1. The financing function and pricing function of the equity market are often the epitome of economic and industrial structure and policy orientation:
Since the 19th National Congress of the Communist Party of China, the development idea has gradually shifted from total expansion to improving quality and efficiency. With the registration system of science and technology innovation board and Growth Enterprise Market as landmark events, the equity market has assumed more financing functions for emerging industries. In the past three years, the financing environment has obviously favored emerging industries and high-end manufacturing. In the first half of 2021, the financing amount (IPO+ fixed increase) of electronics, machinery, medicine, automobile, chemical industry, electrical equipment and computer industry accounted for 54% of the whole market.
2. From the perspective of financing structure and policy guidance, it will be a long-term process to implement the strategy of high-quality development, supporting emerging industries and maintaining supply chain security from top to bottom:
Since 2020, the anti-monopoly curtain has been opened, and capital and policy dividends have further gathered in the hard technology fields of emerging industries. In the next stage, there will be two characteristics in the field of hard science and technology: 1) Before the permeability/domestic substitution slope slows down, the high-growth track may continue to enjoy the valuation premium (see the report "How to Deal with the Overall High Valuation of Science and Technology?" From the perspective of permeability "). 2) With the increasing number of innovative track market players, horizontal and vertical integration and specialized division of labor will give birth to more bull stocks. Under the resonance of policy dividend and industrial cycle, the technology companies that landed in the A-share market in the past two years are the key targets for us to observe industrial trends and tap high-quality targets.
3. We carefully read the financial reports of GEM/science and technology innovation board companies listed in the past 19 years, and sorted out the descriptions of their respective industrial chains by listed companies.On the whole, the current hard technology has five driving forces: 1) domestic substitution/capacity gap; 2) Energy revolution/low carbon environmental protection; 3) Permeability improvement/technical innovation; 4) national defense security/information security; 5) Consumption upgrading/aging.
4. Based on the description of listed companies’ financial reports and the recommendation of industry teams, we selected 28 directions with clear current prosperity among the six industrial chains.
28 tracks in 6 sectors of hard science and technology-related targets of GEM/science and technology innovation board listing since 2019
28 tracks in 6 sections of hard science and technology-main conclusions
First, in the era of direct integration, the equity market is the epitome and barometer of industrial trends.
Looking at the extended interval, the financing function and pricing function of the equity market are often the epitome of the economic and industrial structure and policy orientation at that time.
Secondary market: The United States, Japan and China have successively entered the stage of economic growth center descending (L-shaped descending) and economic structure transformation since 1970s, 1990s and 2010s. After this stage, in the economic structure of the three countries, the proportion of consumer industry, service industry and high-tech industry began to increase. At the same time, in the stock market, the annualized rate of return of stock prices of science and technology, medicine and consumption began to outperform significantly.
Primary market: If we take five years as a cycle, we will make statistics on the industry distribution of IPO in each stage:
1) In the supply of new shares in the 1990s, the top industries included real estate, communications, commerce and trade, public utilities, automobiles and petrochemicals, mainly corresponding to the initial urbanization, pillar industries and basic industries, as well as the retail sector that benefited from the rapid economic growth and market-oriented reform in the 1990s.
2) In the first half of 00′ s, public utilities, petroleum and petrochemical, transportation and basic chemical industry in infrastructure and basic industries were still the areas with a large number of new shares; Some "high-tech fields" such as medicine and electronic components began to have more new shares listed. In the second half, although the financing ratio of cyclical stocks is still relatively high, the number is greatly reduced; Under the joint action of real estate golden decade and manufacturing investment expansion, the number of new shares in the equipment sector in the middle reaches increased.
3) Since the 10th century, the number of new shares in the fields of science and technology, consumption and manufacturing has increased significantly, benefiting from the adjustment of the three major domestic industrial structures and the wave of mobile Internet technology; The number of new shares in real estate and raw materials in the upper and middle reaches has shrunk dramatically. Since the 19th National Congress of the Communist Party of China, the development idea has gradually shifted from total expansion to improving quality and efficiency. With the registration system of science and technology innovation board and Growth Enterprise Market as landmark events, the equity market has assumed more financing functions for emerging industries. In the past three years, the financing environment has been more obviously biased towards emerging industries and high-end manufacturing.
In the first half of 2021, the financing amount (IPO+ fixed increase) of electronics, machinery, medicine, automobile, chemical industry, electrical equipment and computer industry accounted for 54% of the whole market.
From the perspective of financing structure and policy guidance, it will be a long-term process to implement the strategy of high-quality development, supporting emerging industries and maintaining supply chain security from top to bottom. At the same time, since 2020, the anti-monopoly curtain has been opened, and capital and policy dividends have further gathered in the hard technology fields of emerging industries. In the next stage, the field of hard science and technology will present two characteristics:
1) The high-prosperity track in the growth period may continue to enjoy the valuation premium.
The life cycle and the corresponding stock price performance of industries such as Internet, mobile Internet and smart phone can divide the process of new technology or new product from introduction to iteration into four intervals: in the introduction stage, the penetration rate increases slowly (generally the upper limit is between 10-15%), and the valuation increases accordingly, but the prospect and competition pattern are vague; The growth stage (generally the lower limit is between 10-15% and the upper limit is between 30-50%) is characterized by the rapid increase of product penetration, certainty and centralized influx of funds to open the upper limit of valuation, which is the most valuable stage for participation; In the mature stage, the increase slope of permeability slows down (generally after 50%), and the industry pattern gradually stabilizes, entering the stage of valuation digestion, but the market may still make profitable money; In the recession stage, the permeability is no longer improved or replaced by new technologies, and market players withdraw or maintain low valuations.
At present, we stand on the cusp of the rapid increase in the penetration rate of new technologies such as new energy vehicles and 5g, and the acceleration of the localization process of semiconductors and military materials. The hard technology field is expected to continue to enjoy the valuation premium. (See the report "How to Deal with the Overall High Valuation of Technology" for details. From the perspective of permeability ")
2) With the increasing number of innovative track market players, horizontal and vertical integration and specialized division of labor will give birth to more bull stocks.
In the medium-term strategy "Opening a New Battlefield: A New Cycle is a Feast of Hard Technology", we mentioned that the opening of a new round of stock market cycle is to continuously tap the potential core assets in the future in the direction of high prosperity. Looking at the boom sector, on the one hand, industry leaders in some sub-sectors use the first-Mover advantage, establish technical barriers, or integrate the industrial chain horizontally and vertically; On the other hand, the expansion of downstream application fields also leads to the demand for refined and specialized division of labor in upstream and downstream manufacturing, which can also incubate a number of excellent small and medium-sized market capitalization companies. Under the resonance of policy dividend and industrial cycle, the technology companies that landed in the A-share market in the past two years are the key targets for us to observe industrial trends and tap high-quality targets.
Second, a new overview of science and technology innovation board and Growth Enterprise Market-a selection of 28 hard and high-tech tracks
We intensively read the financial reports of GEM/science and technology innovation board companies listed in the past 19 years (with a market value of over 5 billion, a total of 214 companies), and sorted out the descriptions of listed companies on their respective industrial chains. On the whole, the current hard technology has five driving forces: 1) domestic substitution/capacity gap; 2) Energy revolution/low carbon environmental protection; 3) Permeability improvement/technical innovation; 4) national defense security/information security; 5) Consumption upgrading/aging. Based on the description of listed companies’ financial reports and the recommendation of industry teams, we selected 28 directions with clear current prosperity among the six industrial chains.
The targets listed in the table below mainly show the listing on the Growth Enterprise Market and science and technology innovation board in the past 19 years: (The target list does not represent specific recommendation; See below for details and recommended by various industry teams)
The upstream of the integrated circuit industry chain includes EDA tools, semiconductor IP, materials and equipment; The midstream is mainly composed of integrated circuit design, wafer manufacturing, packaging testing and system manufacturers. Downstream includes innovative applications such as PC, Internet, smart phone, digital image, cloud computing, big data and artificial intelligence.
