Depth! Epic changes brought by 5G

"Can you popularize 5G? What good stocks are worth buying?"

As the hottest sector of new infrastructure investment in 20 19, the increase of 5G in the past two months has made many investors jealous.

Investors are worried about the value of King's Landing.

In retrospect, King's Landing wrote many articles about 5G, but it seems that it didn't sort out the whole industry chain.

Ok, today, let's make a pot of tea, eat some melon seeds, and listen to King's Landing to teach you about the 5G industrial chain from beginning to end.

In this paper, we have solved three problems:

What is 1, 5G?

Where are the opportunities for 2,5G?

1

What is 5G?

5G, in short, is the fifth generation mobile communication network.

From 1G to 5G, the upgrade of each generation of mobile communication technology will bring revolutionary investment opportunities.

Give a simple example:

1G You can only make phone calls to listen to voice station chats.

You can send and receive short messages in 2G, and you can log on to Monternet's WAP platform to read novels. The three major portals successfully turned losses into profits through short message CRBT.

With 3G, there are images and animations, and Weibo, WeChat, Didi, mobile payment and mobile games have sprung up like mushrooms after rain. You can also visit Momo to pick up girls.

Under the 4G network, the speed is faster, the traffic is larger, the live broadcast and video are very popular, and autonomous driving and Tik Tok are also addicted to it. The next hand is always 1G and 2G.

As you can see, from 1G to 4G, there are two basic characteristics:

First, the network speed is faster, the traffic is larger, and the tariff is cheaper, which leads to the doubling of the market size.

Second, new technologies bring new applications, from voice, text, images to video, which are constantly developing.

For example, when it comes to the upcoming 5G, the subconscious reaction of ordinary people is: "Isn't it faster to download movies?"

This is of course right, but if it is only so, you may not be able to eat the meat you should eat in the 5G investment.

Actually, the second point is more important.

5G also follows the above upgrade principle. From the technical characteristics, it includes four aspects:

Faster speed, greater traffic, shorter delay and wider connection.

The first two, speed and flow, correspond to the first feature of intergenerational upgrading;

The latter two, namely, delay and connection, correspond to the second feature of intergenerational upgrading.

Let's talk about the first feature first.

In terms of speed, the peak communication rate of 5G can reach 20Gbps, 20 times that of 4G.

In terms of traffic, the bandwidth of 5G can reach 100-400MHz, which is 50- 100 times that of 4G.

The upgrade of speed and traffic mainly brings the upgrade of entertainment methods, including 8K ultra-high-definition video and cloud games, and the corresponding wave of mobile phone updates.

Recently, with the high-level release of "Ultra HD Video Product Development Action Plan 20 19-2022", this sector has already started, and King's Landing will also analyze this industrial chain later, so please pay attention.

Cloud games are also worthy of attention.

In the evolution of 3G-4G, mobile games have changed from light games (such as Angry Birds) to heavy games (such as the glory of the king).

The next upgrade will undoubtedly be a game with higher quality requirements and operational complexity. In this case, the way the game is made will change fundamentally.

At this MWC conference, Tencent launched a cloud game platform "Tencent Play" that can be played online without downloading and installing, which pointed out the development direction for the industry.

To put it simply, the cloud game combines the high-speed and high-traffic transmission technology of 5G with the super computing power of cloud computing, bringing more cool pictures and more intense scene experience, and its revolution can be compared with IMAX in the film industry.

In order to enjoy these new forms of entertainment, it goes without saying that the hardware of mobile phones should be updated. Therefore, after the completion of the 5G infrastructure construction, a new cycle of the mobile phone industry will follow, and the specific content will be expanded later.

Let's talk about the second feature.

In terms of delay, 5G can achieve less than 1ms, which is 10 times smaller than 4G.

In terms of connection, the number of simultaneous connection terminals of 5G can reach11000000000, which is ten times that of 4G.

These two characteristics are the real revolutionary changes of 5 G.

For example, in the past, due to the long delay time, the information between two network terminals could not be synchronized, and many wireless remote control functions could not be realized.

For example, driverless cars, telemedicine operations, remote drone operations and large-scale intelligent manufacturing.

These technologies require very high security and accuracy, and low latency is one of the important underlying supporting logics. Once they are technically satisfied, there will be dazzling innovation and prosperity.

Another example is the exponential growth of the number of connections, which is a key step for the terminal platform to expand from mobile phones to the "Internet of Everything".

