2022 is the third year of China's large-scale 5G network construction. As of April 2022, the proportion of 5G mobile phone users has reached about 20%, which has theoretically reached a sweet area of accelerated penetration.

Category：hotcomm

2025-07-25

(report producer/author: Guojin Securities, Luo Lu, Shao Yikai, Jin Jing)

. Pay attention to new infrastructure and high growth

Outlook In the second half of 2022, the investment opportunities in the communications sector will revolve around two main lines: digital new infrastructure and high growth.

On the one hand, the "end-tube-cloud" value rotation of the ICT industry chain, and new ICT business infrastructure opportunities based on computing power and transmission have emerged. With the continuous implementation and advancement of measures to stabilize growth in the second half of the year, the prosperity of the digital new infrastructure sector is expected to gradually improve. Leading companies with good market structure and scale effects in the supply chain of new ICT infrastructure such as 5G, cloud, optical network, IoT perception, and satellite Internet will benefit from it. On the other hand, from the downstream scenario, the high-prosperity track is mainly concentrated in emerging sub-sectors such as AIoTh, digital energy, and smart cars, which integrate communications and vertical industries. Under many uncertainties such as repeated epidemics and supply chain fluctuations, the annual steady growth expectation of some leading companies in related fields will remain at a level of around 30%. From the perspective of the development logic of the meso-level industry, in the 2020 annual strategy report on the communications industry, we proposed that the development of the technology industry can be summarized into three stages: "Technology-driven- production capacity- drive-brand drive", and the driving force for corresponding enterprise development basically follows the development path of "industry penetration rate increase-concentration-improvement breadth and depth increase in business coverage".

is stationed at the current node, and we have judged and looked forward to the location of the four tracks of 5G, cloud, Internet of Things, and smart cars. 2022 is the third year of China's large-scale 5G network construction. As of April 2022, the proportion of 5G mobile phone users has reached about 20%, which has theoretically reached a sweet area of accelerated penetration. Considering that killer applications and scenarios based on 5G are still incubated, we believe that 5G and 4G will coexist for a long time in the future, and the scale expansion of 5G will rely more on application-driven. In the cloud computing market, from the perspective of the proportion of public cloud revenue to IT expenditure, the global cloud computing market penetration rate in 2021 is 10%-15%, and it is still in the early stage of development. In the field of IoT, with the global potential of 100 billion connections as the denominator, the global penetration rate by the end of 2021 has just exceeded 10%. In terms of smart cars, the penetration rate of smart cars in China's L2 and above in 2021 exceeded 20%, and is expected to reach 50% in 25 years. Looking ahead to the future market, investment opportunities in the 5G field will come more from domestic substitution and the increase in market share of , and will rely on the maturity of killer applications and services in the long run. Tracks such as the Internet of Things, cloud, and smart cars are still in a period of rapid growth, and greater growth investment opportunities in the future will come more from these segments.

. 5G investment has shifted to a long demand-driven period, and pay more attention to structural opportunities

2022 is the third year of the three-year 5G network construction period. After completing large-scale coverage in the second half of the year, the core of industrial development will shift from investment-driven to demand-driven. 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 killer applications and services appear, they are more structural markets, and they can focus on the two dimensions of global market expansion and domestic substitution.

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.

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, 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 is accelerating 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. Core operating indicators show that operator fundamentals are showing a trend of improving. The three major operators in 2022Q1 mobile users and fixed network broadband access both grew, and their revenue and net profit both showed rapid growth. As of the end of 2021, according to the annual report data of the three major operators, there are 1.425 million 5G base stations and 5.9 million 4G base stations. The number of 5G users in Q1 was 849 million, and the 5G penetration rate was 50.92%. At the same time, emerging businesses such as IPTV, Internet data centers, big data, cloud computing, and artificial intelligence are gradually recovering.