Industry space: In 2020, the global semiconductor market sales amounted to USD 439 billion, up by 6.5% year-on-year. According to IBS data, the semiconductor industry will usher in a wave of rapid growth in the next five years. It is estimated that the market scale will exceed 500 billion US dollars in 2022 and reach 606 billion US dollars in 2024.
Under the industry’s own prosperity and policy inclination, the semiconductor industry has been the most concentrated area of GEM and science and technology innovation board listed companies in the past two years. Summarizing the description of the industry pattern in the financial reports of listed companies, the current semiconductor industry chain has three main supports: first, domestic substitution in the upper and middle reaches; The second is the capacity gap formed by rigid supply and strong demand; The third is the opportunity of segmentation brought by specialized division of labor.
Domestic substitution: mainly materials and equipment in the upper and middle reaches; EDA tools and analog IC in IC design.
Under the background of increasing macro-environmental uncertainties such as trade friction, accelerating import substitution and stabilizing semiconductor supply chain security have risen to the height of national strategy, which is an important part of supply chain security. At present, the self-sufficiency rate of integrated circuits in China is still low, and there is still a lot of room for growth; Among them, the importance of domestic semiconductor equipment and materials is prominent.
1) Material link: Take silicon as an example, Japan, Taiwan, China, South Korea and other countries and regions still occupy an absolute dominant position (Shinetsu Chemical and SUMCO in Japan, Taiwan, China Universal Wafer, Siltronic in Germany and SK Siltron in South Korea together account for more than 90%). There is still a big gap between domestic materials and global leading enterprises in terms of overall technical level and production scale. But on the sales side, the compound growth rate of semiconductor silicon wafer sales in China (25.5%) in the past five years (2015-2020) is much higher than the global compound growth rate (9.3%).
2) Equipment industry: Take test equipment as an example. At present, internationally renowned enterprises represented by Tereda of the United States and Edwin of Japan still occupy the main share of the semiconductor test equipment market. With the strong support of the policy, the advantages of domestic equipment such as fast speed, good service and high cost performance are superimposed, and the domestic substitution ratio is expected to continue to increase.
3)EDA tools: EDA is known as the "cradle" and life gate of integrated circuits, and it is the most important software design tool for chip design. In 2019, the global share of the top three giants Synopsys, Cadence and Mentor reached 66%, and the market share of China exceeded 85%; The localization rate is only 10%. Domestic EDA has received more attention since the Sino-US trade friction.
4) Analog IC: IC：2018, the global market size of analog semiconductor industry is about 58.8 billion US dollars, and the market size of analog chip industry in China market is about 32.2 billion US dollars, accounting for more than 50% of the global market. However, at present, the self-sufficiency rate of the industry is low, and domestic analog chips are also mainly collected from analog chip manufacturers such as Texas Instruments and NXP.
Capacity gap and industrial transfer: mainly manufacturing links; Under the influence of the epidemic, the sealing and testing link also benefited.
Manufacturing link: The rise of new formats, new models and new applications such as AI and Internet of Things has driven the demand for chips, but the production capacity of wafer foundry is still tight. Wafer manufacturing and processing is the core process of chip manufacturing. On the one hand, the self-sufficiency rate of wafer foundry in mainland China is still low. In 2019, SMIC+Hua Hong only accounted for 6.5% of the global market share. On the other hand, the proportion of equipment investment is significantly higher than other links, and it belongs to the heavy asset industry, and the capacity expansion cycle is long (it takes at least 6 months for the old factory to acquire bottleneck equipment, and it takes about 2 years for the new factory to be built and put into operation), so it has strong supply rigidity. With the arrival of the traditional peak season, the contradiction between supply and demand will continue to be interpreted.
As the most important part of assets, the expansion of wafer foundry will also amplify the flexibility of raw materials and equipment.
Sealing and testing link: The sealing and testing capacity continues to be tight. In the past year, due to the epidemic in Southeast Asia and Taiwan, China, the production capacity gap was further widened, and the sealing and testing capacity was also facing a continuous tight situation.
The trend of specialized division of labor: it is beneficial to the business model focusing on manufacturing and testing.
The trend of specialization and division of labor, to a certain extent, makes the pressure of traditional IDM model increasing day by day, and only a few large factories can maintain it at present; More wafer manufacturing and integrated circuit test orders flow out from traditional IDM manufacturers, which gives more space to enterprises that focus on manufacturing, packaging or testing.
Judging from the composition of each link of integrated circuits, the fastest development in the past 20 years is the design link; In the past five years, the proportion of output value of manufacturing links has increased slightly; The proportion of sealing and testing links is the lightest, and the production capacity is relatively scattered. Looking ahead, under the trend of specialization and division of labor, it is expected that a number of enterprises focusing on packaging and testing will emerge. Taking testing as an example, the demand for independent and professional testing service organizations is becoming more and more urgent.
In addition, summarizing the descriptions of listed companies, the following main risks are:
1) The semiconductor industry has strong domestic substitution logic, which is relatively the most prominent sector of supply chain risk at present. Many listed companies mentioned the problem of high concentration of raw material supply in their financial reports. From our sample, the concentration of upstream suppliers and downstream customers in the semiconductor industry is high. And because the main raw materials are imported at present, they still face uncertainties such as trade frictions (such as "entity list" control).
2) Semiconductor is a cyclical growth industry. In the long run, it is also experiencing a development cycle of insufficient production capacity and expansion of production capacity to overcapacity; Therefore, when the contradiction between supply and demand is alleviated (the impact of the epidemic situation is weakened and new production capacity is put into production), the industry will also face greater volatility.
3) Risk of government subsidy policy change: The semiconductor industry is a strategic industry encouraged and supported by the state. In particular, the domestic substitution of key environment receives a large amount of government subsidy, and it may face policy changes, trade negotiations and other variables in the future.
4) For the downstream of the industrial chain, the increase in raw materials may cause the gross profit margin to decline.
The upstream of the panel industry chain includes panel materials (mixed liquid crystal, polarizer, OLED organic luminescent materials, etc.) and assembly parts (driving IC, circuit board, passive components, etc.); The middle reaches include semiconductor display devices, panels (TFT-LCD, AMOLED, etc.) and panel modules; Downstream applications mainly include large-size TVs, monitors and notebook computers, and small-size TVs include mobile phones, tablet computers and car monitors.
Industry space: In the display field of the Internet of Everything, with the development and popularization of new technologies such as 5G and AIoT, the development of intelligent display promotes multi-screen, the demand for display panels continues to increase, and the industry is welcoming a new round of rapid growth. CINNO Research predicts that in 2021, the total global panel sales will be expected to exceed 150 billion US dollars (about 955.6 billion yuan), reaching a record total revenue of the display panel industry, with a year-on-year growth rate of more than 25%. Among them, the annual sales of Chinese mainland panel manufacturers will reach about 60 billion US dollars (about 382.2 billion yuan) in 2021, accounting for about 40% of the total revenue of major panel companies in the world.
Global production capacity and technology trends:
1) In the past 10 years, the global LCD production capacity has accelerated to migrate to China. In 2010, Chinese mainland’s LCD production capacity accounted for 5% of the world (at that time, Taiwan, China accounted for 36%); In 2020, Chinese mainland’s share will increase to 50% (25% in Taiwan, China); Japan’s production capacity accounted for 95% in 1995, and it is currently 5%.
2) Small and medium-sized display panels: AMOLED is becoming the mainstream technology (high-end smart phones, wearable devices and other small-sized products, etc.); Apple was first used for iPhoneX in 2017). The global production fields of AMOLED semiconductor display panels are mainly Korean manufacturers and Chinese mainland manufacturers, among which Korean panel manufacturers have a high share of production capacity. On the other hand, mainland panel manufacturers are developing rapidly and showing an accelerated market competition pattern. From 2017 to 2019, mainland manufacturers’ AMOLED semiconductor display panel shipments accounted for 3.24%, 6.87% and 18.51% of the global total, respectively.
