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The communication module is the information entrance for all kinds of intelligent terminals to access the Internet of Things, and its downstream applications are very extensive. In the automotive field, the vehicle communication module is mainly responsible for the information exchange between the car-vehicle and the car-road, which is the key to realizing the networking of automobiles.
At present, the vehicle communication module is mainly used in front-loading T-BOX, intelligent cockpit and rear-mounted OBD and intelligent rearview mirrors. The communication standard is mainly 4G/5G, LPWA and other cellular communication modules, and a small number of WIFI modules and positioning modules.
Judging from the recent growth of participants in the industry chain:
Quectel Communications - In the third quarter of 2021, the company achieved operating income of 7.476 billion yuan, +77.66% year-on-year; and achieved a net profit attributable to the mother of 237 million yuan, +89.53% year-on-year.
GuangheTong - in the third quarter of 2021, the operating income was 2.854 billion yuan, +45.03% year-on-year; and the net profit attributable to the mother was 323 million yuan, +44.45% year-on-year.
Youfang Technology - the third quarter of 2021, to achieve operating income of 685 million yuan, +58.52% year-on-year; to achieve net profit attributable to the mother - 0.1 billion yuan, a year-on-year +75.07%.
Meige Intelligent - in the third quarter of 2021, it achieved operating income of 1.321 billion yuan, +91.69% year-on-year; and achieved net profit attributable to the mother of 0.8 billion yuan, +545.46% year-on-year.
Judging from the expectations of the institution for the prosperity of the industrial chain:
Chart: Wind agencies unanimously expect growth and prosperity
Source: Tajian Research
All aspects of the automotive communication module industry chain, including:
Upstream - raw material suppliers and module foundries. Raw materials mainly include chips (mainly baseband chips, RF chips, memory chips, etc., of which the baseband chip is the core), PCB boards, discrete devices and structural parts. Representative companies mainly include Qualcomm, MediaTek, Tsinghua Unigroup, Samsung Electronics, Murata, etc., and chip manufacturers have a high concentration and a strong voice.
Midstream - vehicle communication module manufacturer. The representative companies in China mainly include Quectel Communications, Guanghetong, Youfang Technology, Mega Intelligence, Sunsea Intelligence, etc.; foreign representative companies mainly include Sierra Wireless, Telit, Gemalto, U-Blox, etc.
Before 2017, the global module market was mainly dominated by overseas module manufacturers. With the active layout of overseas markets by domestic manufacturers in recent years, the market share of domestic manufacturers has increased rapidly, and the shipment volume of modules has exceeded that of international manufacturers.
Downstream – mainly for vehicle companies and Tier 1 manufacturers. Representative companies mainly include Continental, Bosch, Huayang Group, Desay SV and so on.
Figure: Industrial chain
In this follow-up, there are several questions worth thinking about:
1) Vehicle communication module industry, how much space is there in the future?
2) From the perspective of key operating data, what kind of operating factors can be more competitive in the medium and long term?
This report will be updated to the industrial chain map
(I)
According to the definition of the "Internet of Vehicles Industry Technology Innovation Strategic Alliance" for the Internet of Vehicles, the Internet of Vehicles refers to the system network for wireless communication and information exchange between vehicles (V), roads (I), pedestrians (P) and the Internet (N) in accordance with certain communication protocols and data interaction standards.
Figure: Schematic diagram of the Generalized Internet of Vehicles
Source: Zhihu @ Xiaobai's dry pants
One of the main applications of the Internet of Vehicles is autonomous driving. From a global perspective, the realization of high-level automatic driving has two technical routes: bicycle intelligence and vehicle-road collaboration.
Bicycle intelligence needs to install a large number of sensors such as lidar, millimeter-wave radar, and cameras on the car, and requires AI algorithms and autonomous driving chips to provide computing power support, which is more costly. For the United States, the basic scientific research strength is strong, and the artificial intelligence algorithm and autonomous driving chip are leading the world. Therefore, the Internet car-making upstarts represented by Tesla and Google generally choose bicycle intelligent solutions.
