The smashing “fruit” of the Apple industry chain, seeing the Huawei industry chain is very “for”
Editor’s note: This article is from WeChat public number “Guotai Junan Securities Research” (ID: gtjaresearch), author Guotai Junan Total Team.
The iPhone 11 series just released may not be able to save Apple’s share of the domestic smartphone market.
Although the green nights were sold out during the pre-sale period, although the fruit powders will still shout “Zhenxiang” after receiving the real machine, according to foreign media reports on September 15, the first batch of orders for the Apple iPhone 11 series is expected. At around 8 million units, it is at least 10% lower than when new models were launched last year.
The lack of innovative elements and the lack of 5G capabilities have cast a shadow over the future of Apple and its industry chain.
The feng shui turns. Look at Apple in the 4G era, see Huawei in the 5G era.
In the past ten years, the trillion-dollar-dollar apple has given birth to the entire industry chain, and there are dozens of companies on the A-share market that have become ten-fold ten-year-old bulls.
Looking forward to the future, the Guotai Junan Total Team believes that the domestic independent brand supply chain headed by Huawei will usher in the same amount of “golden” investment period.
In the Review of the Golden Year of the Apple Industry Chain, Seeing Huawei’s Industry Chain Investment Opportunities, The Guotai Junan Total Team has responded to Huawei’s information on more than 140 suppliers, and compared each segment and each segment of the development of the Apple industry chain, trying to dig out relatively certain investment opportunities.
01The Golden Year of the Apple Supply Chain
On January 9, 2007, Apple hosted the first iPhone conference, and the design of the touch screen + Home button was amazing. However, in the era when smartphones were not yet popular, the iPhone had only a million units of sales.
Until 2010, the hot market of iPhone4 officially opened the gold investment period of the apple industry chain for 10 years.
From January 2010 to the end of 2017, the A-share Shanghai Composite Index rose 59%, while the Apple Industry Chain Index rose by 1079%, 18 times that of the former.
In this time, the Apple industry chain is undoubtedly the biggest investment theme in the A-share market, giving birth to a number of outstanding performances, the cityA star company with soaring value.
▼The Apple Index has far exceeded the market since 2010
Data Source: Wind, Guotai Junan Securities Research
For example, Changdian Technology in the field of semiconductor devices reached its bottom on November 7, 2008, and then rose to the highest point on June 5, 2015. During the period, it rose out of two rising structures with a total increase of 1485%.
▼Changyi Technology Benefits Chip Sealing and Leading Position 
Data Source: Wind, Guotai Junan Securities Research (box time interval and stock increase)
As another example of Goer shares in the manufacture of acoustic devices, its share price reached its bottom on October 17, 2008, and then rose to the highest point on November 14, 2017. During the period, it rose out of a three-stage structure with a total increase of 3149%.
▼Gor’s share price trend is constantly increasing in correlation with performance changes
Data Source: Wind, Guotai Junan Securities Research (box time interval and stock increase)
There is also Sunlord Electronics. The stock price bottomed out on October 28, 2008, and then rose to the highest point on June 5, 2015. During the period, it went out of two distinctly rising structures, with a total increase of 2235%.
▼Shunluo Electronic’s profitability has steadily increased, supporting the stock price to rise
Data Source: Wind, Guotai Junan Securities Research (box time interval and stock increase)
And Lixun Precision, which manufactures connectors, has a three-stage rising structure from October 2010 to July 2019, with a total increase of 1713%.
▼Lixun Precision is a typical example of crossing the bulls and bears in the entire Apple concept stock
Data Source: Wind, Guotai Junan Securities Research (box time interval and stock increase)
02Investment Path of Apple Supply Chain
Based on the stock price trend of Apple’s related concept in the past decade, we can roughly divide the investment path into three phases:
From mid-2008 to mid-2011;
From mid-2012 to mid-2015;
From mid-2015 to the end of 2017.
▼The Apple Index and the classic target investment can be divided into three phases
Data source: Wind, Guotai Junan Securities Research (in the first stage, the index and part of the target time are listed later, the data comparison is not significant)
The average investment duration of each stage index and listed classics was 24.3 months, 36.6 months, and 24.6 months, respectively. The average increase of the listed classics was 783%, 694%, and 183%, respectively.
From the three stages of the rise in Apple’s concept stocks:
First stage, fullThe industry has generally increased.
The investment target is mainly driven by the valuation. The factors such as the scarcity of the target and the relevance of the concept directly determine the degree of attraction to the fund. During this period, most companies have increased by 5 times.