No matter what 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' market share increases and profitability improves

Global operator capital expenditure will continue to grow moderately in 2022, and focus on structural market opportunities for equipment vendors. According to the Dell'Oro Group's forecast, 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 vendors, 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 . 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. At present, China's total 5G base station construction accounts for about 70% of the global 5G market share, and ZTE's market share in China will steadily increase. We are also optimistic about the company's share expansion after the gradual recovery of the epidemic in 22 years. It is expected that the company's global market share will increase by 1-3PP every year in the next three years (22-24). 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 hit bottom and rebounded. It is recommended to pay attention to the leader of the SUT optical module

Telecom and SUT optical communication markets have shown a trend improvement since Q3 in 2021. The optical communication market will maintain a high prosperity level in 2022. Outlook 2022, the growth of optical modules in the telecommunications market will be relatively moderate, and the main increase will still come from the data center market, especially overseas markets. Benefiting from the metaverse construction and supply chain mitigation, according to Dell'Oro's forecast, capital expenditure for global data centers is expected to grow by 17% in 2022; capital expenditure for data centers 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. Rapid development, AR still takes time. 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. In 2021, Oculus Quest 2 shipments reached 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 are optimistic about VR's 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.

. Cloud computing: marginal improvement in prosperity, paying attention to new applications and structural investment opportunities

Overseas technology giants such as Google and Meta have increased their investment in AR/VR layout and AI algorithm applications. Domestic Internet companies’ platform role in the digital economy has been recognized, and the prosperity of the cloud computing industry chain has been marginal improvement.

3.1 The overall long-term prosperity of the cloud computing industry, the second-tier manufacturers continue to make efforts to

upstream and server shipments to recover, and the overall prosperity of the cloud computing industry chain has recovered. Xinhua Technology's revenue has increased since October 2019, with revenue reaching NT$454 million in April 2019, which has increased by more than 60% year-on-year for two consecutive months. The server market benefited from the rapid recovery of the global economy. User investment in data center infrastructure continued to rise in 2021, with global server market shipments and sales of 13.539 million units and 99.22 billion US dollars, respectively, Y/Y 6.9% and 6.4%. The growth rate of overseas FAMGA capital expenditure slowed down in 21 years, with a slight increase in 22Q1, with a total expenditure of US$36.823 billion, Y/Y 28%. Among them, Alphabet (Google) capital expenditure investment increased significantly, Y/Y 65%, mainly for the early procurement of large office facilities. It is expected that capital expenditure will increase significantly in 2022 compared with last year, mainly focusing on server-oriented technology infrastructure.

Domestic BAT capital expenditure resumed rapid growth in 21Q4, with Y/Y 70%, of which Baidu's capital expenditure increased by 95% year-on-year and 114.32% for the whole year, mainly due to the increase in purchasing servers, network equipment and other computer hardware to increase network infrastructure capacity. It is expected that in the second quarter, capital expenditure will continue to be increased at home and abroad for cloud computing infrastructure construction. The second-tier cloud computing manufacturers and emerging Internet companies continue to make efforts, and capital expenditures increase rapidly with the development of their business. JD.com , Pinduoduo and Kuaishou 2021 capital expenditure growth rates were 141.56%, 7544.19%, and 31.42%, respectively, which was faster than BAT capital expenditure growth. In 2021, Tencent capital expenditure decreased by -1.67% year-on-year, and in 22Q1 capital expenditure was 6.971 billion yuan, a year-on-year decrease of 9.87%. We speculate that it is mainly due to the company's active reduction of some of its loss-making businesses. JD.com's capital expenditure in 2021 was 18.6 billion yuan, exceeding Baidu's capital expenditure scale. There are also cloud computing and Internet companies with faster growth rates (such as: Didi , China Mobile, Huawei Cloud , ByteDance, OPPO, VIVO, etc.).