3) Increase in the share of flexible AMOLED: Rigid AMOLED semiconductor display panels are relatively low in production cost, and quickly penetrate into applications such as tablet/notebook computers; However, in 2020, the shipment of flexible OLED (15.1%) has surpassed that of rigid OLED(13.8%).
4) Large-size panel: LCD is still the mainstream, but technologies such as quantum dots, MiniLED and MicroLED are subverting the existing pattern, which is also the direction of major manufacturers’ layout. The application of MiniLED technology has been economical at present, and it is expected to penetrate rapidly as a new generation backlight/display scheme. At the same time, with the development of display technology such as small spacing and MiniLED, the application tentacles of LED display screen are extending to more fields.
5) The development of flat panel display industry has promoted the development of upstream and downstream materials, equipment and technology, and promoted the localization process of supporting industries. Domestic upstream and downstream materials and equipment have already had certain advantages in industrial competition.
2.2. New energy (vehicle) industrial chain
The upstream of the industrial chain of new energy vehicles is mainly various mineral resources (lithium, cobalt and nickel); The middle reaches are lithium battery materials (electrolyte, positive electrode, negative electrode and diaphragm), equipment and three electric systems (battery, motor and electronic control); Downstream for key components and vehicle manufacturing.
Industry space: According to the IEA pure electric+plug-in hybrid caliber, by 2020, the penetration rate of new energy vehicles in China is 5.7%, and that in Europe is only 10%. According to domestic statistics, by 2021H1, the penetration rate of new energy vehicles reached 12%. Combined with the current policy trends, sales situation and referring to the SUV market in the early 1900s, the current new energy vehicles are still in the early stage of rapid penetration, and the performance of the industrial chain has entered the cash stage. In the medium-term dimension, it is highly probable that the sector will continue to enjoy the valuation premium until there are signs of slowing down the penetration rate.
Lithium battery industry chain
With the tightening of carbon emission policies in various countries, the continuous optimization of the technical level and manufacturing cost of lithium-ion power batteries, and the rapid development of auxiliary facilities such as charging piles, the upstream and downstream of the industrial chain of new energy electric vehicles have achieved rapid recovery and growth against the trend. According to the White Paper on the Development of Lithium-ion Battery Industry in China (2021), the global lithium-ion battery shipments reached 294.5GWh in 2020, of which the China market was 158.5GWh. In the follow-up, the penetration rate of new energy vehicles continues to increase+wind power photovoltaic configuration energy storage+lithium battery replacement of electric two-wheeled vehicles is the main support, which in turn drives the demand for upstream materials and equipment.
1) Material link pattern:
Lithium batteries are mainly composed of anode material, cathode material, separator and electrolyte, which account for 40-46%, 5-15%, 5-11% and 10-14% of the material cost respectively.
Cathode material: Among the four materials of battery, the cost ratio is the highest, and the current concentration ratio is relatively low. Comparing the two mainstream technical routes, the advantages of ternary material cathode are high energy density and strong endurance; The advantages of LFP Ferrous lithium phosphate anode are low material cost and strong safety. Due to the influence of subsidies (and spontaneous combustion accidents to some extent), the proportion of lithium iron carbonate battery production has increased since 19 years. However, under the demand of high cruising range and intelligent driving (and the relatively strong premium ability downstream), the trend of cathode materials is ternary positive nickel and integration, and the speed of industry integration is expected to accelerate in the future.
Diaphragm: Among the four major materials, the industry concentration is the highest, and the current supply gap has widened, and the pattern and profit are better than other materials. The gross profit margin of head diaphragm enterprises has remained above 40% in the past three years. Considering the requirements of energy density and safety, "wet method+coating" is the future development trend.
Electrolyte: The product has a high concentration of production capacity, has been basically localized at present, and has the strongest periodicity among the four major materials. The price of lithium hexafluorophosphate, the main material, fell for three and a half years after 17 years. In September last year, it rose from a low of 69,500 yuan/ton to the current 380,000 yuan/ton, an increase of over 400%. In addition, the gap of additives such as VC is also further expanding.
Negative electrode: CR5 has a high concentration, but it is currently in sufficient supply. In the future, with the development of high nickel battery and the increase of silicon and carbon usage, the permeability of new conductive agents such as carbon nanotubes is expected to increase.
2) Lithium battery equipment:
Lithium battery equipment is divided into front-end (mixer, coater, slitter, etc., with the coater as the core), middle-end (winder, laminator, liquid injection machine, etc., with the winder as the core) and back-end (forming cabinet, volume-dividing cabinet, testing equipment and PACK automation equipment). According to GGII’s "Investigation Report on Automotive Power Lithium Battery Industry in China GGII《2019", the localization rate of lithium battery equipment in China is 90% (the key coating machines and winding machines are basically completely localized), and the competition pattern is relatively stable. Due to the rapid growth of downstream demand, the demand of battery manufacturers for battery equipment has also changed from the original customized single-machine mode to the segmented system integration mode.
The technical threshold of lithium battery equipment is high, the customer stickiness is relatively large, the leading position is stable, and it is not easy for latecomers to break through the barriers. The subsequent driving force mainly comes from the continuous high increase of downstream demand and the horizontal and vertical integration of industry leaders.
3) Lithium battery manufacturing:
Power lithium battery is the core link in the middle reaches of the new energy industry (including motors and electronic control). From the domestic perspective, the current battery link has a large value and relatively deep technology accumulation, and China enterprises, the top ten lithium battery manufacturers in the world, account for half of the country; The production capacity of motors and electronic control links is relatively dispersed. Judging from the financial statements of listed companies, the current lithium battery manufacturing links are as follows:
① The overall driving force of the plate still comes from the rapid growth of demand for downstream new energy vehicles. According to the data of China Automobile Association, from January to June this year, the production and sales of new energy vehicles in China were 1.215 million and 1.206 million respectively, both of which increased by 2 times year-on-year. In terms of power batteries, from January to June this year, the cumulative output of power batteries in China reached 74.7GWh, a year-on-year increase of 217.5%. Looking ahead, the domestic demand is as mentioned above, and there is still room for further improvement in the current penetration level of 12.05% according to sales volume; In terms of global demand, the penetration rate of new energy vehicles in China and Europe has increased rapidly in the past two years, while the United States is relatively backward. The Biden administration’s overweight of new energy vehicles is an important increase in the future.
② China is in a new round of production expansion cycle. According to the incomplete statistics of Geshi Automobile, in the first quarter of 2021, Contemporary Amperex Technology Co., Limited, Guoxuan Hi-Tech, AVIC Lithium Battery and other power battery companies announced more than 20 new projects related to power batteries, with an investment of more than 160 billion yuan and an annual production capacity of more than 350GWh. The production expansion cycle has boosted the demand for lithium battery materials and equipment. Taking the recent development of lithium resources and lithium salt processing as a typical example, head battery manufacturers have accelerated their vertical layout to the industrial chain.
③ Behind the expansion cycle, high-end overcapacity and low-end overcapacity will coexist for a long time. Under the expansion trend of head enterprises, the industry concentration may be further improved, and the low-end production capacity is facing exit pressure.
In addition to power lithium batteries, the demand for lithium battery energy storage brought by the growth of wind and solar installed capacity is also expected to increase in the next stage. In recent years, the global electrochemical energy storage market has entered a period of rapid growth. Lithium battery energy storage has the advantages of long life, flexible deployment and fast response, and its position as the main solution of electrochemical energy storage has been established.