In the second phase, funds began to explore the underlying fundamentals, and the correlation between stock prices and performance began to increase. Companies with short-term ceiling suppression on the track were more likely to stand out.
For example, Laibao Hi-Tech, which displays the panel link, has been exposed to fatal problems such as high single-customer dependence, low barriers to entry in the industry, and extrusion of the upstream and downstream of the industry chain. As a result, the company’s performance has continued to grow, but the growth rate has declined. The downturn is the general trend, the funds are scattered and the stock price collapses rapidly.
In the third stage, due to the downturn of the industry, the participation of marginal funds has fallen sharply. The pricing of individual stocks has become more rational. The basics are kept in line with the performance. The companies with sustained performance are favored by the capital market and can finally get out. Independent market.
Such as stocks such as Sunlord Electronics and Lixun Precision, in the downturn of the industry, most of the underlying performance declines, and the stock price has also fallen sharply, it still maintains stable growth in performance, so it is favored by funds and becomes this stage. The biggest winner.
03Three major segments of Huawei’s supply chain
The past of the Apple industry chain is likely to become the future of Huawei’s industrial chain.
The Guotai Junan Total Team has compiled a total of 164 Huawei’s supplier systems based on the list provided by Huawei, the annual report of the listed company, and the five major customer lists of the prospectus, deducting real estate, transportation and other supporting services. After that, there were 149 Chinese and foreign suppliers in the electronics, communications and computer industries.
Among them, the number of software and service providers is the largest, there are 21, 17 suppliers in the semiconductor design industry, 14 suppliers of manufacturing services such as foundry and wafer manufacturing, and electronic equipment suppliers such as security equipment. There are 10 suppliers, and the number of core components such as memory, connectors and cables involved in China’s main business is also 9 respectively.
According to this calculation, the Huawei supplier market has a scale of about 500 billion, and 27 A-share listed companies from Huawei account for more than 10% of the company’s total revenue.
So, how can you judge who is the biggest cake among such a huge market and many participants?
We are subdivided according to Huawei’s main business, and we can see that it is divided into three parts (data from Huawei’s 2018 financial report):
Consumer business, revenue of 348.9 billion yuan, accounting for 48%;
Operator business, with revenue of 294 billion yuan, accounting for 41%;
Enterprise business, with revenue of 74.4 billion yuan, accounting for 10%.
▼ Consumer Business, Carrier Business and Corporate Business is the pillar of Huawei’s three business operations
Data Source: Wind, Guotai Junan Securities Research
There are huge investment opportunities in the corresponding industry chains of these three business segments:
Operator business is Huawei’s basic business, with a compound growth rate of 9% in 2011-2018;
The consumer business is Huawei’s current largest business with a compound growth rate of 35%;
Corporate business is Huawei’s fastest growing business with a compound growth rate of 37%.
Next, we will conduct in-depth analysis of Huawei’s three major businesses, and explore the potential benefits of each business chain.
▼Huawei list of 92 core suppliers in 2018
Data Source: Huawei, Guotai Junan Securities Research
04Consumer Business:Huawei 5G Mobile Phone Opens a New Chapter
In July 2019, Huawei released the first 5G mobile phone Mate 20X at its Shenzhen headquarters.
This 5G mobile phone is equipped with Kirin 980 chip and Baron 5000 chipset. It is the world’s first dual 7nm 5G terminal chip, supporting NSA (non-independent networking) and SA (independent networking). .
▼Huawei’s first 5G mobile phone Mate 20 X
Data Source: Huawei
From the perspective of Huawei’s first 5G mobile phone supplier, domestic companies account for the majority.
In the assembly of the whole machine, the suppliers are mainly Foxconn and BYD, the main supplier of CPU is Hisilicon, the supplier of fingerprint identification solution is Huiding Technology, and the PCB suppliers include Shennan Circuit and Shanghai Power.
Because 5G mobile phones place higher demands on components on many levels, especially baseband and chips, both will be the biggest increase in the value of 5G mobile phones.
At present, the domestic components of the base components of the baseband and chips can only achieve partial autonomy. In addition to Huawei’s self-production on the baseband, the rest of the components are basically imported.
In addition to baseband and chip, screens, batteries, cameras, antennas, etc. are facing more technical changes, such as the screen to full screen, folding screen conversion, battery needs to provide longer power supply time, camera And the number of antennas faces an increase.
Therefore, in the initial stage of the technology update and iteration, there is a very significant room for value improvement in the relevant industry chain.
We have sorted out the domestic and foreign suppliers or potential suppliers for the parts and components of Huawei’s mobile phone core equipment. The following companies are expected to benefit from the long-term rapid growth of Huawei’s mobile phone business in the future.
