On April 15, Huawei released the P70 warm-up video, which once again sparked heated discussions. The P70 will be upgraded to the Pura70, which will be the beginning of Huawei's "Pura" series.
The Pura70 will be equipped with a Kirin 9000S chip, which supports 5G networks, and the storage space of the base version will be doubled compared to the P60, and the price is expected to increase.
The wave of replacement in the previous 4G era has driven the rapid growth of smartphone shipments in mainland China. The Huawei Pura70 series is at a key node in the 5G mobile phone replacement tide, and the sales volume is expected to catch up with last year's Mate60 series, ushering in explosive growth.
The volume and price of 5G smartphones have risen, and companies providing parts such as OFILM, Zhuosheng Micro, Lens Technology, Weir Co., Ltd., Goodix Technology, Crystal Optoelectronics, Luxshare Precision, and Pengding Holdings in Huawei's industrial chain have also continued to enjoy dividends.
Among them, Zhuosheng Micro is the RF front-end chip manufacturer with the largest market share in China, and Huawei, Samsung, Xiaomi, etc. are the company's major customers.
According to the 2023 annual report (updating), Zhuosheng Micro has 1,050 institutional positions. More than 1,000 other institutions hold positions in Kweichow Moutai, Wuliangye, North Huachuang and other giants, which shows that the market has high hopes for Zhuosheng Micro.
So, what is the main RF front-end chip of Zhuosheng Micro?
Whether it is a 5G mobile phone or a 4G mobile phone, it is a terminal device for wireless communication. Wireless communication consists of four parts: baseband processor, transceiver, RF front-end and antenna.
Among them, the RF front-end is the core module of the mobile device to realize the wireless connection of GPS, Bluetooth, Wi-Fi, etc., which determines the communication distance and communication quality of the mobile phone.
Previously, RF front-end technology has been monopolized by foreign Qualcomm and Broadcom, and the two major domestic companies that have emerged in the international market are Zhuosheng Micro and Weijie Chuangxin. Among them, the global market share of Zhuosheng Micro is 5%, slightly higher than that of Weijie Chuangxin.
At present, there are two solutions for the RF front-end: 4G mobile phones are mainly discrete solutions, and 5G mobile phones have greater requirements for the number of frequency bands and use more module solutions.
Zhuosheng Micro has laid out the RF front-end field early, and has fully mastered the discrete solution technology in the 4G era, and RF discrete devices account for more than 60% of the company's total revenue.
With the advent of the 5G era, Zhuosheng Micro continues to increase research and development, and in 2023, RF modules will account for 31.98% of Zhuosheng Micro's revenue, and are gradually replacing RF discrete devices and becoming the main products of the company's RF front-end industry.
So, as a front-end leader in RF, what is the performance of Zhuosheng Micro?
From 2018 to 2021, Zhuosheng Micro's revenue increased from 560 million yuan to 4.634 billion yuan, with a compound annual growth rate of 103.27%, and its net profit increased from 162 million yuan to 2.135 billion yuan, an increase of nearly 20 times in three years.
In 2022, due to the decline in global demand for consumer electronics, the company's revenue and net profit will decline to varying degrees. In 2023, with the recovery of the downstream market, Zhuosheng Micro reversed the downward trend of performance and maintained a good growth rate.
According to the performance forecast, Zhuosheng Micro will achieve revenue of 4.778 billion yuan in 2023, a year-on-year increase of 19.06%, and a net profit of 1.189 billion yuan, a year-on-year increase of 8.48%.
The increasing demand of the downstream market has gradually improved the inventory level of Zhuosheng Micro.
As of the end of the third quarter of 2023, the inventory amount of Zhuosheng Micro was 1.391 billion yuan, a decrease of 23.74% from the same period last year, and the inventory turnover rate is also increasing, reaching 1.03 in the third quarter of 2023.
So, Zhuosheng Micro has a good performance foundation, what is the future development space?
1.5G mobile phones have driven the expansion of the RF front-end market, and the volume and price of the company's products have risen
In 2022, the global smartphone shipment will be about 1.229 billion units, and 5G mobile phones will account for more than 30%. As the wave of replacement continues, it is expected that the penetration rate of 5G mobile phones will increase significantly to 82.06% in 2028.
The increase in sales of 5G mobile phones will drive the market size of RF front-end to continue to grow.
According to the data, the global RF front-end module market will grow to $26.9 billion at a compound growth rate of 5.8% from 2022 to 2028, with great room for market growth.
Recently, with the continuous increase in the price of 5G mobile phones, analog chip giant ADI has also issued a price increase letter. On the one hand, this price increase reflects the confidence in the increase in market demand, and on the other hand, it will also drive the rise in the price of domestic chips.
As a leader in the domestic industry, Zhuosheng Micro has always adhered to self-research and spontaneousness, and is expected to achieve both volume and price rise in the future, forming a good Matthew effect and continuously increasing market influence.
2. Intelligent automobiles, photovoltaics, and AI fields bring a large number of chip demand
With the continuous penetration of automobile electrification and intelligence, three-electric systems, thermal management, and intelligent cockpits have become rapidly growing application fields of analog chips.
According to the data, automotive chips are the second largest application market for analog chips, with a market size of $20.4 billion in 2022, accounting for 24.7% of total analog chips. In the future, the proportion of automotive chips will continue to expand, and it is expected to reach $31 billion in 2026.
In addition, with the continuous advancement of photovoltaic technology, key components such as photovoltaic inverters and energy storage systems require high-performance chips to achieve efficient and stable energy conversion and storage.
With the continuous development of AI technology, the demand for analog chips is also escalating, requiring chips with higher performance, lower power consumption, and smaller size.
The RF front-end is an indispensable part of the analog chip.
Whether it is a discrete device or an RF module, Zhuosheng Micro has advantages, and the deepening of automotive intelligence and the increase in demand for photovoltaic and AI chips are expected to bring new increments to the company.
3. High R&D investment, large domestic substitution space
Over the years, Zhuosheng Micro has maintained high R&D investment to increase the company's core competitiveness.
Judging from the data, Zhuosheng Micro's R&D investment continues to increase, from 70 million yuan in 2018 to 450 million yuan in 2022. In the third quarter of 2023, the company's R&D expense ratio was as high as 13.35%.
Super R&D efforts have enabled Zhuosheng Micro to cover all RF front-end products except PAMiD modules, ranking first in RF front-end product coverage in China.
The PAMiD module is the most technically difficult and least localized module among RF modules.
80% of the PAMiD module share in the market is occupied by foreign manufacturers, and only Weijie Chuangxin, Huizhiwei, National Feixiang and Angrui Micro can achieve a small amount of mass production in China, and there is a lot of room for domestic substitution.
As of the first half of 2023, the company's self-produced filters in PAMiD module products have accumulated more than 160 million.
After the successful research and development, Zhuosheng Micro will become the only company in China with a whole industry chain layout, and continue to enjoy the dividends of the recovery of the downstream market.
summary
In general, as the No. 1 RF front-end chip manufacturer in China, Zhuosheng Micro has strong R&D strength and product advantages. Coupled with the recovery of the mobile phone market, as well as the continuous expansion of new energy vehicles, photovoltaics, and AI, the company is expected to usher in Davis's double click in the future, which is worthy of long-term attention.
The above analysis does not constitute specific investment advice. The stock market is risky, and investors need to be cautious.
Pay attention to Little Elephant and get the most valuable "Growth 20: 20 Companies with the Most Growth Potential in 2024" investment report now!