The prosperity of the Internet of Things will give birth to a large number of new hardware that we may not be able to imagine now. From cars, drones, robots, smart wear to VR devices, these hardware will undergo tremendous changes in form and function.

If we say that the first feature of 5G is only the experience upgrade to meet the needs of C-side;

The second feature is to let 5G cut into all walks of life at the B end, and completely change our production methods and lifestyles.

2

Where are the opportunities for 5G?

As a periodically upgraded industry, it is very important for 5G to grasp the investment rhythm.

The rhythm here refers to the base station equipment, terminal hardware and application software.

If you buy early or sell late, you will suffer a big loss.

For example, in 20 17 years, the concept of 5G was on fire. If you started buying at that time, it was definitely the rhythm of turning off the lights and eating noodles after the 20 18 crash.

From the experience, the investment in the communication industry needs to build infrastructure (base station equipment) first, then the terminal hardware can be sold, and finally the application software will bear fruit. Only at this stage can operators make money.

According to China's 5G plan:

The license was issued in 20 19, and the network infrastructure construction began in the second half of the year. Large-scale commercialization in 2020, and the peak investment period is 2020-2022.

According to this timeline, the latest trend of 5G mobile phones will not begin until 2020, and a cycle will be completed in the next three years;

The application software is late.

There is a time difference of about six months to one year between the three links.

Of course, investment can't wait until after the results are released.

The best time to enter the market is often the high point of performance six months to a year ago: institutional investors often start to lay out and ambush during this time period.

For example, in the second half of this year, 5G equipment inventory will be installed, equipment procurement and production will be started in the first half of this year, and then it will be promoted. The second half of 20 18 is the best layout time period.

Looking back, we will find that almost all the 5G stocks that have risen for a round are in this range.

This is why the paid version of King's Landing was revised at the end of 10 last year, and a large number of 5G leading stocks were included in the King's Landing Index, and they were classified and rated for key tracking.

There are two points that need careful attention:

First, time, early entry and late entry will lose the best profit opportunities;

Second, before the results were announced, investment in technology stocks was often a speculative concept, which was mixed and showed an overall upward trend.

Even some related theme stocks, such as China Eastern Communications, rose more than those of good companies with real technology.

This is because value investors value long-term returns, and the share price of an excellent company usually grows slowly and continuously with the release of performance.

Hot money obviously does not have such patience, so they will choose pseudo-concept companies that lack actual products and are not favored by institutional investors for speculation.

Imagine that a good company has a lot of institutional funds piled up, and its share price has just been inflated. They have sold a lot. How can they still play?

Therefore, "low price, small size and easy manipulation" is what hot money values. Let's play a game when we are busy, and coax small fans to fish in troubled waters.

However, King's Landing advises investors to stay away from such stocks, and there is a high probability of being cut into leeks.

After entering the performance release period, leading companies in all aspects of the industry will gradually stand out, from a dark horse to a white horse;

These pseudo-concept stocks will reveal their true colors, where they come from and where they go back. These hot money will take the spoils to the next fertile field with abundant water plants and leeks.

So, how to distinguish who is the real leader and who is the pseudo-concept stock?

three

Start with the base station equipment.

The equipment link has three sub-blocks: equipment suppliers, RF components and photoelectric components.

The relationship is like this: the operator is responsible for burning money and distributing orders to equipment suppliers, and the equipment suppliers break up the orders and place orders to various parts companies.

In this process, equipment manufacturers are most likely to benefit.

Because after a long period of competition, the pattern between several leading companies has been very stable.

At present, among local equipment vendors, the scale of Huawei, ZTE and Fiberhome is decreasing according to the approximate ratio of 7: 2: 1.

In the field of spare parts, there are many companies, and the technology is updated quickly, but once it is won, the rate of return is even more amazing.

Among them, the two most changed plates are the RF end and the photoelectric end.

RF terminal includes antenna, RF chip, PCB board and other components. Compared with 4G, it is the part with the most technological innovation, and it is also the field with the earliest performance start and the strongest stock price elasticity.

