“The two major directions of the science and technology track in 2022, one is that 5G applications are getting closer and closer to us, and the other is that the localization starts from 0 to 1, a real breakthrough. Among them, 5G applications will be the most worthy of the market in 2022. Expected direction.”
“There are three most promising directions under the main line of 5G applications: one is the intelligentization of automobiles; the second is the VR, AR and high-definition video industries that extend around the meta universe; and the third is the various scenes of the industrial Internet of to B.”
“In terms of automobile intelligence,’electricity in the first half and intelligence in the second half’, the automobile market will also follow the same path as consumer electronics five years ago. In terms of time and rhythm, first of all, it will focus on the level of hardware. There will be more investment opportunities; in addition, as we continue to move down the chain of automobiles, the entire computer industry will also usher in a relatively large change.”
“In the direction of Meta Universe, on the one hand, we see some content-related companies in the media industry, and on the other hand, some traditional Internet giants have deployed in it. In addition, it may be around some industries in the entire format. In the electronics industry, companies that revolve around making optical displays and panels have also benefited with certainty.”
“The third major direction of 5G applications is the various scenarios of to B’s industrial Internet. We look forward to 2022, because the entire industrial Internet scene may be some tertiary and specialized scenarios, and more of a standardized application. To subdivide industries and vertical industries to do some SaaS companies or industrial software companies, the benefits may be broader.”
“The semiconductor industry chain and its extensions such as the localization of software and information security are the directions that everyone can look forward to on the localization track in 2022.” “The localization today is a bit like the new energy industry two or three years ago. A track that is suspected and guided by policy is gradually moving towards real industrialization.” “On the localization track, the sector with the highest degree of certainty and prosperity at this stage is still the semiconductor sector. The semiconductor industry chain is very long. , From chip design to upstream equipment, and even materials. In addition to the electronics industry itself, around materials, such as the chemical industry, and industries such as non-ferrous metals, there are some related targets.”
On November 30th, Wu Chao, director of the Securities Research Institute of China Securities (28.410, 0.04, 0.14%) and chief analyst of the TMT industry, made a theme at the 2021 China Analyst Conference as “5G applications are gradually approaching, localization “From 0 to 1” in the speech, made the above judgment.
The following is the essence of the investment workbook to share with you:
Two promising directions for the technology track
On the technology track in 2022, we are most optimistic about two directions.
The first direction is 5G applications, including smart cars, VR, AR, meta universe, and the entire to B industrial Internet.
The second direction is localization. Our focus, from the independent control of the entire chip industry chain represented by semiconductor materials and equipment that we have seen in the past, will also extend to software, operating systems and information security in 2022. And network security. These two directions are what I personally think are worthy of everyone’s attention in the big investment strategy of 2022.
5G application is the next most anticipated direction
In terms of 5G applications, 5G was officially commercialized in June 2019. After about two years, the total number of 5G base stations in the Chinese market has reached more than one million stations. It should be said that it is the largest in the global 5G network construction. An existing commercial 5G network accounts for about 70% of the total number of 5G base stations in the world. At present, one million base stations can basically achieve 5G coverage in all prefecture-level cities.
In addition, the penetration rate of the entire 5G terminal or 5G mobile phone has also been significantly improved. According to data from the Ministry of Industry and Information Technology in the third quarter of 2021, we currently have more than 400 million 5G mobile phone users. According to the current total number of mobile Internet users, it has basically reached a penetration rate of more than 40%.
Of course, this figure may have a bigger breakthrough next year. Next year, the shipment of 5G mobile phones is expected to be about 560 million. From this point of view, when the penetration rate of the entire mobile terminal exceeds 30%, the deployment or further explosion of the entire application has a preliminary condition.
And observing the application of 5G is not only to look at the mobile phone. Focusing on more markets for 5G terminals, such as the increase in the penetration rate of smart cars and the explosive development of the smart home industry, various smart terminals are entering our lives.
Looking forward to 2022, Apple’s wearable devices, AR and MR helmets, head-mounted cameras, and head-mounted displays will also be put on the market as mainstream products. This will also be of considerable help to the entire scene of the entire 5G terminal or the penetration of what we commonly call the Internet of Things terminal, and it is worth looking forward to.