3.2 IaaS: The growth rate of the leading cloud giants has slowed down, and the product matrix of the second-tier manufacturers continues to improve

Judging from the market share of China's public cloud IaaS, non-BAT cloud business has grown rapidly. The share of BAT in 21Q3 was 60.95%, a decrease of 1.52 PP from 62.47% in the same period of 2020; Huawei Cloud replaced Tencent Cloud to rank second, and its share continued to increase; operator cloud business growth was relatively fast, China Telecom market share increased by 1.2 PP year-on-year, China Mobile grew to 3.16%, and ranked among the top ten for the first time; Amazon Cloud and JD Cloud's shares increased by 0.18 PP and 0.19 PP year-on-year respectively. China's public cloud and industry cloud markets are developing rapidly, and a population of 1.4 billion constitutes a super-large consumer market. The video, live broadcast, new retail and other industries are developing rapidly, and new applications such as industrial Internet and AR/VR continue to be incubated. With the phenomenon of domestic Internet companies going overseas, we judge that domestic cloud service manufacturers still have broad room for improvement in their global market share. Second-tier cloud computing manufacturers such as

Kingsoft Cloud continue to improve their product matrix and vigorously develop industry clouds. Kingsoft Cloud's Q4 industry cloud achieved revenue of 1.129 billion yuan, Y/Y 110.6%, far exceeding public cloud (Y/Y 12.4%). The core customer base of public cloud has been steadily increasing, and the customer matrix has been continuously improved. The public cloud renewal rate in 2021 is 114%. The company improves the depth and breadth of cloud products and covers more traditional enterprises and customers in the public service field.The epidemic has repeatedly had a two-sided impact on cloud computing manufacturers: on the one hand, transportation and logistics restrict project deployment and delivery, and corporate customers may reduce IT expenditure budgets; on the other hand, the epidemic has accelerated the increase in online collaboration and cloud computing penetration, and cloud demand in industries such as medical care has risen rapidly. Overall, external factors such as the epidemic have limited impact on the cloud computing industry chain. Neutral cloud service providers enjoy the dividends of digital economy development. Cloud native, distributed cloud, and edge cloud are expected to become new growth drivers, and the market share of the second-tier cloud computing manufacturers is expected to further increase.

According to IDCh data, the scale of China's financial cloud market in 2021H2 reached US$3.90 billion, Y/Y 39.3%. The infrastructure financial cloud infrastructure market size reached US$2.78 billion, with Y/Y 38.4%, of which the growth rate of public and private cloud infrastructure markets reached 45.6% and 34.8% respectively. Huawei, Alibaba , H3, Inspur , and Tencent ranked in the top five, with a total market share of 71.7%. Financial Cloud Solutions market size reached US$1.13 billion, Y/Y 41.4%. The market growth rate of the financial cloud platform is 42.9%, and the market competition pattern is basically stable. Alibaba, Tencent, Huawei, , Baidu Smart Cloud , and JD Cloud share exceeds 80%. The application solutions market size reached US$660 million. With the launch of bank-level data middle platform and distributed middleware, cloud database, integrated data lake, AI middle platform and AI device solutions, and scenario-based financial cloud platform, financial institutions generally build or iterate the distributed new core, Internet banking core, credit system, securities comprehensive financial service platform and other systems on the cloud computing architecture, which is expected to promote the growth rate of the cloud application market to remain above 40%.

3.3 IDC: The supply-side pattern of the industry is improved, the "East Digital and West Computing" computing power network hub construction has broad market space

Energy consumption policy is becoming stricter, industry differentiation is intensifying, and the supply-side pattern of IDC is improved, and leading manufacturers are expected to seize the opportunity of market clearance. In the domestic front-tier regions, the country has implemented dual energy control policies, and the layout of new energy in advance and improving energy control operation and maintenance capabilities are the key to increasing enterprises' income. Downstream customers have increased their requirements for IDC operation and maintenance quality, and industry differentiation has intensified, reaching a peak under the background of the "dual carbon" policy last year. The proportion of power consumption in my country's data centers in total continues to increase. The "IDC Circle" of the third-party agency is expected to reach 4% of the total electricity consumption of China's society in 2025, and the proportion in 2018 is only 2.19%. IDC manufacturers with high energy consumption, low efficiency and insufficient comprehensive strength will be cleared by the market and the supply-side structure will be improved.