For China, 5G technology is leading the world, the base station covers a wide range, coupled with the government's strong investment in intelligent transportation infrastructure and other aspects, so the mainland chooses the vehicle-road coordination route.
Vehicle-to-road collaboration is a low-cost solution for high-level autonomous driving. Simply put, it is to carry out environmental perception and data fusion through multiple sensors at the vehicle end, and at the same time, the roadside device is responsible for road condition information collection and edge measurement and calculation, and realizes the interaction and sharing of vehicle and road information through the wireless communication platform, so as to provide a decision-making basis for the vehicle.
Communication between vehicles and roadside devices relies heavily on V2X (Vehicle to Everything) technology. At present, the international is mainly divided into two major technical routes: DSRC and C-V2X.
DSRC is dominated by the United States, the technology is relatively mature, but does not have V2N and V2P functions, is not a complete Internet of Vehicles;
C-V2X is a continental-led cellular-based V2X technology (Cellular V2X) that supports V2V/V2I/V2P/V2N applications and has superior performance over DSRC. As a result, in November 2020, the FCC announced that it was abandoning the DSRC and moving to C-V2X.
Figure: Connected car technology route
Source: Yiou Think Tank, Changjiang Securities Research Institute, Zhihu @Rose
In the early days of C-V2X, the information exchange between V and X was mainly realized by using the existing LTE network (4G) facilities, and when the 5G deployment matures, it can be smoothly evolved to the NR-V2X system based on the 5G network to meet the requirements of high reliability and low latency of the Internet of Vehicles communication.
That is to say, under the C-V2X technology, no matter which technical route is used, the development of the Internet of Vehicles will drive the growth of wireless communication module demand. So, let's look at the vehicle communication module next.
(2)
First of all, let's take 2020 as an example, from the perspective of revenue volume and business structure, let's take a look:
From the perspective of the overall revenue volume in 2020: Quectel Communications (6.106 billion yuan) > Guanghetong (2.744 billion yuan) > Meige Intelligent (1.121 billion yuan) > Youfang Technology (574 million yuan).
From the perspective of income structure:
First, Quectel Communications - the global leader in wireless communication modules, in 2020, wireless communication modules contributed 5.815 billion yuan in revenue, accounting for 95.24% of total revenue, and the products are widely used in vehicle transportation, smart energy, wireless payment, intelligent security, wireless gateways and other fields.
Quectel has a complete range of products, including "all-scenario + full-scale", and the current LTE, LPWA, 5G and in-vehicle services are growing rapidly. Among them, the vehicle business is the leading market share, and there are many cooperative car companies.
From a sub-regional perspective, in 2020, domestic business revenue accounted for 61.84%, and international business revenue accounted for 38.16%.
Figure: Shift Telecom Revenue Structure
Second, Guanghetong - mainly engaged in the application and expansion of wireless communication modules and their communication solutions. In 2020, its communication module contributed 2.691 billion yuan in revenue, accounting for 98.07% of the total revenue, and its products are widely used in mobile payment, mobile Internet, Internet of Vehicles, smart grid, security monitoring and other fields.
Among them, laptops and POS modules are its traditional areas of strength. Since 2018, through the establishment of a wholly-owned subsidiary, Guangtong Yuanchi, and in 2020, it has strategically invested in Xi'an Liancheng and acquired Sierra Wireless, gradually improving its global layout in the field of internet of vehicles.
From a sub-regional point of view, in 2020, domestic business revenue accounted for 31.83%, and international business revenue accounted for 68.17%.
Figure: Revenue structure of Guanghetong
Third, Meige Intelligent - initially mainly engaged in the production of precision components and communication module research and development and sales, in 2019 to sell precision components business related assets, so as to concentrate on the main business in wireless communication modules and solutions business.