Therefore, from the perspective of the entire infrastructure or new infrastructure, from 2019 to now, the entire market has made considerable progress. It is based on such a long-term logic of low-level hardware penetration and basic computing power increase. I personally think that in 2022, the application of 5G should be the most anticipated direction in the next market.
Three directions of 5G applications
Specific to the application, it is mainly divided into three aspects. 1.Intelligent car
First of all, from the perspective of the whole year of 2022, from the perspective of the deterministic growth of performance in the short term and the logic of long-term growth, one sector that is worth looking forward to is the intelligentization of automobiles.
We often talk about “electricity in the first half and intelligence in the second half”. I personally think that the auto market will follow the same path as consumer electronics five years ago. The first thing we see is the improvement in the level of intelligence of the entire terminal hardware. After the increase in the penetration rate of an intelligent foundation such as the car, the more important thing is the development of a series of applications around the car’s intelligence, such as smart cockpits, Autonomous driving and even the future Internet of Vehicles or vehicle-to-road interconnection, which we will gradually see in a future stage.
In terms of time rhythm, first of all, it will focus on the level of hardware, and its investment opportunities will be more, for example, sensors related to automotive electronics, including upstream chips.
The most typical image revolves around automotive electronics sensors, cameras, automotive lidar, including passive components MLCC, PCB, and IGBT, etc. The hardware iterations brought about by automotive intelligence may bring to the original electronics industry Some deterministic quotes.
Of course, we will see a lot of targets here. Maybe it was originally only around some of the leaders in the Apple industry chain or the consumer electronics industry chain. Many people are also verifying whether they have caught up with the wave of automobile intelligence. Therefore, our first recommendation is probably to revolve around this chain. It may have proven itself in terms of products or technical strength, but in the future, the direction of automobile intelligence, the certainty of shipments in the entire vehicle industry chain, and the These targets are more certain in the supply chain.
Of course, there are some directions, such as IGBT, including chip-related companies whose valuation is relatively high. But what is more worthy of everyone’s attention, such as passive components, including PCBs, cameras, etc., in fact, the valuation may have returned to a relatively reasonable position in the past period of time. Looking at this area in 2022, if you say it grows After the logic is verified, it is also expected to usher in a valuation repair, which is also a relatively promising direction for us in the consumer electronics sector.
In addition, as the chain of automobiles continues to go down, the entire computer industry will also usher in a relatively large change.
Most typically, companies related to software services will benefit to a certain extent. People may be worried about whether these companies will eventually have enough barriers in the industry chain. At this stage, the entire industry is still in the process of rapid development from 0 to 1. At this time, according to the industry’s entropy reduction effect, its industry chain will invest or give more orders to quickly reduce industry costs, These companies provide more cost-effective products. Among these, some traditional Chinese software companies still have very good layout and advantages in technology and efficiency.
In addition to these software companies, it corresponds to upstream cloud computing companies that provide computing power, including edge computing companies, and even the underlying communication companies and equipment companies that do IDC (data center) and some communication services related to the data center. It also benefits deterministically.
The above are some of the targets we have seen that we are optimistic about the direction of automobile intelligence under 5G applications.
2.The VR and AR and HD video industries extended around Metaverse
The second direction revolves around the now very hot to C direction, the pixel universe. Behind this is actually an extension of AR/VR technology. On the one hand, we have seen some content-related companies in the media industry, and on the other hand, some traditional Internet giants have deployed here. In addition, it is possible that some industries in the entire format, such as the electronics industry, are also deterministically beneficial to companies that focus on optical displays and panels.
3. to B’s industrial Internet scenes
In addition to the two directions of automobile intelligence and meta-universe just mentioned, the third major application direction of 5G applications is the industrial Internet, that is, there will be some definite scenarios in the direction of to B.
According to the data released by China Mobile and Telecom in 2021, there are already a large number of industrial Internet scenes on the ground, such as in smart ports, docks and mines. In the past, the risk factor was relatively high. Now, scenarios like some digital twins, including some scheduling for 5G area coverage, are already on the ground.