3.4 Server: China's server market leads the world, and leading companies benefit from the opportunities of smart new infrastructure industry

China's server market performs strongly, with the industry growth rate exceeding the global average. The release of new platforms of Intel and AMD is expected to promote the wave of server replacement. Benefiting from the global economic recovery, user investment in data center infrastructure continued to rise in 2021. According to IDC statistics, the global server market shipments and sales in 2021 were 13.539 million units and 99.22 billion US dollars, respectively, Y/Y 6.9% and 6.4%. The sales in China were US$25.09 billion, Y/Y was 12.7%, accounting for 25.3% of the world, an increase of 1.4PP year-on-year, with shipments of 3.911 million units, and Y/Y was 8.4%. Among them, Inspur server continues to maintain the first place in the Chinese market with a market share of 31.4%, and the H3 Xinhua News Agency has a market share of 17.5% in China. According to IDC data, the CAGR of China's server market will be 12.5% from 2020 to 2025 and will reach US$41 billion in 2025.

The high-end server market ushers in structural investment opportunities. In 2021, the accelerated server market size reached US$5.39 billion, a year-on-year increase of 68.6%. Among them, the GPU server still dominates, accounting for nearly 90% of the market share. At the same time, non-GPU acceleration servers such as NPU, ASIC and FPGA accounted for 11.6% of the market share with a growth rate of 43.8%, reaching US$630 million. IDC predicts that by 2026, China's accelerator computing server market will reach US$10.34 billion. Accelerated servers for inference workloads have reached 57.6% in 2021, and are expected to exceed 60% by 2026.

Server manufacturers seize the opportunities of new infrastructure and industrial intelligence to help the development of the digital economy.With the development of new infrastructure for data centers, the "14th Five-Year Plan" Digital Economy Development Plan proposes to clarify the construction goals of digital infrastructure. The National Development and Reform Commission, the Ministry of Industry and Information Technology and other departments have successively issued multiple documents to accelerate the construction of a national integrated big data center system with the collaboration of computing power, , algorithms, data, and application resources, and guide the moderate agglomeration, intensiveness and green development of national data centers. Inspur Information continues to promote the smart computing strategy, steadily grasp the opportunities of the smart new infrastructure industry, relying on its full-stack technology development capabilities to lead cutting-edge applications, and is in a leading position in the fields of cloud, AI, open computing and edge computing. Laying out liquid cooling in the context of "dual carbon" will benefit from opportunities in industries such as new infrastructure. Unigroup Co., Ltd.'s business has been successfully expanded, focusing on 18 industries' digital transformation solutions, and nearly 30 new smart city and digital rural projects have been implemented. In thoroughly implementing the "three clouds and two networks", operators continue to make breakthroughs in centralized procurement, and have achieved remarkable results in expanding their business overseas, benefiting from global digitalization. (Report source: Future Think Tank)

3.5 SaaS: Domestic substitution and cloud transformation accelerate, seize the opportunities of the information innovation and digital economy industry

