With the rapid development of the Internet of things, modules have ushered in a golden age. According to the statistical prediction of IOT analytics, the number of global Internet of things connections CAGR will reach 9% from 2010 to 2020, of which the number of Internet of things equipment connections CAGR will reach 31%, growing rapidly; From 2021 to 2025, the growth rate of the number of Internet of things equipment connections continues to grow. In 2025, the number of global Internet of things equipment (including cellular and non cellular) networking will exceed 30 billion. From the perspective of the Internet of things industrial chain, midstream is a communication module manufacturer, providing standardized or customized module products through design and development, and providing software and hardware support for terminal products. We expect that the integration and iteration of cloud computing, Internet of things, edge computing and other technologies will promote the rapid growth of animal networking equipment market, which is expected to stimulate the sales volume of midstream communication modules.
The downstream market pattern has changed, and the Internet of things has brought new customization demand. On January 4, 2022, the Ministry of industry and information technology and other five ministries and commissions issued the action plan for innovation and development of intelligent photovoltaic industry (2021-2025), aiming to improve the intelligence level of photovoltaic industry by 2025; On January 6, 2022, the Ministry of water resources issued a document requiring the construction of digital twin watershed; In September 2020, Huawei established the “star flash alliance”, which mainly promoted the innovation of new wireless short-range communication technology and industrial ecology, and put forward higher requirements for vehicle communication modules; At the same time, the sinking of AI capability improves the data value. The generated data flow requires external devices to interact with the communication module through at instructions, which puts forward higher requirements for the software design ability of module manufacturers, and develops a variety of functions according to the customization of AI applications. We believe that the exponential growth in the number of Internet of things device connections and the increasingly rich downstream application scenarios need to rely on low-cost and high-precision communication methods; Highly flexible communication modules can be customized to better meet the needs of downstream fragmentation, and communication modules are expected to usher in growth.
Module manufacturers build platform capabilities and constantly expand business boundaries. It is a new trend for the wireless communication module of the Internet of things to develop in the direction of high added value. It extends to the cloud platform while providing customized solutions. At present, some overseas enterprises have created end-to-cloud complete solutions for downstream subdivided industries, forming a business layout of “end connection cloud”. We believe that the communication module platform trend can create more standard module products and realize large-scale effect. Taking the intelligent vehicle scenario as an example, the modular platform can collect more fragmented on-board data, realize the automation level and test coverage of 5g on-board modules, and truly realize the continuous leadership of R & D and design, continuous improvement of product quality and continuous improvement of delivery capacity.
Investment suggestion: the era of Internet of all things has come, and the market space of communication module is huge. The number of global Internet of things equipment connections has a strong growth momentum. Iota analytics predicts that the number of global Internet of things equipment (including cellular and non cellular) will exceed 30 billion in 2025. According to GSMA data, the market scale of China’s Internet of things industry is about 1.7 trillion in 2020. It is expected that the market scale will reach 2.8 trillion and CAGR will reach 11% in 2025. China leads the development of the global Internet of things industry. The module undertakes the upstream and downstream ends of the Internet of things industrial chain and directly benefits from the high landscape of the upstream and downstream. China’s IOT chip manufacturers accelerate the domestic substitution process, which will significantly reduce the cost of module manufacturers and drive the growth of midstream module demand. Highlight Shenzhen Neoway Technology Co.Ltd(688159) , Fibocom Wireless Inc(300638) , Meig Smart Technology Co.Ltd(002881) , Quectel Wireless Solutions Co.Ltd(603236) .
Risk tip: risk of product technology iteration caused by 5g technology application; The risk of loss of core technical personnel and disclosure of core technology; Risk of chip shortage.