You may not feel very obvious in terms of investment. The main reason is that the application of to B is more abstract than the application of to C. However, I think it revolves around some targets related to the industry chain, such as connectors, including modules. , As well as some chip upstream companies, controller companies, etc. we have seen, in fact, the boom in 2021 is already very high.
Looking forward to 2022, because the entire industrial Internet scene may be some tertiary and specialized scenes, it may not be like the to C scene, it is more of a standardized application. From this point of view, it is possible to do some SaaS companies or industrial software companies in sub-industries and vertical industries, and the benefits may be broader.
Localization from 0 to 1: Optimistic about semiconductors, software and information security
Looking forward to 2022, there is a second direction in the big technology track, that is, the entire localization will enter from 0 to 1. It should be said that it is in the process of gradually moving from deep water to verification and differentiation. Therefore, I think the possibility of localization today is a bit like the new energy industry two or three years ago, from a relatively suspicious, relatively policy-led and guided track, and gradually toward industrialization in the true sense.
Of course, at the current stage, the industry has the highest certainty, or from the perspective of prosperity, it is the semiconductor sector that is better and more flexible.
The semiconductor itself is actually a very long industrial chain, from chip design to upstream equipment and even materials. In addition to the electronics industry itself, around materials, such as the chemical industry, and industries such as non-ferrous metals, there are some relevant targets.
Looking forward to 2022, although this track is said to have a relatively high valuation, some advanced manufacturing processes are gradually being verified and implemented around the entire Huawei ecosystem, and the capacity shortage caused by the 2021 epidemic has been removed, which will affect the prosperity. In addition, in fact, some high-end chains with relatively core technologies are worth high valuations. The reason is that once it is verified, there is still a lot of room for future growth of the entire industry. The most typical ones are analog ICER, as well as companies in the field of equipment and materials that we have seen.
Therefore, looking at 2022, whether it is PE or PEG, the valuation level that matches the growth rate is still worth looking forward to.
Of course, localization will also be a big concept in the future, not just chips and semiconductors, like the Hongmeng ecosystem in Huawei’s ecosystem, it has actually begun to open source the ecosystem. After the hardware is localized, it is also important to focus on the software ecology and operating system. These aspects are also worthy of everyone’s attention.
In addition, under the “Information Security Law”, a lot of data security and privacy protection have come out in the policy field this year, and the policy height has also been raised to a high position. In addition to policy catalysis, the most important thing is that 5G in the future will definitely bring about the digitization of the entire industry. Compared with the past 3G and 4G, which affects everyone’s lives more than to C, many are related to production safety or reliability. The scenes that will come out, such as intelligent medical care, including some scenes of to B, will definitely bring its high requirements for data and reliability. At this point, it is more an explosion of real industry demand brought about by industry digitization. Therefore, we are also very optimistic about the information security sector.
With the development of the security industry over the past period of time, its products have also undergone essential changes. In the past, there were more software and hardware companies, but now it is basically a cloud product company that integrates the entire cloud, tube, and terminal. Several leading companies in this industry basically have hundreds or even thousands of products. Some of the leading companies here, whether it is R&D or the entire revenue scale, and the customers of to B and to G that they serve, already have a fairly leading position in the industry. Therefore, it is easier for everyone to choose the target.
The above is our outlook for the entire 2022 TMT and technology industry investment strategy. In summary, there are two major directions. One is that 5G applications are getting closer and closer to us. Second, the localization started from 0 to 1, a breakthrough in the true sense.
Under the main line of 5G applications, I personally have three most optimistic directions: The first direction is the intelligentization of automobiles. The second direction is the VR and AR and high-definition video industries that extend around Metaverse. The third direction is the various scenes of to B’s Industrial Internet. These are the three most promising directions for applications.
Under the localization track, in addition to the semiconductor industry chain that everyone has been very concerned about in the past period of time, extensions such as the localization of software and information security are the directions that we should look forward to on the localization track in 2022.