General ERP manufacturers accelerate cloud transformation, enhance product strength, and enhance cloud subscription business. It is recommended to pay attention to the new product release and customer order delivery in the second half of the year. UFIDA Network and Kingdee International focus on cloud business, vigorously develop cloud subscriptions, and continue to break through to central enterprises and benchmark enterprises. The subscription revenue ARR has increased rapidly and the future revenue is highly certain. The cloud business has constituted the main source of revenue for UFIDA and Kingdee, accounting for more than 60%. UFIDA Network has significant customer advantages. In 22Q1, the customer orders of central enterprises increased by more than 60%, breaking through benchmark customers such as Three Gorges Group, China Salt Industry , Agricultural Bank of China, and Bank of China. The new generation of treasurer products were delivered by many central enterprises, setting off a wave of new treasurer construction. On July 30, the company will release a new version of accounting products based on the YonBIP architecture, with new increased fee control, reimbursement, procurement and other sensitive applications involving external connections, high frequency and high iteration, which are expected to grasp the digital transformation + domestic substitution needs of large enterprises. Kingdee International Cangkong and Xinghan Cloud have grown rapidly, and have signed long-term strategic cooperation with industry benchmarks such as Jianxin Jinke , Guocai Zhongda, Shagang Group, BGI , and Zhongsoft International . The Cangkong Application Market has launched more than 1,000 applications in 13 major industries and 10 major business fields, covering manufacturing, finance, education, medical care, new retail, construction and other industries. Q2 Release of Xinghan version of human resources as scheduled is a typical practice for benchmark projects to further accumulate into product strength. With the accelerated advancement of the information and innovation industry, the company continues to break through benchmark enterprises in various industries and accelerates its strategic ecological layout. The SaaS cloud business can continue to grow.

Industrial Internet software domesticization process is accelerating, and vertical track cloudization and intelligence are accelerating. According to the Ministry of Industry and Information Technology's "Deep Integration Development Plan for the 14th Five-Year Plan for Informatization and Industrialization", by 2025, the integrated development index of informatization and industrialization will increase to 105, the digital penetration rate of enterprise management will reach 80%, the penetration rate of digital R&D design tools will reach 85%, and the penetration rate of industrial Internet platforms will reach 45%. Baoxin Software continues to promote the development of industrial Internet platform components, and develop intelligent energy-saving and emission reduction technologies to help the "dual carbon" strategy, which is beneficial to industrial Internet platforms and software companies. In addition, the process of cloud-based and intelligentization of the tax system has accelerated, and the fourth phase of the Golden Taxation empowers the performance of new tax SaaS products. Mingyuan Cloud quickly adjusted its company's strategy in response to the changes in macro environment , and fully entered the real estate development/operation/service market in 2022. ERP transformed from OP to SaaS, quickly integrated resources, and the proportion of state-owned customer income increased from 28% in 2020 to 33% in 21, and is expected to increase to 40% this year. my country's IT expenditure accounts for only 1.4% of GDP, far lower than that of the United States. In the long run, the cloud computing industry chain can still maintain a growth rate of more than 20% in the long run.

4. Internet of Things: Long-term focus on the opportunities of One Horizon N vertical, and optimistic about the continued improvement of profitability of 22H2

4.1 Differentiation: Module track Matthew effect continues to appear, smart controller track blooms multiple points

Module track high prosperity continues, industry differentiation leader Matthew effect strong people always have strong Module track high prosperity continues, and 5G module shipments will accelerate in 23 years. According to the forecast of Counterpoint, the global shipment of cellular IoT modules is expected to exceed 1.2 billion in 2030, with a compound annual growth rate of 12% from 2021 to 2030. Starting from 2023, the shipment of 5G modules will grow the fastest among all standards, with an annual compound growth rate of 60%. In addition to 5G, NB-IoT and 4G Cat.1bis are the largest, and 4G modules are still the main force at present. It is expected that 4G module shipments will continue to increase by 2027.

The trend of advancing east and retreating east is difficult to reverse, and the Matthew effect in the industry is enhanced. According to TSR and IoT Analysis, the top three module manufacturers in the world shipments in 2017 were Sierra Wireless, Telit and Gemalto, and the sum of the three shipments accounted for 59% of the global shipments. In 2020, the top three module manufacturers in the world shipments were Yiyuan Communications, Guanghetong and Rihai Intelligent, and the sum of the three shipments accounted for 55% of the global shipments. The sum of shipments in 2020 of Sierra Wireless, Telit and Thales (acquired Gemalto) accounted for only 16% of the world. Judging from the performance of listed companies in the module track, the leading company Yiyuan Communications had a revenue and net profit of yoy in 2021, respectively, and the five-year compound growth rate of revenue and net profit in 2016-2021 was 81%/76%, respectively, far exceeding non-leading companies.