In terms of industry space: on the technical side, the improvement of the penetration rate of electric vehicles and 5G is an intelligent natural carrier and application scenario; On the policy side, since 2015, China has successively issued policies related to intelligent driving to promote the development of the industry. In 2020, relevant policy departments successively issued the Innovative Development Strategy for Smart Vehicles and the Development Plan for New Energy Automobile Industry (2021-2035). On the industrial side, in the past year, Internet giants accelerated the layout of smart cars, and the financing scale of the whole industry chain of design, research and development, manufacturing and sales services increased rapidly. According to IDC Global Intelligent Networked Vehicle Forecast Report, the global smart car market shipments will reach 76.2 million units in 2024, and CAGR will reach 14.5% from 2020 to 2024.
Starting from the description of the main business distribution and industrial chain of new shares, we can pay attention to several directions in the future: ① The cost proportion of automobile electronics in the whole vehicle will gradually increase, and the traditional automobile distributed electronic and electrical architecture (E/E) will be promoted to integration. The cost of electronic devices in traditional limousines accounts for about 25%, and it can reach 45%-65% in new energy vehicles. (2) The change of consumers’ demand for automobiles gives birth to intelligent cockpit space, which drives the demand for related software and hardware. ③ The automotive aftermarket is accelerating the development trend of digitalization and intelligence (intelligent diagnosis, etc.). (4) the market share of independent vehicle brands has increased and parts have been localized.
Installation space of scenery: According to the report of China Energy and Electric Power Development Outlook 2020, the primary energy demand is expected to reach its peak in the early period of the 16th Five-Year Plan under the situation of conventional transformation and accelerated electrification, with a peak value of about 5.8 billion to 5.9 billion tons of standard coal. In addition, the proportion of non-fossil energy in primary energy will reach 63%~81% in 2060. According to the calculation of Tianfeng public utilities team, assuming that the total primary energy consumption in 2030 is 5.85 billion tons of standard coal, the proportion of non-fossil energy will increase from 15% in 2019 to 72% in 2060. It is estimated that by 2030, the power generation of wind power and photovoltaic power will increase from 0.4/0.2 trillion kWh in 2019 to 1.6/ 1.6 trillion kWh respectively; The installed capacity increased from 2.1/200 million kilowatts in 2019 to 7.7/1.38 billion kilowatts respectively, totaling 2.15 billion kilowatts, which was higher than the minimum target of 1.2 billion kilowatts proposed at the Climate Ambition Summit in December 2020. In 2019-2030, the installed CARG of scenery was 13% and 19% respectively.
The upstream of the photovoltaic industry chain is mainly silicon materials, silicon wafers and other raw materials; The middle reaches are mainly photovoltaic system components such as battery chips, components, inverters, junction boxes, photovoltaic brackets, cables, auxiliary materials, etc. The downstream is mainly photovoltaic power station applications such as the construction, operation and maintenance of solar photovoltaic power stations. China has a complete photovoltaic industry chain, which has become a relatively concentrated and fully competitive industry, ranking first in the world in manufacturing capacity and market share.
Based on the financial reports of listed companies, the current industry space, technology trends and key concerns include:
(1) Concentration: photovoltaic "parity access to the Internet" has accelerated, and in most areas of China, it has the conditions of parity or even lower than the benchmark price of coal. The market share of photovoltaic industry will be further concentrated in enterprises with core advantages such as technology, scale and supply chain management.
② In the upstream silicon wafer link, on the one hand, large-size silicon wafers ushered in a wave of transformation. In the past year, large-scale new production capacity was put into use, mainly around large-size silicon wafers, batteries and components, and the old production capacity with low efficiency and high cost was accelerated to be eliminated (existing in escape sequence). On the other hand, the substitution of single crystal for polycrystalline has come to an end. According to Zhang Longgen, CEO of Daquan New Energy, single crystal products will account for 80% of the global market share in 2021. At the same time, the rapid application of diamond wire slicing technology has significantly reduced the slicing cost and silicon wafer thickness.
③ Battery link/photovoltaic equipment: In recent years, the newly developed PERC has become the mainstream of the market; Double-sided PERC batteries are gradually opening up the market. However, with the demand for improving the conversion efficiency of batteries in the future, PERC batteries are facing efficiency bottlenecks, and more manufacturers will lay out new technology path batteries such as HJT and TOPCon. The technical iteration of battery chip link will also drive the upgrading of equipment.
④ Inverter link: The iteration of domestic inverter products is obviously faster than overseas, and it continues to seize overseas market share. The advantages of series inverter are obvious, and the market penetration rate continues to rise. Updating demand and energy storage inverter will become new growth points.
⑤ Packaging material film: With the large-scale application of double-glass components and double-sided batteries, high-quality film including multi-layer co-extruded POE film and white synergistic EVA film has the opportunity to further enhance the market space.
In terms of wind power, listed companies mainly mentioned:
① Development of offshore wind turbines: Although onshore wind power is still expected to be the main market for new capacity in the future, the development of offshore wind power market has shown a sustained and rapid trend. In the five years from 2015 to 2019, the proportion of new installed capacity of global offshore wind power in the new installed capacity of wind power has increased from 5% to 10%; In 2019, the installed capacity of offshore wind power in China reached 2.49GW, up about 50% year-on-year, ranking first in the world.
② Large-scale wind turbine: The trend of large-scale single-machine capacity is certain, and the whole machine manufacturer with large MW product capacity will be more competitive in the market in the future.
③ Core components such as domestic high-end bearings have room for further domestic substitution.
In terms of industry risks, a number of photovoltaic and wind power companies jointly mentioned that: first, the risk of gross profit margin decline caused by subsidies for slope retreat; Second, the risk of high industry concentration and accelerated clearing of low-end production capacity; The third is the risk that the installed capacity will increase rapidly and the subsequent demand will be overdrawn.
2.3. Industrial Internet/Internet of Things
There are many downstream application fields in the era of 5g+ Internet of Things, but the growth rate and penetration are uneven. Under the trend of digitalization, intelligence and Internet of Everything, these application fields have jointly contributed to the demand for upstream chips. Summarizing the descriptions of downstream demand end by many semiconductor companies, it is found that mobile phones and personal computers are still the largest market for chips, and emerging application fields are developing rapidly, including: automotive electronics, cloud computing, big data, medical electronics, security electronics, etc. In addition, industrial control, artificial intelligence, driver assistance and other fields are also in a period of active iterative development.
Industry space of Internet of Things: According to IDC statistics, the global Internet of Things expenditure in 2020 was 690.47 billion US dollars, of which China market accounted for 23.6%. IDC predicts that by 2025, the global Internet of Things market will reach 1.1 trillion US dollars, of which the market share of China will increase to 25.9%, and the compound growth rates of the global and China markets will be 11.4% and 13.4% respectively. In addition, IDC’s forecast downgraded personal health testing, smart home, car networking, smart meters and other scenarios, but believed that the growth rate of industrial Internet and smart cities was still relatively fast.
Combined with the financing situation in the segmentation field, the upstream and downstream verification of the financial report on the judgment of the industrial chain, and the recommendation of Tianfeng industry team, it is suggested to focus on AIoT chips, machine vision, industrial software and automation equipment in the direction of industrial Internet, as well as the smart city field (including security, etc.) with clear application.
The upstream mainly includes light source, lens, camera and image processing software; The middle reaches are solution providers; The main application fields are electronic and semiconductor equipment, automobile manufacturing, pharmaceutical industry and so on.
In terms of industry space, according to GGII data, the market size of machine vision in China in 2019 was 6.55 billion yuan (excluding the market size of computer vision), with a compound growth rate of 28.4% from 2014 to 2019. GGII predicts that by 2023, the market size of machine vision in China will reach 15.56 billion yuan, with a compound growth rate of 24.1%.
The main driving force, in addition to the promotion of the downstream application, mainly comes from the localization of upstream hardware and the industry consolidation of the midstream solution provider.
1) Among the upstream links, the competition in the light source link is relatively sufficient at present; High-end products of lens link depend on imports, and domestic manufacturers of low-end products have cost-effective advantages; Industrial cameras and image processing software are almost monopolized by overseas markets at present.
