Demand for automotive radar is strong, and the RF microwave industry is facing a development turning point

Source: CITIC Securities Research

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RF front-end is indispensable in radio equipment, and microwave components are its components

The RF front end changes the frequency of analog signals and is an essential component in radio equipment. Radio equipment uses electromagnetic waves to transmit and receive to achieve communication, detection, confrontation and other functions. The antenna vibrator works most efficiently when its length is 1/4 of the radio wavelength. In order to achieve the miniaturization of the equipment, the radio signal is often of shorter wavelength, that is, higher frequency. However, due to the limitation of the back-end digital signal processor, the original electrical signal frequency is often lower. Therefore, radio equipment needs to change the frequency of analog signals, and the RF front end is the component that performs this change process.

Taking the conversion of digital signals into radio signals as an example, the data processing unit (DSP) classifies, merges, calculates and processes the digital signals. The data conversion module converts the processed digital signals into analog signals. The RF front end performs a series of processes such as modulation and power amplification on the analog signals, and finally converts the analog signals into radio signals through the antenna.

With the popularization of radio equipment, RF front-end has been widely used in various military and civilian fields. Influenced by factors such as the advancement of radio technology and the expansion of human economic activities, radio equipment has gradually become popular in military and civilian fields, driving the continuous increase in the application fields of RF front-end.

In the military field, the RF front-end is mainly used in radars, military communication equipment, military radio reconnaissance and electronic jamming equipment; in the civilian field, the RF front-end is mainly used in mobile communication terminals including base stations, mobile phones and tablets, as well as ADAS (Advanced Driver Assistance System). The application in ADAS is mainly automotive millimeter-wave radar. In the future, in the field of Internet of Things, the RF front-end will also have broad application prospects.

In the era of the Internet of Everything, the civilian value of microwave technology is constantly being explored, and the industry ceiling continues to rise. RF devices are the core of wireless connections and the basic parts for signal transmission and reception. They are widely used in the civilian market. At present, communication is the most important application field of RF in the civilian market. The 5G communication frequency covers the millimeter wave band. The price of microwave components in this band is relatively high. At the same time, 5G base stations use MIMO technology, and the use of microwave components has also increased significantly. The gradual popularization of 5G commercial communications will bring huge demand for microwave circuits.

In addition, the large-scale deployment of 5G base stations will also release the demand for other applications such as the Internet of Things, and related terminals are expected to increase in volume. Satellite navigation is accelerating its integration with new industries such as intelligent driving, and the market application prospects of terminal microwave components such as in-vehicle navigation, portable navigation devices, and intelligent driving recorders are broad.

With the gradual popularization of advanced driver assistance technology, the market demand for automotive radar front and rear installations will also usher in explosive growth. With the increasing application of radio frequency in traditional communications and breakthroughs in emerging markets such as the Internet of Things and smart driving, the market ceiling for civilian microwave components is expected to continue to rise.

The demand for RF power components is strong and is expected to enter a period of rapid development . Among civilian RF components, power devices occupy a large market share. Thanks to the construction of 5G base stations and the addition of small base stations, the RF power device market is expected to emerge from the low tide since 2015 and enter a stage of rapid development.

According to Yole's forecast, the RF power component market is expected to reach US$2.5 billion in 2022, with a CAGR of 9.8% between 2016 and 2022. Among them, base station facilities and wireless backhaul network components account for nearly half, with CAGRs of 12.5% ​​and 5.3% respectively between 2016 and 2022.

According to Yole data, the CAGR of military RF power devices during the same period was 4.3%. Strong demand from the civilian end will continue to drive the development of the RF power component market in the next few years.

The number and value of RF components in 5G base stations have increased. In the 5G era, mainstream base stations will evolve into BBU+AAU forms, using Massive MIMO technology. The 64-channel antenna solution requires 192 filters for a 5G base station, which is much higher than the number of filters in the 8-channel solution in the 4G era.

At the same time, under Massive MIMO technology, RF devices need to be highly integrated with antennas, and the technical threshold and added value of RF devices are greatly improved. In the 3G and 4G stages, RF value only accounted for 4% of the total value of the base station, but in the 5G era, the proportion of RF value is expected to further increase to 8%-10%.

After 5G is commercialized, the value of the RF front-end of terminal equipment will also increase significantly. From the perspective of the value of a single mobile terminal, the value of a single mobile terminal in the 5G era reaches US$25, which is significantly higher than US$8 in the 3G era and US$18 in the 4G era, and an increase of nearly 40% compared with 4G.

