The sensor is the bottom layer of Internet of things technology, and the compound annual growth rate of gas sensor is 10.9%. The outline of the 14th five year plan proposes to focus on key areas such as sensors and accelerate the R & D breakthroughs and iterative applications of basic theories, algorithms and equipment materials. The market scale of China’s sensor industry increased from 98.26 billion yuan in 2014 to 218.88 billion yuan in 2019, with an annual compound growth rate of 17.4%, higher than the global compound growth rate of 12.4%. In terms of gas sensors, the overall scale of global gas sensors is about US $1.1-1.2 billion, which is expected to reach US $2.2 billion by 2026, with a compound annual growth rate of about 10.9%.
The three cores built sensor R & D barriers, and the proportion of optical gas sensors increased. Material formulation, hardware design and software algorithm are the main barriers of general gas sensor companies. Among them, the software algorithm needs a long time of experience to realize optimization and iteration and adapt to the sensor hardware. It is the core of optical gas sensor, and the research, selection and application of new materials are the main core competitiveness of electrochemical gas sensor companies. According to the statistics of yole and Mordor, electrochemical, infrared and semiconductor technologies jointly account for more than 95% of the market share in the global gas sensor market. Among them, the proportion of gas sensors using electrochemical and semiconductor technologies reached 44.2% and 38.3% respectively. In 2018, the market share of gas sensors using electrochemical, infrared and catalytic combustion technologies increased, while the share of gas sensors using semiconductor technology decreased significantly.
Hanwei Electronics Group Corporation(300007) : Hanwei is the leader of domestic gas sensors. Based on the path of electrochemical gas sensing technology, it accounts for 70% of China’s gas sensors. It has more than 200 sensors to monitor more than 300 gases. According to yole statistics, the gas sensors of Hanwei and its subsidiary Weisheng accounted for about 4% of the global market in 2020. With the implementation of the new production safety law and the catalysis of gas explosion events such as 6.13 in Shiyan and 10.21 in Shenyang, the company has vigorously expanded the production of gas and industrial instruments. In the long run, the penetration rate of China’s gas alarm is only 7%, and there is a broad development space. In the field of automotive air quality, the company invested in Xinli electronics to accelerate the development of vehicle standard air sensors. In addition, the subsidiary can develop flexible sensors and participate in the digital twin of Teri digital innovation layout.
Cubic Sensor And Instrument Co.Ltd(688665) : Sifang, as the leader of China’s optical gas sensors, has achieved a compound revenue growth rate of 65.2% in the past three years. Sifang has a complete gas sensing core technology platform, and gradually realizes domestic substitution by improving the self-development rate of core parts. Taking dust sensors as an example, as of the semi annual report of 2021, the self-production rate of core parts laser tubes and fans is more than 75% and 72% respectively. At the same time, the company actively improves the domestic substitution rate of MCU and other parts to enhance the independent and controllable ability of the supply chain. In terms of downstream application fields, the compound growth rate of China’s fresh air system industry exceeds 30%, and the company’s products are supplied to major customers such as Midea and Xiaomi. The penetration rate of on-board air quality sensors has been continuously improved, and the company has won the fixed point of high-end brand Jaguar Land Rover project.
Investment suggestion: we believe that sensors are the bottom technology of the Internet of things, and gas sensors usher in new demand in downstream smart home and automotive air quality. China gas sensor company is expected to usher in new development opportunities by virtue of domestic substitution. We mainly recommend Hanwei Electronics Group Corporation(300007) ( Hanwei Electronics Group Corporation(300007) . SZ) and Cubic Sensor And Instrument Co.Ltd(688665) ( Cubic Sensor And Instrument Co.Ltd(688665) . SH).
Risk warning: the policy promotion is not as expected, resulting in the risk of weakening downstream demand; Risk of shortage of upstream chips and rising prices of raw materials; New product R & D and promotion are less than expected risks; Increased competition and risks in the Internet of things industry.