In 2020, the wireless communication module and solution business contributed 1.052 billion yuan in revenue, accounting for 93.82% of the total revenue. The products focus on three major areas: intelligent networked vehicles, 4G/5G FWA (fixed wireless access) connections, and Internet of Things pan-connectivity represented by new retail and smart finance.
In terms of sub-regions, domestic business revenue accounted for 63.83% and international business revenue accounted for 36.17% in 2020.
Figure: MeG Smart Revenue Structure
Fourth, Youfang Technology - the initial main business was mainly wireless communication modules, and then with the entry into other Internet of Things scenarios such as the Internet of Vehicles, the proportion of terminal product revenue increased rapidly. At present, the products are mainly oriented to the field of smart energy and internet of vehicles, and actively expand to other Internet of Things scenarios.
In 2020, the revenue of wireless communication modules was 452 million yuan, accounting for 78.76%; the revenue of wireless communication terminal products was 0.76 billion yuan, accounting for 13.22%.
In terms of sub-regions, domestic business revenue accounted for 88.95% in 2020, and international business revenue accounted for 11.05% (29.5% in 2019).
Figure: Revenue structure of Youfang Technology
(III)
Next, we put together revenue and profit growth in recent quarters to perceive the growth trend:
First, the growth rate of income
Chart: Comparison of revenue growth rates (unit: %)
From the perspective of revenue growth, the growth rate of Quectel Communications and Guanghetong is relatively stable, and the fluctuations of Youfang Technology and Meige Intelligence are relatively large. thereinto:
The revenue growth rate of Meige Intelligent began to be negative in the third quarter of 2019, mainly due to the active divestiture of precision module-related assets, and the revenue of precision component business fell sharply by 76.26% year-on-year (the wireless communication module and solution business continued to grow in the same period). After the divestiture of the precision components business ended in 2020, revenue began to return to growth.
The revenue growth rate of Youfang Technology in 2020 was negative, mainly due to: 1) affected by health events and new standard updates, the number of tenders for wireless communication module products in the power grid decreased year-on-year, resulting in a year-on-year decrease in revenue in the field of smart energy by 13.84%; 2) the spread of overseas health events affected family travel, consumption and new model releases, which in turn affected the demand for OBD and other products, resulting in a 68.23% decline in revenue in the field of internet of vehicles.
Second, the growth rate of net profit attributable to the mother
Figure: Comparison of the growth rate of attributable net profit (unit: %)
The growth rate of attributable net profit is basically consistent with the fluctuation of revenue growth. thereinto:
The decline in the net profit attributable to the mother in Q2 of 2020 of Youfang Technology is much greater than the decline in revenue, mainly due to its strengthening of R&D investment and overseas sales layout, and the year-on-year increase in R&D expenses and sales expenses is large. In addition, due to the impact of health events, credit impairment losses and inventory decline losses also increased significantly compared with the same period last year.
Quectel Communications 2020 Q3 and Mega Smart Q3 2021 Q3 attributable net profit increased significantly year-on-year, mainly due to the expansion of revenue scale, while the expense ratio of the period decreased year-on-year, and the scale effect began to appear.
(Wanton)
After perceiving the growth trend, we will then take apart the revenue and profit of each company and look at the data of the third quarter of 2021.
First, Quectel Communications - In the first three quarters of 2021, the cumulative operating income was 7.476 billion yuan, an increase of 77.66% year-on-year; the net profit attributable to the mother was 237 million yuan, an increase of 89.53% year-on-year.
1) Analyze from the growth rate of a single quarter:
In the single quarter of Q3 2021, the revenue was 3.161 billion yuan, +84.73% year-on-year, +28.51% month-on-month, and the net profit attributable to the mother was 103 million yuan, +86.91% year-on-year, and +41.8% quarter-on-quarter.
The growth of Q3 performance is mainly due to the rapid development of the Internet of Things driving the demand for communication modules in smart terminals, as well as the development of new services such as ODM and antennas.