The company includes-

Antennas: Universal Communication, Lu Sheng Communication, Mobi Development, Jingxin Communication, Dongshan Precision, Feixiangxiangda;

RF chips: Aifu Electronics, Canqin Technology, Guohua New Materials, Dafu Technology, Wuhan Fangu, Lux, Dongshan Precision, Sanan Optoelectronics, Fenghua Hi-Tech, Shunluo Electronics;

PCB board: Shennan Circuit, Hudian Co., Ltd., Yi Sheng Technology, Dongshan Precision, Founder Technology, Ding Peng Holdings, Chongda Electronics, Wang Jing Electronics, Hong Sheng Technology;

However, we should be careful that this is a strong cycle, and the rising period of the stock price is usually within 1-2 years, which is difficult to sustain, so it is very important to track it in time.

The main reason is that the technical threshold of this link is low, and the related enterprises lack the bargaining power with equipment suppliers, so they can only make money in the case of tight supply and demand in the early stage.

Once entering the stage of large-scale expansion of the industry, the price reduction of equipment manufacturers will follow suit, making the performance of parts enterprises lose imagination.

The photoelectric end includes optical chip, optical module and optical cable. The short-term elasticity of stock price is slightly worse, but the continuity of performance will be better.

In fact, due to the increase of the transmission rate of 5G, the transmission distance becomes longer, the bandwidth becomes larger, the density of base stations increases greatly, and the long-term demand of photoelectric terminals increases obviously.

The company includes-

Optical chip: Guangxun Technology;

Optical modules: Guangxun Technology, Xinyisheng, CIMC, Bochuang Technology, Tianfu Communication, Chenchen and Cambridge Technology;

Optical fiber and cable: Hengtong Optoelectronics, Zhongtian Technology, Ding Tong Internet, and special information;

four

Next is the terminal building.

Terminals are divided into several opportunities: first, mobile phones with clear opportunities are more fashionable, and then industries such as driverless cars, VR devices and service robots are still in the conceptual stage.

Let's talk about mobile phones first.

If the base station equipment link has entered the initial stage of performance release in 20 19, then the mobile phone industry will not have performance until at least 2020.

Therefore, in theory, the concept of speculation will not be suitable until the middle of this year, when all brands of 5G mobile phones are listed one after another.

After all, it is estimated that the price of the first batch of 5G mobile phones will exceed 8,000 yuan, and there will hardly be much sales.

This year is the last year of the 4G cycle of mobile phones, and the sales volume is expected to decline.

But as far as investment is concerned, unexpected things always happen at any time.

With the release and listing of Huawei's first "5G+ folding screen" mobile phone (although the actual listing will not be until the middle of 20 19), the investment enthusiasm of 5G mobile phones has been ignited in advance.

So, where will the main opportunity be?

Let's not talk about mobile phone brands. Anyway, they are not listed on A shares.

King's Landing believes that the next mobile phone upgrade cycle will mainly provide opportunities for innovation and reorganization in three major links: RF, display and camera.

Like 5G equipment, the biggest change of 5G mobile phone is RF terminal, and the investment logic is almost the same, but the beneficiary companies are obviously different.

The company includes:

Antenna: Xinwei Communication, Lux, Dianlian Technology, Dongshan Precision, Shuobeide;

RF chips: Ziguang Zhanrui, Sanan Optoelectronics, Xinwei Communication, Maijie Technology, Haoda Electronics, Zhuoshengwei;

PCB board: Dongshan Precision, Hong Xin Electronics, Ding Peng Holdings, Wang Jing Electronics, Chongda Technology and Hong Sheng Technology;

There are also huge investment opportunities for display screens, especially the emergence of folding screen technology, which will make exciting changes in the form of mobile phones in the next few years.

More importantly, it will be a key battle for the panel industry to shift its dominance from South Korea to China.

In the past 20 years, China's panel industry has burned more than 100 billion dollars, but it has always lagged behind South Korea in technology and scale, and it has been difficult to make money for many years.

Nowadays, with the top technology of panel industry catching up, China panel industry will gradually enter the sweet turning point of profit.

This is very worth looking forward to.

The company includes:

Panel: BOE, Visionox, Shentianma, Huaxing Optoelectronics;

Materials: Xinlun Technology, Li Qiang New Materials, Sanlipu, Zhong Shi Technology, Wanrun, Puyang Huicheng;

Equipment: precision electronics, Li Ande equipment, Han laser, North Huachuang, Zhiyun, Ruike laser;

The early leaders in this field were Samsung and Apple, but since last year, domestic mobile phones have become the leaders.