▼Huawei 5G mobile phone industry chain related benefits
Data Source: Guotai Junan Securities Research
05Operator Business:Explore the opportunity of 5G investment from 4G investment
From the perspective of Huawei’s base station construction plan, the 5G construction progress has been leading the world.
As of the end of February 2019, Huawei has signed more than 30 5G commercial contracts with many head operators around the world, and more than 40,000 5G base stations have been built around the world.
In addition, Huawei’s RuralStar, PoleStar and TubeStar (Three-Star) solutions will provide network coverage for 100 million rural people and provide space-efficient base stations for cities.
At the same time, Huawei has also developed a TubeStar with a single pipe integrated into the entire base station. The processing capacity is close to the processing level of the tower station, but the floor space will be smaller.
Starting from 2020, as the 5G investment gradually enters the peak period, Huawei’s carrier business is expected to usher in a major outbreak. It can be expected that in the process of investment in the future 5G construction, the operator’s business income will be significantly improved.
As far as Huawei’s communication industry chain structure is concerned, it can be roughly divided into:
Network Planning – Wireless Master Equipment (Core Network, BBU, RRU; Chips and Modules; Antennas, Antennas; RF Devices such as PCBs, Filters, Optical Modules, Optical Devices, and Small Base Stations) – Transmission Equipment – – Fiber optic cable – system integration (IT support, value-added services) – terminal equipment – operators – users.
In the middle and upper reaches of the communication industry chain, some companies have entered the Huawei supplier system, and some companies have already had preliminary cooperation intentions.
In conjunction with the 92 core suppliers announced by Huawei, we believe that the companies that will continue to benefit from the Huawei communications industry chain in the future are shown in the following table.
▼Huawei Communication Industry Chain Related Benefits
Data source: Huawei official website, Guotai Junan Securities Research
06Corporate business:Cloud computing opens up new growth space
Huawei’s enterprise cloud business is distributed in 12 scenarios, including not only the current key financial, transportation, oil and gas, education and retail industries, but also the cloud of smart cities, public safety, government affairs, etc., providing solutions for urban construction and public safety.
In these application scenarios, Huawei provides customers with not only their own hardware devices and cloud computing platforms, but also leads the way to provide highly customized cloud computing solutions. The partners include top-level design and operation. Platforms and applications, etc., these companies will also benefit from the booming of Huawei enterprise cloud computing.
▼Huawei Enterprise Cloud Computing Application Scenario
Data source: Huawei official website, Guotai Junan Securities Research
In 2018, the business was affected by the big environment, and the growth rate declined. Even so, the growth rate of this business is still higher than that of other businesses.
▼Huawei’s business scale and proportion increase year by year
Data Source: Huawei, Guotai Junan Securities Research
In the supply chain, Huawei’s enterprise cloud computing infrastructure is mainly server, storage and data center switches. The required components include core components such as chips, DRAMs and optical modules.
We have sorted out the suppliers and potential suppliers that can provide these core components to Huawei. We can find that there are no suppliers in China that can provide core components such as chips needed to meet Huawei’s requirements for servers and memories.
But for optical modules, Huawei’s core suppliers, such as Guangxun Technology, Huagong Technology, and New Yisheng, will benefit from the growth of Huawei’s enterprise cloud business.
▼Huawei Enterprise Cloud Industry Chain related benefits
Data Source: Guotai Junan Securities Research
07Huawei’s domestic alternative supply chain
Before, Huawei relied heavily on foreign suppliers in the mobile phone production supply chain. However, the 2018 Sino-US turmoil made Huawei more aware that supporting domestic suppliers has become the only way to ensure supply chain security.
As of now, four US chip designers and suppliers, including Intel, Qualcomm, Xilinx and Broadcom, have cut off deals with Huawei. At the same time, Google also announced that it has suspended news of some business dealings with Huawei.
Since May, many insiders have speculated that Huawei’s supply chain will gradually be Americanized in the future.
For the US trade restrictions, Huawei’s supply chain security strategy has been adjusted to high-end chips based on independent research and development of Haisi, and at the same time cooperate with foreign top manufacturers to ensure product competitiveness, domestic manufacturers only supply low-end components of mobile phones.
The RF device supplier such as filter, the product design is responsible for Huawei, the supplier is only the foundry of Huawei, and the antenna is mainly produced by Huawei itself.
We believe that just like the past ten years of the creation of the Apple industry chain, in the future, under the catalysis of domestic substitution and 5G tide, Huawei’s industrial chain will usher in the same amount of gold investment opportunities.
If you miss Apple for the past ten years, don’t miss Huawei in the next decade.