Electronic Element: Grasping New Product and Capacity Transfer

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The results of the mid-year report of companies in the " electronic components industry " have all been disclosed. Excluding equipment and equipment and color TV companies that have been eliminated, the overall operating income of the 66 electronic component companies increased by 48% . The operating income of 63 companies realized positive growth year-on-year, with growth exceeding 50% . 35 homes. Fifty-six companies achieved a positive year-on-year increase in net profit attributable to the parent company after deducting non-recurring gains and losses. There were 29 companies with an increase of more than 100% , and 37 companies with more than 50% . Since the net profit attributable to the parent company after deducting non-recurring gains and losses last year in the 63 companies was negative, the overall comparison is no longer meaningful. The gross margin of 45 companies achieved positive growth year-on-year. Fine-semiconductor semiconductors, LEDs , PCBs , passive devices, optical components, electro-acoustic devices have achieved significant growth, respectively.

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I. Several factors of this significant increase in performance

1 . Depressing demand release and inventory replenishment to drive capacity utilization to historic highs is one of the reasons for this growth.

We compared the above-mentioned 66 listed electronic component companies in China and global semiconductor sales revenue, and found that their fluctuation laws are almost identical, and they are consistent in time, as shown in Figure 1 . This is because chips, PCBs , passive devices, optical components, electro-acoustic devices, etc. are components or accessories that make up the whole machine, so there is a strong correlation between them and changes. On the other hand, from the perspective of industry, the electronic information industry is a highly globalized industry and should be the industry with the highest level of globalization, including the distribution of industrial organizations, products, markets, technologies, standards, supply and demand, and prices. Globalization of talent. Therefore, the operating characteristics of the semiconductor industry can basically reflect the operating characteristics of China's electronic components industry.

The economic crisis triggered by the subprime crisis in 2008 caused terminal manufacturers to be full of worries about the future of the market, and reduced investment and upstream manufacturers' orders one after another. Therefore, starting from the third quarter of 2008 , the global electronic components industry began to decline in orders, and the performance was in 2008 . The fourth quarter showed that bad performance continued until the third quarter of 2009 . Since the third quarter of 2009 , the global economy has recovered and business confidence has increased. It has started to increase investment and make up inventory to meet consumer demand that has been deliberately suppressed by manufacturers for almost a year. Orders of electronic component manufacturers continue to increase, and the fourth quarter of 2009 has recovered. To the level before the economic crisis. In the first half of 10 years, the capacity utilization rate reached a historical high. Taking the chip as an example, according to the statistics of global wafer production capacity, the utilization rate of wafer production reached 95% in the second quarter, and even there were chip design firms waiting in line for the foundry. This is why the global semiconductor foundries have increased their investment budgets to purchase semiconductor equipment this year. In the first half of this year, the utilization rate of listed electronic component companies in China has almost reached the highest level in history, such as Silan Micro, Leybold High-Tech, Crystal Optoelectronics, Suzhou Gushao, and even some companies' products are in short supply.

2 . The emerging of new products and new applications is the second reason for this growth

If only the changes in demand and inventory demonstrated by the industry's own adjustments are not sufficient to maintain the current high level of prosperity, there is also an important reason for the emergence of new products and new applications. Such as mobile Internet, sensor networks, smart phones, LED LCD TVs, tablet PCs, touch screens, automotive electronics (sensing, navigation, entertainment), energy-efficient lighting, smart buildings, and intelligent transportation. Looking back at the history of the past few years, there has never been a confluence of so many new applications and new products.

These applications and products would have begun to exert force in late 2008 and 2009 , but due to the economic crisis, both terminal companies and upstream electronic components companies have been cautious about postponing the development of new products and new applications. Manufacturing and promotion were finally concentrated in the first half of the decade .

3 . Increased competitiveness of domestic enterprises and transfer of low-end and middle-end products are the three reasons for this growth.

The economic crisis in 2008 was actually a good factor for domestic electronic component manufacturers. Because it has accelerated the speed of foreign production of low-end products companies in trouble, under the pressure of sustained losses, these companies shut down some production capacity, and these closed production capacities have been transferred to domestic enterprises. For example, Silan Micro bought a 6 -inch production line from Japan at a low price of 60 million yuan during the economic crisis.

Another transfer method is for foreign companies to abandon production, directly entrust the product to OEM production, and then sell it under their own brand. For example, Suzhou Gushao benefits to some extent through this method. It is also through the OEM method. A better way for domestic companies to step into a certain industry can avoid market risks at the initial stage. After accumulating sufficient technology and market experience, they can completely sell with a free brand.

In addition, in the context of the financial crisis, companies in the United States, Europe, Japan, Korea, and Europe have a higher cost of capacity expansion due to lack of cost elasticity, and the overall competitiveness has been greatly reduced. Domestic enterprises have the advantage of low cost and large market. Once the market recovers, they can quickly expand their production capacity to the largest extent and seize the market. In addition, after so many years of development in itself, under the technology ceiling effect, the distance between domestic and low-end products and foreign manufacturers has gradually diminished or even disappeared, such as the Leybold Tech touch screen and Goer acoustics acoustics products. There is a very clear rule in the IT industry. Once a certain technology is mastered by the Chinese, it is difficult for foreign companies to compete with China. Their only choice is to cooperate and withdraw or they will fall into the quagmire of cost war and price war. Being expressed by ZTE and Huawei, this rule also applies to the electronic components industry.