Chart: Quection Communications quarterly revenue, attributable net profit and growth
Chart: Single-quarter revenue (left), Net profit attributable to the parent (right) (unit: 100 million yuan)
2) Looking back at the growth of the previous few quarters, it can be seen:
The lower net profit attributable to the parent in Q3 2019 was mainly due to the increase in R&D investment and licensing fees for 5G applications and the increase in new office expenses, resulting in a significant increase in R&D expenses and management expenses in the current period.
Second, GuangheTong - in the first three quarters of 2021, the cumulative operating income was 2.854 billion yuan, an increase of 45.03% year-on-year; the net profit attributable to the mother was 323 million yuan, an increase of 44.45% year-on-year.
In the single quarter of Q3 2021, the revenue was 1.032 billion yuan, +47.16% year-on-year, +7.3% month-on-month, and the net profit attributable to the mother was 121 million yuan, +39.94% year-on-year, and -1.49% month-on-month.
The growth of Q3 performance is mainly due to the continuous high prosperity of the Internet of Things industry, as well as the richness of the company's product line and the gradual improvement of the marketing layout, and the market expansion effect is obvious;
Q3 Attributable Net Profit decreased slightly sequentially, mainly due to an increase in the provision for asset impairment losses and credit impairment losses in the current period.
Chart: Guanghetong quarterly revenue, attributable net profit and growth
Q4 2020 revenue increased sequentially, while attributable net profit fell sharply sequentially, mainly due to the impact of higher prices of upstream raw materials and declined gross margins.
Third, Youfang Technology - in the first three quarters of 2021, the cumulative operating income was 685 million yuan, an increase of 58.52% year-on-year; the net profit attributable to the mother was -0.1 billion yuan, an increase of 75.07% year-on-year.
In the single quarter of Q3 2021, the revenue was 272 million yuan, +77.92% year-on-year, -3.16% q-o-q; and the net profit attributable to the mother was 0.07 billion yuan, +147.33% year-on-year, +6.9% q-o-q.
The Q3 performance growth was mainly due to the gradual improvement of health events and the continuous recovery of downstream order demand. The sequential decline may have been due to the impact of some chip shortages on the delivery of orders in hand.
Chart: Quarterly revenue, attributable net profit and growth of Youfang Technology
Although the scale of revenue increased significantly in the first three quarters of 2021, the cumulative net profit attributable to the mother was still a loss.
On the one hand, it is because the first quarter is affected by the shortage of chip supply, and the various expenses are relatively rigid; on the other hand, due to the put into use of the R&D headquarters building and the increase in the salary and testing and certification fees of R&D staff, resulting in a large increase in management expenses and R&D expenses, which has depressed profits.
Fourth, Meige Intelligent - in the first three quarters of 2021, the cumulative operating income was 1.321 billion yuan, an increase of 91.69% year-on-year; the net profit attributable to the mother was 0.8 billion yuan, an increase of 545.46% year-on-year.
In the single quarter of Q3 2021, the revenue was 620 million yuan, +143.01% year-on-year, +40.51% month-on-month, and the net profit attributable to the mother was 0.32 billion yuan, +1737.01% year-on-year, and -0.46% quarter-on-quarter. The growth is mainly due to the continuous expansion of smart module shipments and the continuous increase in terminal products such as FWA (fixed wireless access).
Chart: Meg Smart's quarterly revenue, attributable net profit and growth
The net profit attributable to the mother in Q3 of 2020 was negative, mainly due to the increase in R&D investment in 5G smart modules, 5G FWA solutions, vehicle-grade communication modules and other fields, resulting in a significant increase in R&D expenses in the current period.
(Wu)
After comparing the growth, let's look at the changes in profit margins and expense ratios.
First, the cost structure -
Figure: Operating cost composition of wireless communication module
The manufacturing cost of wireless communication modules is mainly composed of direct materials, processing fees and transportation costs.
Taking Quectel Communications and Guanghetong as examples, direct material costs are the majority of operating costs, accounting for more than 90%. In the cost of materials, the baseband chip is the core, generally accounting for about 50% of the cost of materials.