Leader: Revenue and net profit continue to grow at a high rate. Yiyuan Communications and Guanghetong achieved revenue of 3.058 billion yuan and 1.178 billion yuan respectively in 22Q1, and net profit of 124 million yuan and 105 million yuan. As the epidemic recurred in 22Q1, Yiyuan Communications' net profit volume hit a record high and exceeded expectations. The growth rate of revenue and net profit of Guanghetong in 22Q1 was basically in line with expectations. As the dual leaders of IoT communication modules, Yiyuan Communications and Guanghetong are expected to continue to increase their scale advantages, fully enjoy the upward dividends of the industry's prosperity, and have high growth rate development.

cost control capabilities are stable, and the leading scale effect continues to emerge. The expense rate of Yiyuan Communications during the 22Q1 period was 14.65%, an increase of 1.9% month-on-month and a decrease of 1.6% year-on-year. The expense rate of Guanghetong during the 22Q1 period was 15.01%, a decrease of 2.59% month-on-month and a decrease of 2.06% year-on-year. The overall cost rate of Yiyuan Communications and Guanghetong is stable, reflecting the improvement of the leading enterprise's ability to manage in fine management . The scale effect will become one of the core advantages of the company's continued deepening its market.

22Q1 Gross profit margin and net profit margin both increased month-on-month. Under the influence of factors such as the overall shortage of upstream raw material supply and repeated epidemics, the gross profit margins and net profit margins of Yiyuan Communications and Guanghetong have both improved month by month, reflecting the excellent comprehensive management capabilities and cost control capabilities of the leading companies. In 22Q1, the gross profit margin of Yiyuan Communications was 18.19%, an increase of 2.4% month-on-month, a decrease of 1.2% year-on-year, and a net profit margin of 4.05%, an increase of 0.8% month-on-month and year-on-year; in 22Q1, the gross profit margin of Guanghetong was 22.00%, an increase of 0.75% month-on-month, a decrease of 3.11% year-on-year; the net profit margin was 8.88%, an increase of 2.66% month-on-month, a decrease of 0.46% year-on-year. It is expected that as the prices of upstream raw materials stabilize and the epidemic is further controlled in the future, the profitability of the leader is expected to maintain an increase trend. Benefiting from the advantages of product portfolio improvement and channel breakthroughs, the trend of improving profitability of platform module manufacturers is more obvious. As the leader of vertical modules, Guanghetong has experienced pain in the process of transformation to a platform manufacturer, and 22Q1ROE/ROA has improved.

Intelligent Control Industry has strong "customized" attributes, vast space, latecomers' strength cannot be underestimated

All things intelligence background, home appliances, automobiles, power tools and other products and multiple scenarios intelligent help intelligent control devices to 100 billion space. The current smart controller market segment is mainly automotive electronics, household appliances, power tools and industrial equipment devices, accounting for nearly 50%, of which automotive electronics account for the largest proportion, up to 23.3%; followed by household appliances and power tools, accounting for 13.7% and 12.9% respectively.According to the Forward Industry Research Institute, the market size of China's smart controllers increased from 1.17 trillion yuan in 2015 to 2.37 trillion yuan in 2020, with a CAGR of 15.11% in five years, and is expected to exceed 3 trillion yuan in 2022. We believe that the smart controller industry is large in scale and is expected to maintain a growth of more than 10% in the next five years.