From the perspective of the number of RF devices, since 5G needs to support more frequency bands and perform more complex signal processing, the number of RF components such as filters and power amplifiers required will increase significantly. If future 5G mobile phones will need to implement more complex functions, including multiple-input multiple-output (MIMO), smart antenna technology (such as beamforming or diversity), carrier aggregation (CA), etc., the value of the RF front-end will continue to increase.

Beidou's accuracy is on par with GPS, and the civilian market is expected to open up

After the BeiDou-3 system was fully built, the timing and positioning accuracy was greatly improved. my country's BeiDou satellite navigation system was launched in 1994 and has now developed to the third generation. At the end of 2019, all medium earth orbit satellites of BeiDou-3 were launched, marking the completion of the deployment of the core constellation of the BeiDou-3 global system.

Compared with BeiDou-1 and -2, BeiDou-3 has achieved technological breakthroughs in atomic clocks and intersatellite links, making the positioning accuracy of the BeiDou system leap from 10 meters to meters. Its performance has surpassed that of GPS, laying the foundation for the subsequent large-scale commercial application of BeiDou.

China's navigation market is expanding rapidly, and Beidou has great commercial potential. According to the "2020 China Satellite Navigation and Location Services Industry Development White Paper" (China Satellite Navigation and Positioning Association), the total output value of China's satellite navigation and location services industry reached 345 billion yuan in 2019, an increase of 14.4% over 2018.

The core output value of the industry directly related to the research and development and application of satellite navigation technology is 116.6 billion yuan, accounting for 33.8% of the total output value, and Beidou's contribution to the core output value of the industry exceeds 80%. With the in-depth promotion of "Beidou+" industry applications and the gradual expansion of the consumer market, the civilian market has great development potential.

Beidou applications are supported by policies, and the industry application market is growing rapidly in the short term. The industry market refers to the application market for industry users and specific purposes, mainly including two major business categories: terminal product sales and solution services, targeting surveying and mapping, displacement monitoring, agricultural machinery and other fields. According to the Shanghai Industrial Research Institute, the scale of China's industry navigation market will reach 12.077 billion yuan in 2020, a year-on-year increase of 24.97%.

From the perspective of market segments, for example, in the field of intelligent connected vehicles, unmanned electric port tractors (Level 4) based on Beidou, LiDAR, millimeter-wave radar, cameras and other equipment can achieve full-range autonomous driving horizontal transportation. As some industry applications involve sensitive geographic information, in order to ensure national security, the government has introduced policies to guide Beidou to replace GPS. This part of the market is less sensitive to terminal prices, and it is expected that Beidou will maintain rapid growth in the industry application market in the short term.

The prospect of mass application market is broad, and Beidou's share may increase after the terminal price drops. Civilian navigation and location services include terminal markets such as smartphones, wearable devices, tablets, and digital cameras. As of the end of 2019, the sales volume of domestic Beidou-compatible chips and modules has exceeded 100 million pieces, and the total sales volume of domestic satellite navigation and positioning terminal products has exceeded 460 million units, of which the sales volume of smartphones with satellite navigation and positioning functions has reached 372 million units;

In the field of passenger car navigation, as of December 2018, nearly 2 million Beidou/GNSS compatible passenger car front-mounted intelligent vehicle terminals have been promoted, and more than 30 models of more than 10 domestic automobile manufacturers have been mass-applied. Consumers are more sensitive to prices in mass applications. Since the Beidou-3 network has been completed in a short time and the relevant industrial chain is not yet mature, the current terminal product prices are much higher than GPS products, and it is difficult to expand the mass application market. It is expected that with the increase in Beidou applications in the future, the scale effect will be prominent, and the terminal price is expected to drop to the same level as GPS, and Beidou's share in the mass application market may increase.

In the era of intelligent driving, millimeter-wave radar has become a necessity. Millimeter-wave radar is a detection radar that works in the millimeter-wave band (30-300GHz). Compared with centimeter-wave radar, millimeter-wave radar has the characteristics of small size, light weight and high spatial resolution;

Compared with optical radars such as infrared, laser, and television, millimeter-wave radar has a strong ability to penetrate fog, smoke, and dust, and is available all day and all night (except on rainy days). Its importance in vehicles is increasing day by day, and vehicle-mounted millimeter-wave radars are gradually entering the fast lane.

As the penetration rate of ADAS increases, the "1 long + 4 medium and short" 5 millimeter-wave radars have gradually become standard equipment for cars. Currently, many car companies, such as Volkswagen, Mercedes-Benz, Audi, Toyota, etc., have equipped their high-end models with millimeter-wave radars.

