Industry cycles, affecting companies.
Some industries are cyclical and weak, and product prices will not fluctuate periodically, such as food and beverage, medicine, and home appliances, so the performance of Kweichow Moutai, Haitian Flavor, Pien Tze Huang, Gree Electric Appliances and other companies is also relatively stable.
The performance and market value of companies in strong cyclical industries will change with cyclical changes, such as PetroChina, Sinopec, China Shipbuilding, LONGi Green Energy, Sungrow, etc.
Similar to oil and photovoltaics, the semiconductor industry also presents a more typical cyclical nature, in which memory chips are basically consistent with the overall trend of the industry, but the volatility is greater, and it is regarded as the "vane of the semiconductor industry".
Memory chips generally have a cycle of 3-4 years, thanks to the active control of output by upstream memory wafer manufacturers such as SK hynix and Samsung, the price of memory chips will begin to reverse in the second half of 2023 and enter the fifth upward cycle.
In the first three months of 2024, driven by the demand for AI computing power, the price and demand for memory chips have both increased, making related concept stocks such as Demingli, Longsys, GigaDevice, BIWIN Storage, Beijing Junzheng, Xiangnong Xinchuang, Montage Technology, Hengshuo Co., Ltd., and Puran Co., Ltd. explode.
At present, the market has attracted more attention to HBM (high-bandwidth memory) applied to AI servers, and there is really no advantage in China in this regard, and most of them are suppliers of materials and equipment.
However, the downstream applications of memory chips are extremely extensive, and in addition to the booming and sustainable AI, there are other application fields worthy of our attention, such as smart cars, which have flourished in recent years.
Automotive intelligence is mainly reflected in three aspects: intelligent cockpit, intelligent driving and intelligent service, and these intelligences are inseparable from memory chips. Take intelligent driving as an example, the car needs to be aware of the surrounding road conditions at all times and make the next response based on the data obtained, and the data generated in this needs to be installed in the memory chip.
Therefore, the market space for on-board memory chips is very large, and there is great growth potential in the next few years.
It is predicted that the global automotive memory chip market will grow from $3.75 billion in 2023 to $6 billion in 2025, with a compound annual growth rate of 26.49%.
Mainland China has a very competitive company in the field of on-board memory chips, the second largest market share in the world, and is the only company in China that surpasses Samsung Electronics, which is Beijing Junzheng.
We know that the majority of memory chips are DRAM and Nand Flash, as well as two niche types of SRAM and Nor Flash, and the same classification is true for in-vehicle storage.
In 2021, Beijing Junzheng will have the second largest market share of automotive DRAM in the world, only lower than the international memory chip giant Micron Technology (45%), higher than Samsung (11%), and SRAM will be the first in the world in terms of market share, and the same will be true in 2022 and 2023.
Next, let's take a closer look at the competitiveness of Beijing Junzheng.
First of all, first-mover advantage and dislocation competition.
The management of Beijing Junzheng are all graduates of famous universities and related majors, with knowledge reserves and foresight, when other companies are competing fiercely in consumer electronics, servers, etc., Beijing Junzheng aims at the automotive storage market with fewer companies participating.
In 2020, Beijing Junzheng entered the automotive memory chip through the acquisition of Beijing Sicheng, and expanded rapidly in 2021, doubling its revenue and net profit by 1165.27%.
With its technology accumulation, Beijing Ingenic has entered the industrial chain of most of the world's well-known automotive first-tier suppliers and most of the terminal brand car factories, including new energy vehicles, fuel vehicles, and new car manufacturers, and has completely established its leading position in the on-board memory chip market.
Although the company's performance has been affected to a certain extent due to the impact of the overall economic downturn since 2022, and both revenue and net profit have declined in the first three quarters of 2023, the decline has gradually narrowed since the third quarter, and a growth inflection point is expected to appear.
Secondly, the product is continuously updated and iterative.
In the current situation of rapid technological level, even if it has accumulated a lot of advantages, Beijing Ingenic is still continuing to upgrade its products.
The automotive DRAM series is upgraded from DDR2 to DDR4, from LPDDR2 to LPDD4, and the memory capacity is also increasing, but the gap is still relatively large compared with Micron Technology, and Micron has developed to DDR5 and LPDDR5, indicating that the company has room for improvement.
(Product R&D progress of the world's top four automotive DRAM companies)
This is why the company continues to increase R&D and build a "new generation of high-speed memory chips for smart cars" R&D project, and R&D expenses have also increased from 62 million yuan in 2019 to 642 million yuan in 2022.
Finally, multi-business collaborative development.
In addition to memory chips, the company also has computing chips and analog and interconnection chip businesses, accounting for 21.29% and 8.47% of revenue, respectively.
Computing chips are mainly used in smart homes, smart wearable devices, face recognition devices and other fields of microprocessor chips and intelligent video chips, analog and interconnection chips include LED driver chips, touch chips and so on.
On the one hand, the technology of part of the in-vehicle storage business can be used for the R&D progress of the other two businesses, and on the other hand, the sales channels and customers of the storage business also assist in the market launch and expansion of the other two businesses, which is conducive to the development of the second and third growth curves of the company.
For example, Beijing Junzheng's on-board storage business has accumulated many customers, and the automotive market is an important application field for analog and interconnection chips, and intelligent video chips can also expand in this aspect.
Because of this, after the acquisition of Beijing Sicheng, Beijing Junzheng's computing chip and analog and interconnection chip businesses have developed significantly, and even if it is greatly affected by weak downstream demand after 2022, it is still on an upward trend overall.
Overall, the smart car and memory chip markets are in an upward cycle, combined with the current market position and competitiveness of Beijing Junzheng, the growth of the storage business is relatively certain, and other businesses are also contributing to the growth of performance in coordinated development.
As of December 31, 2023, the company has 381 institutional positions, including Beijing Yitang Semiconductor, a leading domestic semiconductor equipment company, and Weier Co., Ltd., the first leader in image sensors, are the company's major shareholders.
The above is only for the analysis of listed companies and does not constitute specific investment advice.
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Source: Flying Whale Investment Research