Second, the current valuation of domestic electronic components industry is high

The actual performance of electronic components companies this year will not be much different from the current market expectations, because it is currently in September , and the performance in the third quarter is almost a certain number, and some companies have reached the fourth quarter quarterly visibility of orders. Therefore, the valuation now basically reflects the market's expectations for 11 years. The current plate PE ( TTM ) value is 50 , and the market's predicted 10 year dynamic PE value is around 40. It should be said that it is operating at a high level. Because in 10 years, almost all of the electronic plate companies have been in the best operating condition in history since the beginning of the 1st quarter, and the capacity utilization rate has almost reached the limit. Therefore, 11 % growth in the overall sales revenue of electronic component companies can be expected to be optimistic, of course, 20% growth in sales revenue can bring about a 50% increase in net profit. We believe that it is possible to achieve such a growth rate in 11 years. The main reason is that the new products and applications mentioned in the previous section are still in the early stage of the popularization period and have not reached the mature stage. If this product continues to exert force, It is possible to stimulate the current electronic components industry's boom over 2011 and keep it operating at a high level. This is also a point we emphasized in the mid-term strategy meeting.

Third, the recent investment ideas: grasp new products and new applications and capacity transfer, find the leading companies in the fine molecular industry

Among the growth factors in the first half of the year, the release of repressed demand and inventory restocking can no longer be the driving force for growth. The new applications of new products and industrial transfer can continue to drive the performance of related companies in 11 years. Focusing on these two main lines, we can focus our attention on those high-quality enterprises that are capable of grasping these opportunities. In time, these companies are expected to become leading companies in the industry, even if there are no downward adjustments in the industry that have not been foreseen in advance. It can also be transformed into an insurance company. After the storm, it will quickly become a bigger leading company because every industry crisis is a big wave of Ebbing, and the rest is real gold.

Based on this idea, we recommend:

1. China Microelectronics Co., Ltd., Suzhou Wuxi Co., Ltd. and Silan Microelectronics, which have been cultivating for a long time in the field of semiconductor discrete devices. These companies will benefit long-term growth from low, medium and high-end capacity transfer in the next few years. Currently, the products of the three companies have been recognized by the market and they are actively expanding overseas. The products are in short supply, and China Microelectronics and Silan Microelectronics The next 1-2 years are likely to achieve mass production of IGBTs .

2. Sanan Optoelectronics and Silan Micro in the LED field. Sanan Optoelectronics is the only company that currently manufactures full-color LEDs in China. The company has a long history of LED manufacturing, has ample technical and talent pool, and can quickly use the newly purchased 107 MOCVD equipment. Silan Micro's advantages in the LED field lie in its sensitivity and stability, as well as its focus on technology accumulation, rather than blind expansion. Since 2005 , the company has entered the LED field. In 2006 , it had 2 MOCVD units, which increased to 4 in 2007 , increased to 6 in 2008 , and increased to 8 in 2009 . In early 2011 will reach 16 . Each expansion is carried out after full market and technical demonstration, and the company is about to enter the field of LED white lighting. The LED industry has broad prospects. At present, technology is still more important than scale. Otherwise, blind expansion will bring the risk of lagging production capacity. Therefore, we are very optimistic about Silan Micro's steady and steady strategy in the LED field. Recently, the company issued an announcement and obtained the purchase subsidies for MOCVD equipment from the Hangzhou Municipal Government, and purchased 30 new MOCVD equipment.

3. In the touch-screen field of Leybold Tech, we stated in the report “The Tablet PC Surpasses Expectations, and Leybold Gaoke is Undervalued” in which Leybold Tech will benefit from the demand for touch screens brought by the popularity of tablet computers.

4. DeRun Electronics in the connector field is to see that DeRun Electronics will begin mass production of CPU connectors in the fourth quarter. After the technological breakthrough and brand increase, it will usher in a rapid growth in the capacity transfer.

5 , Shengyi technology in PCB field, the main focus is non-public hair extension project flexible PCB copper clad laminate, rigid HDI PCB copper clad laminate, LED high thermal conductivity PCB clad laminate, the demand for these products are new products such as personalized consumer electronics, The smart phone, LED backlight TV gave birth to, the future return has a greater certainty. Historically, the company's sales revenue has maintained a compound growth rate of 30% , while global PCB has a growth rate of less than 10% , apparently benefiting from the transfer of production capacity. It is expected that the company will have a compound annual growth rate of 25% in the future, and the market-predicted company's 10- year PE value is only 21 , and the valuation is relatively low.

6. Cole acoustics in the electroacoustic field. The company has in the electro-acoustic field of a very high profile, with Samsung, Hewlett-Packard, Cisco, LG, Panasonic, Siemens, NEC, Foxconn, Flextronics, Asus, Lenovo, Kyocera, ZTE, Plantronics, Harman (Harman), Logitech ( High-quality customer resources such as Logitech ). The company will further integrate acoustic signal processing technology, short-range wireless communication technology, and MEMS technology with its ever-increasing technology integration capabilities, and is committed to becoming a world-class provider of acoustic total solutions. The company has a strong growth momentum in the future, and Plantronics' production capacity transfer is completed. Some new products such as consumer electronics acoustics systems, short-range wireless communication modules, and TV 3D glasses begin to enter the market in batches, as these new products are all leading The joint development of enterprises has a considerable certainty in the contribution of the company's revenue for the next year. Therefore, in the future, the company will benefit from the industrial transfer caused by new applications and technological breakthroughs.

7 , security application chip leading enterprises national technology. Under the trend that all applications are based on the Internet, the security of local and network access is an issue that companies and individuals are increasingly paying attention to. Safe payment, secure storage, and trusted computing have just been in the promotion period and the pre-universal period, and there is still room for further development in the future. The national technology security chip market share has reached 80% , and the security chip application field will be expanded horizontally and vertically.