Millimeter-wave radar has entered a period of rapid expansion, driving the demand for RF components. With the further development of the driverless industry, the market size of millimeter-wave radar has increased year by year. Data shows that the global millimeter-wave radar market size exceeded US$5 billion in 2020, maintaining a high growth rate of more than 20% for five consecutive years.

The domestic market is growing even faster, maintaining a high growth rate of more than 30% between 2016 and 2020, higher than the global performance. The millimeter-wave radar market may reach 7.21 billion yuan in 2020. With the continuous structural upgrading of domestic automobile consumption and the expansion of the market demand for driverless cars, the high growth of the domestic millimeter-wave radar front-end and rear-end market may continue in the next few years. As the core RF part of millimeter-wave radar, the RF front-end component accounts for about 25% of the cost, and the demand may further expand.

Microwave components are the components of the RF front end, and each has different functions. The RF front end is composed of microwave components, mainly including frequency source, transmitter, receiver and TR components, etc. Different microwave components contain various microwave devices. The frequency source is used to generate a stable high-frequency electrical signal carrier, and the core component is the oscillator; the core components of the transmitter include the modulator, power amplifier (PA) and power supply. The modulator realizes the modulation of the low-frequency signal, and the PA is used to amplify the high-frequency electrical signal;

The core components of the receiver mainly include low-noise amplifiers, filters, and demodulators, which can filter out clutter and demodulate high-frequency electrical signals at the same time. There are two types of receivers: traditional receivers and digital receivers. The former uses circuit demodulation, which is low-cost but time-consuming, while the latter integrates a digital-to-analog conversion module to convert analog signals into digital signals before demodulation, which is time-saving but costly.

TR components are essential microwave components in phased arrays. The main function of traditional passive TR components is to control the transmission and reception of signals. Core components include circulators and phase shifters. New active TR components have integrated some functions such as transmitter power amplification into TR components.

A chip is an application of the integrated circuit method, not a device with a specific function. A chip is a device, component, module or even system in a circuit manufactured using the integrated circuit method for a specific purpose and use. An integrated circuit is a miniaturized way of manufacturing circuits (mainly semiconductor devices, passive components, etc.) on the surface of a semiconductor wafer in electronics.

The chip is designed according to specific requirements during the manufacturing process and is realized through the method of integrated circuits. Devices, components, modules and even systems with different functions can be integrated into the chip through the method of integrated circuits.

Multi-layer RF chips have greatly improved the degree of miniaturization and integration, and their application in radio equipment has gradually expanded. RF chips are integrated chips that integrate devices, components, modules, and even the entire RF front end through integrated circuits.

The RF front end has achieved multi-level chipization. The device level includes power amplifier chips, switch chips (mobile communication conduction switches, WiFi switches, antenna tuning switches), etc.; the component level includes TR chips, etc.; the module level includes digital-to-analog conversion chips, power supply chips, etc.

At the system level, there are RF front-end chips in mobile phones. The application of chip integration technology in the RF front end greatly reduces the size of the device, improves the integration of the module, and provides a technical basis for cost control and performance stacking. The power amplifier chip is an indispensable electronic component in communication base stations and terminals. The TR chip is one of the key electronic components of the entire radar and is widely used in the field of military radar. With the widespread commercial use of 5G technology and the further construction of China Mobile's communication base stations, the application scenarios of RF chips will be further expanded.

Research institutes are the main force in the market, and private enterprises have great performance flexibility

Participants in the RF microwave market mainly include two categories: research institutes within the system and private enterprises outside the system. Among the research institutes, 13th and 55th institutes are the main forces in the RF microwave field, with comprehensive product spectrum covering a wide range of downstream applications, and strong strength in technologies such as compound semiconductor power devices;

The 14th and 29th institutes, which are information-based host institutes, often also produce some microwave components for their own supply. The business scale of private enterprises is smaller than that of the 13th and 55th institutes. Their products are mostly concentrated in specific types of microwave components, and the supporting models are relatively few. However, private enterprises are more flexible in corporate governance. With the accelerated installation of downstream information equipment during the 14th Five-Year Plan period, the performance flexibility of private enterprises may be greater.

my country's microwave technology started late, the gap is large, the industry is immature and the competitiveness is weak

Microwave technology entered the historical stage after World War I and maintained rapid development for nearly a hundred years. Microwave technology was born in the interwar period between World War I and World War II. In 1936, Southworth published a paper announcing the success of the waveguide transmission experiment, officially creating the history of microwave technology. Since then, microwave technology has maintained rapid development for nearly a hundred years. The birth of the first decimeter wave radar in 1939 greatly promoted the implementation and development of microwave technology. With the outbreak of World War II, radar technology quickly matured, anti-radar technology came into being, and the new branch of electronic countermeasures came onto the historical stage;