Give two simple examples:

First of all, Huawei P20Pro is equipped with three cameras for the first time, and the shooting effect is amazing. P-series mobile phones in 20 18 years doubled year-on-year, which made Huawei successfully gain a foothold in the field of high-end mobile phones.

Secondly, at this year's MWC conference, OPPO showed a periscope telephoto lens with zoom 10, which pushed the camera ability of the mobile phone to a new peak.

With the upgrading of various technologies such as three-camera, zoom, wide-angle, ultra-high-definition, 3D structured light, and the improvement of accuracy and complexity, this link has great long-term growth value, and the investment logic is similar to the photoelectric plate of 5G equipment.

The company includes:

Module: Oufei Technology, Yu Shun Optics, Xinli International, Qiuti Technology, Helitai;

Motor: Jinlong Electromechanical;

3D structured light: Lianchuang Electronics, Crystal Photoelectricity;

five

The opportunity for mobile phones has ended, but King's Landing believes that this opportunity mainly belongs to 2020.

After 202 1 year, with the improvement of 5G facilities and the maturity of AI technology, the investment in science and technology industry will usher in a real climax.

This stage belongs to innovative terminal hardware and corresponding application software, which is a unique treasure in the 5G era.

It is still too early to analyze and predict.

Let's talk about driverless driving first.

It has been 10 years since Google put forward this concept in 2009.

Although it is still in the experimental stage, more and more funds and companies are pouring into the whole industrial chain, and how to achieve the final unmanned state has made a theoretical breakthrough.

To put it simply, to achieve driverless driving, you must have four technical supports-

Perception system: depending on vision, radar, positioning and other sensors to realize the perception of road position and obstacles, just like people have five senses;

Cognitive system: Connect the cloud data center through the 5G network, and combine the high-definition map and the shared data of other cars to let the cars know what their environment is like, so as to avoid collisions in dynamic driving and ensure safety. This is crucial, just like people are conscious.

Decision-making system: update the route and scene processing mode in real time through AI chip and deep learning algorithm, just like people have brains;

Control system: The new energy vehicle terminal driven by electricity is like a person with hands and feet.

In recent years, the perception system, decision-making system and control system have gradually matured, just waiting for the 5G connection of the cognitive system.

There is no low-latency 5G technology, just like a computer, it only relies on a 56K telephone line to access the Internet. It takes more than ten minutes to open a website.

This car can only be regarded as a mentally retarded child.

Therefore, the whole industry is looking forward to the arrival of the 5G era, so that driverless cars can be truly commercialized.

The traditional automobile industry is a huge market of hundreds of billions, which is the pillar of the whole western modern industry and one of the core industries in Japan, Germany, the United States, South Korea and France.

In the past 100 years, this industry has been refined along the evolution law of mechanical power structure, but it has never changed qualitatively.

Now, once it is subverted by new technologies and the industrial value chain is reorganized, how amazing the investment opportunities will be!

The company includes:

Cars: Tesla, Weilai, BYD, Geely Automobile, SAIC, Yutong Bus and traditional automobile giants;

AI chips: NVIDIA, Intel;

IGBT chips: NXP, Renesas, Infineon, Texas Instruments, BYD, Huawei Microelectronics;

Algorithms: Google, Apple, Uber, Delphi, Didi, Baidu, Huawei;

Maps: Google, HERE, Baidu, Gaode Map, NavInfo;

Software: Iflytek;

Screen: Oufei Technology, Changxin Technology;

Camera: Oufei Technology, Yu Shun Optics, Crystal Optoelectronics, Lianchuang Electronics;

Sensors: Naiwei Technology, Goer, Weir, South China University of Technology, Gaode Infrared, Suzhou Guchuang, Huacan Optoelectronics;

Intelligent cockpit: Sheng Jun Electronics Company;

…………

There are many companies involved, and the industrial chain is unprecedented.

Moreover, it is conceivable that with the maturity and landing of technology, many companies in the communication, software, electronics and semiconductor industries will queue up to share their cakes.

This will be an epic investment feast, far exceeding any previous theme of A shares.

After reading these, you may think: "Can I invest in this company"?

This is not an easy decision, because in addition to the fundamental opportunity analysis, it is necessary to conduct a more in-depth investigation on financial risks, performance certainty and business competition pattern.

Authors: King's Landing Team.

More analysis and industry interpretation of growth stocks are in King's Landing, a new generation investment and research service organization in China.