. In the future, it is expected to come to the forefront with the full-stack end-to-end advantages under the trend of multi-cloud and hybrid cloud. Both domestic and foreign technology giants have entered the car cloud service. Under the trend of multi-cloud and hybrid cloud, there is still a lot of room for growth in the next ten years. Industrial chain partners are expected to achieve common growth with Huawei car cloud service. It is recommended to grasp the investment opportunities of Huawei Car Cloud Service Industry Chain Partners in the order of value chain transfer from infrastructure construction, data to applications and services.
5.7 Offline investment opportunities for smart car owners
"Intelligence" is the core keyword and main line of our investment in the era of smart car investment. Focusing on the main line of intelligence, we believe that the overall investment rhythm of smart cars needs to grasp three waves.
first wave, supply chain. We are optimistic about the rise of China's supply chain in the era of automotive intelligence, and we can seize investment opportunities from three dimensions. First, there are opportunities for global expansion. In some sub-sectors such as batteries, cameras, connected modules and in-vehicle communication equipment, domestic leading companies have the ability to expand globally. Once they enter the global core OEM supply chain, their scale can be expanded rapidly. The second is the opportunity for domestic replacement. 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. Third, there are opportunities for reshuffle of the new track. In some sub-sectors such as computing platforms, lidar, 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 are expected to be born.
second wave, vehicle manufacturers and autonomous driving solution providers. Automotive intelligence provides Chinese auto companies with the opportunity to overtake instead of lanes. Car companies that cannot adapt to the trend of intelligence will be eliminated. This round of reshuffle has just begun. It is too early to judge who is the winner. It may only be possible for us to see the clues when the penetration rate of China's new energy vehicle reaches 20% in 2025. Vehicle manufacturers will be divided into two camps. Most new car manufacturers and some traditional leading car manufacturers will choose vertical integration mode, develop core software and some hardware; most traditional car manufacturers will provide manufacturing and integration capabilities, and will cooperate in depth with ICT giants such as Huawei and Waymo that master full-stack autonomous driving technology. Vehicle manufacturers and autonomous driving solution providers that have emerged will take away most of the industry's profits and become the big winners of this wave.
third wave, applications and services. With the popularization of vehicle-road collaborative infrastructure and the improvement of bicycle intelligence level, L4 is being used in the passenger car market, Robotaxi services have entered large-scale operation, and applications and services based on autonomous driving scenarios have begun to explode. Self-driving infrastructure providers, travel service companies, and mobile Internet of Vehicles application and service platform providers will become the key targets of the third wave of investment.
We are optimistic that Huawei is expected to fill the gap in China, besides Bosch and the mainland, and become a new ICT Tier1 supplier of $50 billion. has a layout in almost all core links such as vehicle manufacturing and batteries, as well as hardware with low value such as ultrasonic radar and vehicle information entertainment.
We believe that Huawei's entry will promote China's intelligent driving industrialization process, and companies with long-board collaboration and complementary capabilities in the intelligent driving industry chain are expected to benefit first. Such as vehicle manufacturers Changan, BAIC New Energy, battery leader CATL, and high-precision map manufacturer Four-dimensional Map New.
For areas that Huawei has entered or is deploying, such as lidar, computing platforms, IGBT and other sub-sectors, due to the low penetration rate of the industry or the domesticization has just begun, the TAM market space is large enough, and other companies that have already deployed in these fields still have great investment opportunities. Overall, considering that Huawei is still in its initial stages to enter the field of smart cars, there is a high degree of uncertainty about who will benefit from and how much will the industrial chain partners benefit, and there is a need for continuous dynamic tracking in the future.
Huawei focuses on the five major areas of intelligent driving, smart cockpit, smart networking, smart electric, and car cloud services, which are also the most important incremental market brought about by future automotive intelligence. We estimate that the total incremental market size of China's passenger car market will grow from 200 billion yuan in 2020 to 1.8 trillion yuan in 2030, with a compound growth rate of 25% in 10 years. The average value of bicycles brought by intelligent networking will rise from 10,000 yuan to 70,000 yuan. From a structural perspective, smart electric, intelligent driving, and car cloud services will account for more than 90% in the future. Currently, the proportion of smart electrification is above 45%. Smart driving will make efforts in the medium term, with a share of value by 2025. The market value of car cloud services has not yet appeared at the moment, and it is expected to account for 12% by 2025 and 30% by 2030.
6. Risk warning
5G 2C business has not yet formed a clear business model, and industry applications may take a long time to cultivate. Operators' willingness to spend 5G may be lower than expected;
ICP Capital expenditure growth slows down, and the development of public cloud business may not meet expectations;
Enterprise cloud access progress is lower than expected, industry competition intensifies, and enterprise IT expenditures have been greatly reduced;
software domesticization progress is lower than expected;
Internet of Things connections growth is lower than expected, and the industrial chain development is lagging behind;
intelligent driving industry development is lower than expected;
Sino-US trade friction escalation risk.
(This article is for reference only and does not represent any of our investment advice. If you need to use relevant information, please refer to the original text of the report.)
selected report source: [Future Think Tank Official Website].
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