analyzes with the dual leaders, short-term profits are under pressure and will not change the medium- and long-term development trend. 22Q1 Tuobang Co., Ltd. and and Tai achieved operating income of 1.868 billion yuan and 1.24 billion yuan respectively, up/down by 10.02% and -2.7% respectively. Against the backdrop of rising raw materials prices and repeated epidemics, the performance of the two leading companies has remained relatively stable. On the one hand, it is due to the two insisting on R&D investment and layout, new products have frequently occurred and obtained multiple product certifications, and shipments remained stable; on the other hand, it is thanks to the leaders' high refined management capabilities, the company's supply chain has upgraded the basic capabilities of key business links as the focus of organizational capacity building, personnel sorting and professional ability improvement work continues, and automated production is fully promoted in outsourced processing plants, which is expected to effectively reduce costs while ensuring delivery. From the perspective of product structure, smart controller manufacturers continue to horizontally expand into automotive electronics, new energy vehicles, smart life and other fields based on technology reusability, enrich their business portfolios, and are expected to further improve their profitability.

cost rate is controlled stably, increasing investment and improving product competitiveness. From the perspective of expense ratio, Tuobang shares Heheertai continues to promote cost reduction and efficiency improvement. In 22Q1, Tuobang shares increased by 60.55%/54.88%/37.50% year-on-year due to the increase in equity incentive expenses and employee wages, the increase in R&D investment in new projects and some overseas bases entered the investment period, resulting in the company's sales/management/R&D expenses increased by 60.55%/54.88%/37.50% year-on-year; the income from changes in fair value decreased by 67.49% year-on-year. Heandai's sales/management/financial/R&D expense ratio has decreased by 0.02PP/0.81PP/1.06PP/0.29PP in 21 years, with overall profitability enhanced and improved operating efficiency.

Increase raw material reserves to cope with out-of-stock problems. Tuobang shares and and Tai 's overall turnover rate has not changed much. Against the backdrop of rising prices of upstream components, both parties have stepped up their stocks. As of 2021, Heertai's inventory increased by 47.15% to 1.537 billion yuan compared with the end of 2020. In addition, Tuobang Co., Ltd. Heheertai takes advantage of the advantages of the global supply chain platform to increase domestic substitution of components through procurement resource connection, supplier system establishment, price resources, upstream and downstream industrial information connection, and further reduce procurement costs. (Report source: Future Think Tank)

4.2 Future: Downstream N Longitudinal Large-grain scenarios are still the focus direction

Smart home: The industry is booming, and the domestic growth rate is faster than the global

Home intelligent is the long logic of the development of the home Internet of Things. According to IDC data, the global smart home equipment market in 2021 increased by 11.7% compared with 2020, with equipment shipments exceeding 895 million units. In the domestic smart home market, the number of devices exceeded 230 million units in 2021, with a market size of 580 billion yuan, a year-on-year increase of 12.75%, faster than the global growth rate. We are optimistic about the upstream perception, connection layer opportunities and platform-based enterprise opportunities brought by the long-term development of home intelligence.

Intelligent travel: Focus on the fields of intelligent automobile networking and short-term travel

Domestic automobile networking continues to increase, and 5G T-BOX is still waiting to be started. According to Zosi Automotive data, the pre-assembly assembly volume of T-Box of China's passenger car in 2021 was 12.94 million units, a year-on-year increase of 38%; the assembly rate reached 60%, an increase of about 10 percentage points from the previous year. Among them, the insurance volume of 5G models is about 40,000, accounting for 0.3% of the total assembly volume of T-Box; the insurance volume of 5G models is 15,000 in January-February 2022, accounting for 0.5% of the total assembly volume of T-Box, and the proportion of 5G T-Box in the total market is still relatively small. In the future, driven by factors such as the continuous development of intelligent networking functions, the growth of demand for new energy market, regulatory requirements of competent departments, and OTA needs of OEMs own vehicle OTAs, passenger car networking will be further popularized, and the T-Box assembly volume and assembly rate will continue to rise. According to Zosi Automotive Data, it is expected that the pre-assembly assembly rate of T-Box of China's passenger car T-Box in 2025 will reach 83.5%, with an assembly volume of more than 20 million vehicles. T-Box and the Internet of Vehicles will gradually become the standard configuration of passenger cars. In 22 years, the assembly rate will increase by 8 points.