2) At present, a number of solution providers have emerged, which combine the upstream hardware integration, the algorithm implementation of the middle layer and the scene understanding of the client. They can expand upstream and downstream, cut into multi-field applications, and master the core value of the machine vision industry chain.
AIoT/AI chip, MEMS sensor
The AIoT industrial chain can be divided into four levels: the sensing layer includes the bottom components such as sensors and chips; The network layer includes communication technology and service providers, mainly as data transmitters; The platform layer mainly stores and analyzes data; The downstream application layer realizes specialized AI functions and services.
In terms of industry space, in 2021, affected by the epidemic situation, the dual demand of epidemic prevention and home was driven, and the number of domestic AIoT faucet connection equipment increased rapidly from the previous month, and a large number of AIoT application scenarios quickly landed. With the maturity of intelligent technology, it is expected that it will still be in the stage of rapid growth in the next decade. According to the data and forecast released by IDC, the global AIoT market scale reached US$ 226.4 billion in 2019 and is expected to reach US$ 482 billion in 2022, with a compound growth rate of 28.65% from 2019 to 2022.
Judging from the financing situation in the past two years, many newly listed companies focus on AIoT chips and MEMS sensors. At present, the main bottlenecks are still the global supply shortage and the import substitution of key links. For example, the price of MCU chips has soared under the severe shortage in the past year. At present, the global MCU market is highly concentrated, with the market share of the top five manufacturers exceeding 70%, and the domestic market is mostly occupied by overseas brands. At present, MEMS manufacturers are mainly from Europe, America and Japan, and a number of excellent competitors have emerged in China (Goer ranks among the top ten MEMS manufacturers), but it is still in the initial stage of domestic substitution.
Industrial software mainly includes R&D design (BIM, CAX, PLM, etc.), workshop manufacturing (MES) and information system (ERP, etc.). Among them, R&D design is the core and key.
In terms of industry space, according to the data of China Industrial Technology Software Industry Alliance, the scale of China’s industrial software industry will reach 197.4 billion yuan by 2020, with double-digit growth in the past three years. The core CAX category, the global market is expected to reach nearly 84 billion yuan in 2021; China’s market is expected to reach 11.3 billion in the next three years, 16.3 billion in the next five years, with a long-term space of 40 billion yuan, so there is plenty of room for development.
The main driving force comes from domestic substitution: "The 14th Five-Year Plan for Intelligent Manufacturing Development (Draft for Comment)" clearly puts forward that the domestic satisfaction rate of industrial software will exceed 50% in 2025. At present, the localization rate of ERP is generally high, but the localization rate of high-end ERP is only about 25%; The localization rate of MES products is 30%; The localization rate of core CAX is the lowest, which is only about 11% at present.
General automation equipment mainly includes industrial robots, laser+,injection molding machines, numerical control CNC, etc. Downstream is widely used in 3C, automobile parts, household appliances, chemicals and other fields. In terms of comprehensive growth, penetration rate and domestic substitution space, industrial robots and lasers/equipment still have great room for development.
1) Industrial robot: infiltration space under low density+domestic lifting space.
On the one hand, the sales volume of industrial robots in China increased by 11.68% annually from 2012 to 2018, and the growth rate slowed down after 18 years, mainly due to the large increase in 17 years, which overdrawn the demand in subsequent years to some extent. In terms of density, China’s industrial robots have greatly increased from 11/10,000 people in 12 years to 140/10,000 people in 18 years. Although the growth rate is fast, it is still far lower than Japan’s 327/10,000 people and South Korea’s 774/10,000 people. At present, China’s manufacturing industry is still in the early stage of intelligence and automation, and it has broad penetration space in the future.
On the other hand, the current competitive position of local robots in the industrial robot industry is low. According to the data of IFR and Changsha Intelligent Manufacturing Research Institute, in 2018, the four family robots (Fanuc, ABB, An Chuan and KUKA) accounted for 58% of the global robot shipments. The autonomy rate of domestic robots in welding, assembly and painting is low. In the process of localization, the autonomy of core components is the key.
2) Laser+:Infiltration lifting+ultrafast laser development
At present, the total market scale of China’s laser+laser equipment industry has reached 65.8 billion yuan (in 2019). In 2013, the industry scale was only 19.4 billion yuan, and it experienced positive growth for seven years from 2013 to 2019. In terms of laser cutting, the penetration of laser to traditional cutting methods is about 26.26% ~ 30.65%; In laser cutting equipment, high power (above 1500W) accounts for only 20.8%, and there is still room for penetration.
Ultrafast lasers have become the most prominent growth point in the laser market in recent years, with a compound growth rate of 70.5% in 2015-2019, while the compound growth rate of the global laser market in 2015-2019 is only 11%. In 2019, there were more than 25 domestic enterprises engaged in R&D and production of ultrafast lasers. In 2019, the market space reached 2.45 billion yuan, which has grown into a market equivalent to 30% of domestic fiber lasers.
Application-Smart City (Security, Smart Home)
There are many applications of 5G/ Internet of Things. From the financial reports of upstream industries, under the catalysis of the COVID-19 epidemic, smart cities in a broad sense, such as security, smart communities and smart homes, have achieved rapid development. Smart city industrial chain can be divided into suppliers (hardware manufacturing, software development, network communication), operators (transportation, security, environmental protection, public services) and supporting platforms (cloud services, data analysis, mobile payment, artificial intelligence and Internet of Things, geographic information technology).
In terms of industry space, IDC predicts that the global smart city expenditure will gradually accelerate in 2021, and achieve a compound growth rate of 14.6% during 2020-2024. In the sub-field, the overall market size of smart home in 2020 is 435.5 billion yuan, 16.8% year-on-year (statistics include smart home hardware equipment, design, installation, maintenance and other related service fees, network service fees). In 2019, the market size of the security industry reached 756.2 billion yuan, with a compound growth rate of 11.9% in the past 16 years.
The underlying foundation of new infrastructure, the increase of disposable income of residents’ departments and the demand brought by post-epidemic era and urban agglomeration construction are the main driving forces in the field of smart cities.
2.4. 5G Communication and Application
In the past year, the profitability of listed companies in the 5G sector was weak, which was related to the characteristics of the 5G communication industry chain in addition to the impact of trade friction. Compared with 4G, 5G technology is more widely used in toB field (industrial Internet, cloud computing, artificial intelligence, etc.), not limited to personal consumption field (smart phone, mobile Internet). Therefore, from the perspective of standardization process and permeability improvement index, it is slower than that in the 4G period; However, this will also expand the space of the 5G industry and lengthen the investment interval.
In addition, in terms of horizontal comparison, compared with the 4G stage, China is currently in the leading position in the field of 5G infrastructure and applications. According to the introduction of the Ministry of Industry and Information Technology, the current systematic leadership of China’s 5G industry is mainly reflected in three aspects: First, the construction of 5G networks remains ahead. At present, China has opened 961,000 5G base stations and the number of terminal connections has reached 365 million; Second, the proportion of essential patents for 5G standards continues to lead the world; Third, the integration of 5G application empowerment into thousands of industries has been remarkable.
Due to the wide horizontal and vertical coverage of the 5G industrial chain, we have screened out the segmentation direction that is relatively more certain at present or the sector boom is expected to reverse at the bottom (overall, the hardware field is still better than the software).
Optical communication (optical devices, etc.)
Optical communication is to 5G: optical communication takes photons as the carrier of information transmission. Photons themselves have extremely fast response ability, extremely strong parallel ability and no charge. As the carrier of information, they have no electromagnetic interference and excellent confidentiality. With the rapid expansion of data traffic in the information age, "light enters copper and retreats" (that is, the network based on "narrowband+copper cable" changes to "broadband+optical fiber" network) has become an inevitable trend in the development of communication industry. 5G backbone network, bearer network and the connection between base stations are inseparable from optical communication.