The second is the processing fee, the general module manufacturer is mainly responsible for the design and sales of products, and the production is mainly realized by outsourcing processing (Yuanyuan Communication is a combination of self-production and commissioned processing). However, the proportion of processing fees is relatively low, averaging about 5%.
Second, the gross profit margin -
Chart: Gross margin comparison
Compared with the gross profit margin, Guanghetong > Quection Communications ≈ Meige Intelligent > Youfang Technology. thereinto:
The higher gross profit margin of Guanghetong is mainly due to: 1) the high degree of customization of laptops and vehicle-mounted modules, and the high technical barriers, so the gross profit margin is also higher; 2) the proportion of overseas revenue is high, and the gross profit margin of overseas markets is significantly higher than that of Gao Nei. Since Q4 2020, the gross profit margin has declined, mainly due to the impact of the price increase of upstream electronic raw materials such as chips and passive devices.
The gross profit margin of Youfang Technology in Q4 2020 fell sharply, mainly due to the change in product structure (the proportion of module sales in the low gross profit margin of water, gas and other industries increased) and the fluctuation of the RMB exchange rate (wireless communication terminals were mainly shipped in the second half of the year).
Third, the net interest rate -
Chart: Net Interest Margin Comparison
The trend of net profit margin changes is basically consistent with gross margin.
Fourth, the cost ratio -
There is little overall difference in sales expense rates and management expense rates. Among them, the increase in the sales expense ratio and management expense ratio of Youfang Technology in 2020 is mainly due to the decline in revenue scale due to the impact of health events.
Figure: Sales expense ratio versus management expense ratio
In terms of R&D expense ratio, the R&D expense ratio of Meige Intelligent and Youfang Technology in 2020 is on the rise. Among them, Meige Intelligent is mainly due to the continuous development of wireless modules and related solutions, and constantly increase investment in new product research and development. Youfang Technology is mainly due to the continuous decline in its revenue scale.
The sharp decrease in the financial expense ratio of Quectel in Q4 2020 was mainly due to the decline in the EXCHANGE rate of the US dollar against the Renminbi, resulting in an increase in the exchange income generated by the company's external payments payable in US dollars.
Figure: R&D expense ratio versus financial expense ratio
V. Return on Net Assets ——
Figure: DuPont decomposition (unit: %, times)
Compared with their respective return performances, Guanghe Tong > Quection Communications > Meige Intelligent > Youfang Technology. Taken apart, the higher returns of GuangheTong come more from the net profit margin on sales that is better than that of its peers.
The total asset turnover rate of Youfang Technology in 2020 is low, on the one hand, due to the impact of health events, the scale of revenue in 2020 has declined; on the other hand, it is due to the consolidation of Dongguan Songshan Lake R&D Center, resulting in a significant increase in fixed assets.
(Lu)
Vehicle-to-road collaboration based on V2X technology requires direct communication between on-board units (OBU) and road side units (RSU) with the help of wireless communication modules, so as to realize the sharing and interaction of vehicle-to-road information.
Therefore, for the market size of the vehicle communication module, we can be divided into two parts: the vehicle terminal and the roadside terminal, and the formula can be expressed as:
Market size of automotive wireless communication module = market size of vehicle terminal communication module + market size of roadside terminal communication module;
1. Vehicle-mounted terminal (OBU)
Vehicle-mounted terminals mainly include two categories: telematics BOX (Telematics BOX, telematics processor), V2X terminal, and on-board OBD (On-Board Diagnostics). The formula can be expressed as:
The market size of vehicle terminal communication module = the market size of vehicle front loading + the market size of vehicle aftermarket. thereinto:
Vehicle front-loading market size = new car sales * front-loading equipment penetration rate * communication module average unit price
Vehicle aftermarket size = car ownership * aftermarket penetration rate * average unit price of communication modules.
Then, several core elements, we disassemble one by one:
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