The rapid development of radio astronomy after the war put forward higher requirements on the performance indicators of microwave technology. The space arms race during the Cold War promoted microwave technology into a period of rapid development. From the 1990s to the present, active phased array radars, communication upgrades, intelligent driving and the Internet of Things have dominated the revolutionary development of microwave technology.

my country's microwave technology started late and developed slowly in the early stage, but has been catching up rapidly in recent years and the gap has gradually narrowed. When microwave technology appeared after World War I, my country was in a state of long-term war and separatism, missing the golden period of microwave technology. It was not until the founding of the People's Republic of China that China's microwave technology began to take off. In the early 1950s, my country developed the first meter-wave air defense radar, which was about 20 years behind the world's advanced technology.

In the early 1960s, the importance of microwave technology was recognized, and a systematic system of related production, research and education began to be established; in the 1980s, with the pace of reform and opening up, my country's microwave industry began to accelerate its catch-up, until recent years when it has achieved world-leading achievements in individual segments, and the overall gap in the industry has gradually narrowed.

At present, there is a big gap in my country's microwave technology in the three fields of high-frequency devices, industrialization and system design. Compared with the world's first-class level, the gap in my country's microwave technology is mainly concentrated in three areas:

1. With the upgrade of military radio equipment and the development of civilian 5G communications and the Internet of Things, the frequency bands that microwave components need to support have increased significantly. In the field of high-frequency microwave components, there is still a gap between my country and Western developed countries;

2. Although my country has made breakthroughs in the research and development of some advanced microwave components, there are still deficiencies in industrialization, resulting in gaps in cost and reliability of domestic microwave components;

3. As electronic products tend to be miniaturized, problems such as power supply and heat dissipation of microwave components have become increasingly prominent, which puts higher requirements on the system design of the RF front-end. In this regard, my country also has a lot of room for improvement.

The gap in microwave technology has led to the weak competitiveness of China's microwave industry . China's microwave technology lags behind the world's advanced level, and there is a gap in the performance of military devices. At the same time, the localization rate of civilian products is low. For example, in the field of anti-interference communications, the US Strategic Defense Initiative (SDI) has achieved a very high equipment communication rate, achieved anti-interference exchange through a large amount of information, and can monitor and transmit without obstacles. Among them, high-altitude surveillance sensors can simultaneously monitor 1,500 missiles launched at the same time; while China still has a big gap in decryption technology, coding error correction technology, etc.

In the field of electronic warfare, the major military powers of the United States and Europe started early and developed rapidly over the past few decades. In 2016, the U.S. military launched the world's first cognitive electronic warfare system (SRx), which provides adaptive and remotely reprogrammable functions, is integrated in a palm-sized module, and can achieve full spectrum coverage.

However, the domestic awareness and attention to the next generation of cognitive electronic warfare is insufficient, and the technology is generally backward. Civilian products are difficult to open up the downstream market due to their late start, small scale, and poor cost control capabilities, and the market share of related domestic components is low.

The widespread use of phased array radars has driven up demand for microwave components. Phased array radars are radar arrays composed of a large number of identical array elements, each of which can control its current phase, and electronic scanning is achieved by controlling the phase difference between array elements. Phased array radars use dense antenna arrays and can perform electronic scanning in different directions at the same time. They have now become the mainstream in the field.

In the fields of detection and electronic countermeasures, microwave components account for more than 60% of the relevant manufacturing costs, and the market space is huge. China has moved from a radar manufacturing power to a radar R&D power. It is currently in the stage of solid-state analog active phased array systems that use a large number of monolithic microwave integrated circuits, and is gradually transitioning to digital array radars. The large number of transmitting units used in phased array radars has further driven the value share of microwave components such as TR components to increase.

Active phased array radar is superior to passive phased array radar and has become the development direction of military phased array. Active phased array radar is a type of phased array radar. Unlike passive phased array radar, which uses phase shifters to change the high-frequency signal generated by the transmitter, each transmit/receive component (TR component) of active phased array radar can generate high-frequency signals by itself.

Active phased array radars outperform passive phased array radars in performance due to their distinctive features such as multi-function, long range, high precision, high flexibility, high reliability and excellent anti-interference ability. Therefore, active phased array radars have become one of the important development directions of current shipborne phased array radars, airborne radars, missile seekers, etc., and have been the focus of development by the world's military powers.