1) Domestic substitution of upstream devices and chips: the optical communication industry chain includes optical chips, optical devices and modules, optical fibers and cables, optical network equipment, etc. At present, the upstream links of the core (optical chips and optical devices) are still weak. According to the Roadmap of China Optoelectronic Device Industry Technology Development (2018-2022) issued by the Ministry of Industry and Information Technology, more than 90% of China’s high-end optical communication core chips need to be imported, and the policy side clearly proposes to speed up the domestic substitution process of high-end optical chips and devices.
2) Optical fiber and optical cable are out of the bottom of the boom: the release of new production capacity of optical rods in the last round is coming to an end, and the epidemic situation and price pressure accelerate the clearing of small and medium-sized production capacity (after 19 years of China Mobile’s optical fiber centralized purchase price has been directly halved from 60 yuan to 30 yuan, the price of optical fiber centralized purchase has continued to drop sharply in the past 20 years, and the profit margin of manufacturers has been further compressed). In the medium and long term, the new round of high traffic growth cycle driven by 5G/ cloud computing/Internet of Things /AI will drive a new round of boom in optical fiber demand. In this year, the supply-side production capacity will continue to clear out, and the relationship between supply and demand will gradually improve in the future. The industry is expected to enter a new round of boom cycle.
PCB (printed circuit board), as a carrier for carrying electronic components and connecting circuits, is known as the "mother of electronic products" and is the upstream basic industry of China’s electronic industry. The upstream of PCB industry includes PCB photoresist, electrolytic copper foil, special wood pulp paper, electronic-grade glass fiber yarn, etc., and the downstream is widely distributed, covering communication equipment, computers and their surroundings, consumer electronics, industrial control, medical care, automotive electronics, military, aerospace science and technology and other fields.
Industry space: China’s electronics manufacturing market is large, and the market capacity is basically above 10 trillion yuan. According to the data of the National Bureau of Statistics, the market size of China’s electronics manufacturing industry will be about 12.10 trillion yuan in 2020, a year-on-year increase of 6.40%. Emerging electronic products are constantly emerging, which makes the use and market of printed circuit board products expand continuously. From 2014 to 2020, the compound annual growth rate of domestic PCB output value is 4.99%, reaching $35.1 billion. The demand of downstream industries continues to grow rapidly, and the construction of 5G base stations will drive the development of high-frequency and high-speed PCB as basic components. It is estimated that the annual compound growth rate will be 4.3% from 2019 to 2024, and the global PCB industry output value will reach 75.846 billion US dollars by 2024.
Production capacity distribution and industry driving force: With the global electronic information industry shifting from developed countries to emerging economies and countries, the global printed circuit board manufacturing enterprises are mainly distributed in Chinese mainland, Taiwan, China, Japan, South Korea, Southeast Asia, the United States and Europe, among which Asia accounts for about 90%. According to Prismark data, among the subdivided products of printed circuit boards in China, multilayer boards account for the largest proportion, with the market share of about 44.86% in 2020, followed by flexible boards and HDI boards with the market share of about 17.37% and 17.34%. At present, domestic PCB photoresist has basically achieved domestic substitution, but foreign-funded enterprises still occupy the main market share of the global high-end copper clad laminate market; Many companies mentioned the risk of insufficient supply of high-end copper clad laminate and high-end PCB abroad.
Cloud computing is the core infrastructure for China to build a digital power. Benefiting from breakthroughs in technologies such as big data, artificial intelligence and blockchain, the maturity of cloud computing technology has been continuously improved and application scenarios have been continuously enriched. Industry space and trends:
1) Space and penetration rate of cloud computing industry: In 2020, China’s cloud computing market will reach 147.74 billion yuan, with a year-on-year growth rate of 27.0%, and it is expected to reach 185.83 billion yuan in 2021. According to the White Paper on Cloud Computing Development (2020) issued by China ICT Institute, in 2019, the proportion of enterprises that have applied cloud computing in China was 66.1%, and the penetration rate increased by 7.5% compared with the previous year.
2) Massive data demand continues to generate market space for cloud computing. During the "Thirteenth Five-Year Plan" period, the compound annual growth rate of China’s big data industry exceeded 30%, and the industrial scale in 2020 exceeded 1 trillion yuan. According to IDC’s forecast, from 2020 to 2024, China’s big data-related technologies and services market will achieve a compound annual growth rate of 9.6%, mainly used in the financial, government and communications industries.
3) The public cloud is more recognized as an enterprise transformation infrastructure. The scale of China’s public cloud market surpassed that of private cloud for the first time in 2019. In 2020, the scale of China’s public cloud market reached 69.14 billion yuan, a year-on-year increase of 33.1%; The private cloud market reached 78.40 billion yuan, up 22.1% year-on-year.
4) Three service modes of cloud computing (SaaS, IaaS, PaaS): In terms of share, the global SaaS market accounted for 58.15% of the global cloud computing market in 2019, and it is expected that it will still occupy the main market share in the next few years.
In terms of terminal applications, on the one hand, there is still room for smart phones and 4G/5G penetration in developing countries. According to the annual report of Voice Holdings, the penetration rate of mobile phones in Africa (its main market) is only 48%, of which smart phones account for only 44%; The penetration rate of 4G is only 12%, the penetration rate of 3G is 52%, and the penetration rate of 2G is 36%, so there is great room for improving the penetration rate and optimizing the structure of smart machine/function machine in the future.
On the other hand, the demand for various wearable devices under the catalysis of the epidemic is expected to grow more than expected. At present, the products of wearable devices mainly include smart glasses, smart watches, smart bracelets, smart clothes, etc., and their functions cover many fields such as health management, sports measurement, social interaction, casual games, audio-visual entertainment, positioning navigation, mobile payment and so on. According to IDC data, in 2020, the global wearable device shipments were 444.7 million units, a year-on-year increase of 28.4%. The top five manufacturers by shipments are Apple, Xiaomi, Huawei, Samsung and Fitbit.
2.5. Medical biology field
Under the influence of the policy inclination and the epidemic situation, the pharmaceutical bio-sector is also the most concentrated sector of new shares issued by Science and Technology Innovation Board/Growth Enterprise Market in the past two years, especially the medical devices (including in-vitro diagnosis of the benefits of the epidemic situation), biopharmaceuticals, and the booming medical beauty sector. From the perspective of the general trend of the industry, under the background of deepening the reform of the medical and health system, the reform of the medical insurance system, the reduction of drug prices and the balance of medical resources are constantly advancing, and the long-standing situation of "supporting doctors with drugs" in China is being broken. In the new period, the trend of specialization of medicine will be more obvious in the future, as all links will increase revenue and reduce expenditure, reduce drug prices, shorten circulation, improve drug efficacy, encourage innovation and tilt therapeutic drugs.
Medical instruments (equipment, consumables, etc.)
The demand of medical device industry belongs to rigid demand, and the industry has strong anti-risk ability, so the cyclical characteristics of the industry are not obvious. One of the characteristics of the supply of medical device products is small batch and multi-variety, so as to meet the diversified needs of different levels of medical institutions and different types of medical scenes.
The rapid development of China’s economy, the deepening of urbanization and population aging, the improvement of medical insurance coverage and the continuous release of medical demand have promoted the rapid expansion of the medical device market. In the post-epidemic era, there is a stronger demand for global medical institutions to control medical expenses, and medical terminals will be more inclined to choose medical device products with high cost performance. Therefore, China brands with better cost performance and faster innovation still have greater room for domestic substitution and global expansion.
The short-term risk is that the trend of price reduction of high-value consumables puts pressure on the industry in stages and promotes the concentration of the industry.
IVD in vitro diagnostic industry mainly refers to in vitro diagnostic related products, including in vitro diagnostic reagents and in vitro diagnostic instruments and equipment, which are composed of upstream (electronic components, diagnostic enzymes, antigens, antibodies, NC membranes and other core raw materials), midstream (diagnostic equipment, diagnostic reagents) and downstream application fields (hospital laboratory, physical examination center, independent laboratory, epidemic prevention station, etc.).
Over the past year or so, due to the epidemic situation, many companies in the field of in vitro diagnosis have been listed in science and technology innovation board. In recent twenty years, the industrialization of in vitro diagnosis in China has been rapidly improved, and it has maintained a double-digit growth rate for 16 years. In terms of sub-fields, China’s in vitro diagnosis market is composed of immune diagnosis, biochemical diagnosis, hematology and body fluids, instant testing, molecular diagnosis and other sub-fields. At present, immunodiagnosis accounts for the highest proportion, and molecular diagnosis has the fastest growth rate.
The follow-up driving force of IVD comes from the overall demand for medical devices brought by the increase of life expectancy and the aging population, the domestic substitution of high-tech threshold areas, and the rapid detection demand brought by the further penetration of detection scenarios into communities and families in the post-epidemic period. Specifically:
1) Chemiluminescence: the mainstream technology of immunodiagnosis, which is highly valued by the global IVD giants, requires very high performance of reagents and instruments, has a high technical threshold, is difficult to develop, and has a low localization rate at present. Since Siemens Chemiluminescence products entered China in 2003, Roche, Abbott, Beckman and Siemens, the four international IVD companies, have occupied more than 70% of the domestic Chemiluminescence market, and multinational giants such as Johnson & Johnson, Bio-Meria and Himsen Meikang have also stepped up their occupation of the China market.
2) Raw material industry of molecular diagnosis: Precision medicine has promoted the rapid development of molecular diagnosis market in the past few years, and the coverage of domestic enterprises on the whole industrial chain of molecular diagnosis has obviously accelerated. Among them, the upstream fields (chemical, biological and electronic raw materials) are still highly dependent on foreign countries, and domestic IVD is actively deployed through independent research and development and cooperation with external scientific research units.
3)POCT equipment: POCT has many advantages, such as convenience, high efficiency, high accuracy, relatively low price, wider application scenarios, etc. It is rapidly expanded and internationalized under the catalysis of COVID-19 epidemic, and it will also be the main field of competition in the future.
Compared with developed countries in Europe, America and Japan, chemical preparations mainly based on generic drugs still occupy the dominant position in China’s pharmaceutical market, and the proportion of innovative drugs is extremely low. According to the cross-sectional data in 2015, the size of the US pharmaceutical market was 439 billion US dollars, of which innovative drugs accounted for 67%; The European market is $144 billion, accounting for 60% of innovative drugs, and the Japanese market is $79 billion, accounting for 68% of innovative drugs; In China, the market size is about $115 billion, and innovative drugs account for little. According to the data of Minei, the proportion of innovative drugs in China’s drug terminals in 2019 was only 5%.
From the perspective of policy environment, after the establishment of the Medical Insurance Bureau in 2018, the actions were frequent, and the medical and health system reform was further deepened with the purchase and use of quantity as a breakthrough. Through the medical insurance reform, medicine and medical reform were promoted, and medical reform entered a new cycle of rapid promotion. Under the medical insurance reform, the core competitiveness of pharmaceutical companies is to open up sources and reduce expenditure, reduce drug prices, shorten circulation, improve drug efficacy and encourage innovation. Considering the expansion of patient group and the improvement of payment ability, the growth rate of biopharmaceutical market in the future may be much higher than that of chemical drug market in the same period; At the same time, compared with chemical drugs, biopharmaceuticals have higher research and development costs, higher supply chain barriers and stricter supervision.
CXO is a service provider covering the whole industrial chain of drug R&D and production. According to different responsibilities, CXO industrial chain can be divided into CRO (Contract R&D Organization), CSO (Contract Sales Organization), CMO (Contract Production Organization) and CDMO (Contract R&D Organization).
In terms of industry space, due to the increasingly fierce competition in the new drug research and development market under the new medical reform cycle, the cost and difficulty of research and development are rising, and the pharmaceutical outsourcing (especially R&D outsourcing, CRO/CDMO) market is developing rapidly. From 2015 to 2019, the CAGR of CRO market in China was 27.3%, compared with 9% in the same period in the world. According to the statistics of the National Pharmaceutical Technology Market Association, from 2016 to 2020, the CRO market in China has rapidly increased from 46.5 billion yuan to 97.5 billion yuan, with a compound annual growth rate of 20.3%. From 2014 to 2019, the market size of small molecule CDMO in China was 18.4%, and the market size of large molecule CDMO was 40.3%. In addition, in response to the impact of the "two-vote system" on the field of drug circulation, domestic distributors are more likely to transform to CSO.
The upstream of the medical beauty industry is the manufacturer of medical beauty consumables and the manufacturer of equipment; The middle reaches of the industry are medical beauty institutions, including plastic surgery, dermatology and non-public medical beauty institutions in public hospitals; Downstream is the end consumer.
Industry space: According to Frost& Sullivan’s forecast, China will become the largest medical beauty service market in the world in 2021, and the market space of China’s medical beauty industry is expected to exceed 900 billion yuan. According to Frost& Sullivan’s forecast, the market scale of medical beauty hyaluronic acid terminal products in China is expected to reach 7.6 billion yuan in 2024 with a compound growth rate of 12.8%.
On the one hand, the driving force of the plate comes from the increase of per capita disposable income, the improvement of personal awareness of medical beauty and the expansion of industry space brought about by the younger consumption of medical beauty; Compared with the United States, Brazil, South Korea and other countries, the penetration rate of domestic medical beauty is still not high.
On the other hand, at present, the main Light medical cosmetology products and ophthalmic consumables are basically monopolized by foreign brands, and there is a big room for domestic brands to replace them. In terms of sub-varieties, 1) The hyaluronic acid market started with imported products. In 2018, the sales revenue of the top three local enterprises in China accounted for only 23.4%, but at present, domestic brands are on the rise. 2) The US-China botulinum toxin market for injection medicine is dominated by Korean manufacturers. 3) The line carving market is mainly imported from the United States and South Korea. Domestic manufacturers include Southeast Hang Seng, Aimeike, etc., and the approved products are still few. 4) Among the popular photoelectric projects, Hot Maggie, Hot Latitude, Picosecond, Super Picosecond, etc., foreign R&D instruments account for nearly 80% of the domestic high-end market. 5) More than 70% of the global market share of orthokeratology lenses in ophthalmic consumables is occupied by four foreign brands, and more than 80% of the global market share of intraocular lenses is occupied by three foreign brands.
In 2020, under the background of the spread of COVID-19 epidemic, the impact on the global economy, repeated trade frictions and increased geo-risks, China proposed "taking the domestic macro-cycle as the main body and domestic and international dual-cycle". Apart from supply chain security (chips, etc.), national security is more important. Generally speaking, we believe that the concept of national security includes at least four aspects: food security (corresponding to independent innovation of genetically modified/seed industry), energy security (ensuring supply/forcing energy structure reform), national defense security (materials and equipment in the upper and middle reaches) and information security (operating system and data security).
National defense security field: focus on military electronics and aviation equipment.
The upstream of the industrial chain mainly includes supporting growth industries such as military electronics (passive components and integrated circuits) and new materials (fiber materials, metal materials and processing), while the middle reaches are emerging technology industries such as equipment informatization, scene informatization and army informatization. Downstream are monopolistic weight enterprises such as aviation mainframes, aero-engines and missiles.