Millimeter wave MIMO technology is widely used in civilian fields such as 5G, which will also boost the demand for microwave components. Millimeter wave refers to electromagnetic waves in the frequency domain of 30 to 300 GHz (wavelength of 1 to 10 mm), which has the characteristics of wide spectrum, good directionality, high reliability and extremely short wavelength. With the rapid development of the Internet of Things and 5G mobile communications, spectrum resources are becoming increasingly scarce, and the development and utilization of millimeter wave spectrum resources has become the focus of the fifth generation of mobile communication technology.

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In order to give full play to the advantages of millimeter waves, 5G base stations widely use multiple-input multiple-output technology (MIMO). This technology refers to the use of multiple transmitting antennas and receiving antennas at the transmitting and receiving ends respectively to improve communication quality. It has a high correlation with phased array technology and will also increase the demand for microwave components.

China's phased array technology is developing rapidly and is expected to achieve breakthroughs in military and civilian applications. Due to historical reasons, China has a large gap with developed countries in Europe and the United States in technologies such as vacuum electron tubes, which has also led to China's radio industry lagging behind for a long time.

In recent years, with the advancement of radio technology and the popularization of active phased arrays, transistors are replacing vacuum tubes in more and more fields. In this transformation, China has seized the historical opportunity and made important breakthroughs in transistor technology, which has also led to the rapid development of military and civilian phased array technology. It is expected that as the application of phased array technology in military and civilian fields gradually expands in the future, China may achieve a curve overtaking in the field of radio frequency.

Active phased arrays are widely used in advanced fighters, and the value of stand-alone microwave components has increased

New models of fighters are being put into service at an accelerated pace, and the application of active phased array radars is increasing. In terms of air force equipment, my country is still equipped with a large number of second-generation fighters, with third-generation fighters, as the main models, accounting for less than half, and the more advanced fourth-generation aircraft accounting for a very low proportion. In contrast, the United States has completely eliminated second-generation aircraft, and fourth-generation aircraft account for as high as 15%; my country also has a large gap with the United States in the structural proportion of multi-purpose medium-sized helicopters, large and medium-sized transport aircraft, and the proportion of trainer aircraft.

As our military accelerates its modernization, old equipment is being replaced and new models of fighter jets are being put into service at an accelerated pace. Active phased array radars are gradually replacing passive phased array radars in new models of fighter jets because of their superior performance, stronger tracking and search capabilities, higher resolution, stronger anti-electronic interference capabilities, and high data communication capabilities.

Airborne radars are upgraded to active phased arrays, and the value of microwave components is increasing. Each transmit/receive component (TR component) of an active phased array radar can generate electromagnetic waves by itself, so the amount of microwave components such as power modules and power amplifiers used in radars is significantly higher than that of traditional radars and passive phased array radars.

With the upgrade of airborne radars to active phased array radars in advanced fighter jets, the value of microwave components in a single aircraft has increased. Coupled with the accelerated deployment of new types of fighter jets, the market for microwave components in the airborne field is expected to enter a period of rapid expansion.

Military broadband frequency bands are relatively high, and the proportion of high-frequency microwave components may increase. As the process of national defense informatization continues to deepen, large-capacity information flows including images, videos, voice, data, etc. have increased, and narrowband digital trunking communication systems that can only support low-speed data services cannot adapt to changes in business needs. The demand for broadband digital trunking communication systems with large bandwidth and high speed is becoming increasingly strong.

Due to the physical properties of electromagnetic waves, large-bandwidth military broadband requires the use of higher frequency bands, and military broadband equipment also requires matching high-frequency microwave components. High-frequency microwave components have high technical content and are difficult to produce, and their price is positively correlated with the frequency band they are adapted to. With the popularization of military broadband, we expect that the proportion of high-frequency microwave components in the military communication field will increase, and drive the increase in the value of microwave components in a single device.

Linear equipment is widely used in electronic countermeasures and other fields, providing new value for microwave components.

The importance of electronic warfare is increasing day by day, and my country is accelerating to catch up with military powers such as the United States and Russia. With the improvement of national defense informatization, the control of information has become the key to victory or defeat in war, and the importance of electronic warfare is increasing day by day.

A new generation of millimeter wave IFF systems has been launched, and is expected to be widely used in the future. IFF is the identification of the enemy and friend attributes and types of targets. Traditional IFF equipment mostly relies on laser technology, while the millimeter wave system stands out due to its strong anti-interference ability and all-weather working characteristics, becoming the mainstream of the IFF system of the armies of various countries.

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