In terms of industry space/cycle, the current global armament has once again entered the stage of continuous enhancement of "scientific and technological investment", and many countries have now released future medium and long-term national defense plans and scientific and technological trends, which are clearly strengthened from three aspects: total delivery, future combat systems and emerging technologies. In the 14th Five-Year Plan and the Outline of Long-term Goals in 2035 (Draft) issued in March 2021, it is proposed that China should speed up the upgrading of weapons and equipment, accelerate the breakthrough of key technologies, put forward the integration of the three industries into intelligent weapons, and accelerate the development of strategic and subversive equipment and technology. In terms of specific links:
1) Military electronic components (passive devices and active devices)
As the main carrier of informatization in all kinds of new equipment, it has the Shuang Sheng logic of unit equipment value proportion and equipment production scheduling during the Tenth Five-Year Plan period. 21Q1 The downstream demand for passive devices is high, and the demand for domestic substitution is significant, so the domestic permeability is expected to accelerate. Among them: ① the demand for domestic substitution of new types of passive devices is significant, and high-end capacitor manufacturers may continue to benefit; ② The performance trend of power supply enterprises in the field of active devices is clear, which is expected to continue the pattern of stable market share and single product value in Shuang Sheng.
"Leap-forward development of weapons and equipment" is the key investment direction of the 14 th Five-Year Plan. The superimposed aviation equipment has entered a 10-year reloading cycle, and the aviation machine sub-sector has entered a medium-and long-term production and volume expansion stage. Specifically, 1) the whole aircraft itself has the characteristics of strong business continuity, strong monopoly and strong barriers; In the next 10 years, the whole aircraft will enter a period of large-scale batch production and heavy volume. 2) The volume of the whole machine will directly boost the demand for upstream military materials (fiber materials, metal materials and processing, etc.). 3) The cumulative increase in the number of complete aircraft will drive the development of China’s military aircraft MRO market.
In terms of risks, listed companies mainly mentioned: 1) the price fluctuation of upstream raw materials; 2) Downstream enterprises are military, which may face problems such as too high downstream concentration, being affected by the overall arrangement of the military industry, and uncertain pricing for trial.
Information security field: Focus on Xinchuang and network security (including recent antitrust and data security fields).
1) Domestic substitution in the field of innovation.
Domestic substitution in the field of Xinchuang is also a gradual process. In the medium and long term, the market capacity is broad, and domestic head manufacturers will continue to benefit from the promotion of localization. Since May last year, the bidding situation of operators and state-owned banks shows that the process of localization of party and government office systems has accelerated. In China Telecom’s centralized server purchasing, servers equipped with domestic CPU (Kunpeng+Haiguang) definitely entered large-scale centralized purchasing for the first time, and the proportion of domestic servers in centralized purchasing has further increased this year, indicating that China’s Xinchuang industry has the ability of import substitution.
On the one hand, the current breakthrough lies in the opportunity of a new round of reform of central enterprises and state-owned enterprises; On the other hand, HarmonyOS 2.0 is gradually coming to the ground. Huawei predicts that HarmonyOS OS will cover 300 million devices in 2021, which will help the layout of the Internet of Everything and accelerate the process of domestic replacement of domestic software and hardware. In the future, the field of innovation is expected to accelerate from "party and government innovation" to "industry innovation", and the base server chip and upper ERP, bank core system, CAD and other core application software in the industrial chain may be the main increments.
2) Top-level policy+event-driven, network security penetration will accelerate.
The products provided by network security companies mainly include standardized products (firewall, IDS, VPN, terminal security software, etc.); Semi-standardized products (situational awareness products, including computing systems, various probes and display devices); Security integration and security services, services and integrated services.
In terms of industry space, the network security market in China will reach 92.68 billion yuan in 2021, with a year-on-year growth rate of 23.7%, which is faster than the global market (9.3% year-on-year). From a horizontal comparison, China’s network security market accounts for 1.87% of the information market at present, which is lower than that of the United States (20.4%) and that of the world (3.74%), so there is much room for improving the penetration rate.
The recent event catalysis comes from the Didi incident, which has paid great attention to the field of network security (data security). In terms of expanding the scope, this round of supervision on data security and monopoly of Internet platforms has been significantly tightened since last year. In terms of policy framework, in January 2020, the Anti-Monopoly Law was revised for the first time after 12 years of implementation. In April, the "Network Security Review Measures" was officially released; In November, the anti-monopoly guide for the Internet platform will be released again; In June of 2001, People’s Republic of China (PRC) Data Security Law was passed. The opening of the anti-monopoly curtain is a medium-and long-term variable, which correspondingly constitutes a long-term positive for the network security field.
Note: Industry risks are not listed for all segments. There is a breakdown of the main risks listed, mainly because many listed companies in the sector mentioned the same risk, which has obvious industry commonality; Whether to list industry risks is not the basis for recommendation.
Risk warning: Trade friction leads to increased supply chain risks, epidemic situation repeatedly impacts the global supply chain, domestic substitution process is less than expected, technology update or cost control is less than expected, etc.
Note: The report in this paper is excerpted from the published research report of TF Securities Research Institute. See the full report for details and relevant risk warnings.
Securities research report "A comprehensive review of hard technology-clues from 214 science and technology financial reports"
Release date: July 24, 2021
TF Securities Co., Ltd. (with the qualification of securities investment consulting business approved by China Securities Regulatory Commission).
Liu Chenming SAC Practice CertificateNo.: S1110516090006
Li Rujuan SAC Practice CertificateNo.: S1110518030001
Xu Xiangzhen SAC Practice CertificateNo.: S1110518070006
Zhaoyang SAC Practice CertificateNo.: S1110519090002
Wu Liyan SAC Practice CertificateNo.: S1110520090003
Special note: public micro-signal "fenxishixubiao"
Introduction of Tianfeng Strategy Team Members
Xu Biao, Executive Director of TF Securities Research Institute, Member of the Third National Financial Youth Federation and Chief Asset Allocation Strategy. Master of National Economy from Fudan University and Bachelor of Vehicle Application Engineering from Jilin University. He was in charge of macro and strategic research of wealth management lines in China Merchants Bank, and was good at top-down market research. He has served as the head of the strategy department of Everbright Securities Research Institute, the director of the chief strategy and strategy research department of Huatai Securities, and the deputy director of Anxin Securities Research Institute. Now he is the managing partner and deputy director of TF Securities Research Institute. New Fortune, Crystal Ball, Golden Bull Award Best Strategy Analyst, member of several important research groups of the State Council SASAC. Sina and Netease columnists, FT Chinese independent writers, CFA external lecturers, guest commentators on TV financial programs of CCTV 2, CBN and Phoenix Satellite TV, and interview experts of CBN and Huaxia Times.
Liu Chenming is the chief strategist. Master of World Economics, Nankai University, worked in Huatai Securities Research Institute and Anxin Securities Research Institute successively, and is currently a strategic analyst of TF Securities Research Institute, mainly engaged in macro-economy, policy and stock market strategy research. The fifth best analyst of New Fortune in 2014, 2015 and 2017, and the second core member of the team of the best analyst of New Fortune in 2016. In 2019, Caijing ranked first in this list, fourth among the 30 most valuable analysts in Jinniu market in 2019, fifth among Sina Golden Kirin strategists in 2019, and fifth among New Wealth strategists in 2019.
Li Rujuan holds a master’s degree in finance and a bachelor’s degree in engineering from Sun Yat-sen University; He has worked in Guangzhou Securities Hang Seng, Bank of China International and TF Securities for industry and strategy research; At present, he is mainly responsible for industry comparison.
Xu Xiangzhen holds a master’s degree in finance and a bachelor’s degree in insurance from Xiamen University, and is mainly responsible for policy tracking and industry comparison.
He holds a master’s degree in monetary and banking finance from Birmingham University, Zhao Yang, and a bachelor’s degree in finance and administration from Nankai University. He has worked in Capital Securities and TF Securities for strategic research, and is currently mainly responsible for special research and industry allocation.
Wu Liyan holds a master’s degree in accounting and a bachelor’s degree in accounting from Wuhan University.
Yu Kecheng holds a master’s degree in finance from the Australian National University and a bachelor’s degree in accounting from the University of Macau. He has worked in the real estate industry.
Attachment: institutional sales address book of Tianfeng Research Institute
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