Analysis of the 2022 Automotive Optics Industry Chain Report: Intelligence Brings High Growth Space

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1. China's L2 intelligent driving penetration rate will exceed 20% in 2021

The intelligentization of automobiles is accelerating. According to data from the Ministry of Industry and Information Technology, the penetration rate of domestic L2 intelligent connected passenger cars was 15% in 2020 and 20% in 2021, and the penetration rate of intelligent automobiles is accelerating. Looking ahead, with more players entering the market, the arms race for intelligent automobiles is becoming increasingly fierce. We believe that the penetration rate of intelligent automobiles in the future is expected to closely fit the S curve of smartphone penetration and achieve rapid growth.

ADAS can be divided into six levels from L0 to L5. The current mainstream ADAS level is between L2 and L3. The main functions of L2 include reversing monitoring, panoramic parking assistance, blind spot detection, adaptive cruise control, forward collision warning, intelligent speed control, lane departure warning, pedestrian detection system, traffic signal and sign recognition.

We believe that cameras and lidars have complementary advantages and are both essential sensors for intelligent assisted driving. L2-level intelligent assisted driving is equipped with 5 to 8 cameras, L3-level intelligent assisted driving is equipped with 8 to 16 cameras and 1 to 3 lidars. L4 and L5 autonomous driving ADAS systems are still in the research and development stage and generally require more than 13 cameras and 4 to 6 lidars.

According to TSR, the global shipment of in-vehicle cameras reached 165 million in 2020, with a CAGR of 30% in the past ten years, and the number of cameras installed on a single vehicle reached 2.1. Currently, mainstream smart car models on the market generally have 5 to 8 cameras. It is expected that with the gradual increase in the penetration rate of smart cars, the number of in-vehicle cameras will grow rapidly in the future.

According to different uses, cameras can be divided into imaging cameras and perception cameras (ADAS cameras). Imaging cameras are used for passive safety and store or send the captured images to users. ADAS cameras are used for active safety and need to capture images accurately. In 2020, the number of imaging cameras, imaging + perception cameras, and perception cameras installed on each car in the world was 0.6, 0.2, and 1.3, respectively.

According to different positions, vehicle cameras can be divided into front-view cameras, side-view cameras/surround-view cameras, rear-view cameras and in-cabin cameras. 1) Front-view cameras are used to realize various ADAS functions (anti-collision warning, lane departure warning, etc.), with heavy tasks and the highest specifications. 2) Side-view cameras are used to monitor the scenes in front or behind the side to realize blind spot monitoring. Surround-view cameras use wide-angle lenses. After being installed around the car, they obtain 360° images of the car body and splice them to realize panoramic parking. If algorithms are added, road line perception can be realized. 3) Rear-view cameras use wide-angle lenses for reversing assistance. 4) In-cabin cameras are used to monitor the driver's status and realize fatigue reminder functions.

The rear view has the highest penetration rate, while the front view, surround view, and in-cabin penetration rates are relatively low. 1) In 2020, the global car is equipped with 0.6 front view, 0.6 surround view, 0.85 rear view, and 0.01 in-cabin. 2) Referring to the mainstream models on the market, a general smart car is equipped with 3 front view, 4 surround view, and 1 rear view. The corresponding estimated front view penetration rate is 22%, the surround view penetration rate is 16%, the rear view penetration rate is 85%, and the in-cabin penetration rate is 1.8%.

Looking back at 2021, the global automotive lens industry increased by 20% year-on-year and achieved steady growth. The high growth rate at the beginning and low growth rate were mainly affected by the shortage of automotive chips. Considering that Sunny Optical Technology is the global leader in automotive lenses with a market share of over 30%, we can get a glimpse of the industry growth rate through the growth rate of Sunny Optical Technology's automotive lens shipments. From January to November 2021, Sunny Optical Technology's automotive lens shipments reached 63 million units, a year-on-year increase of 25%. From the perspective of monthly shipment growth, it showed a high-first-low-later situation. The growth rate of automotive lenses has gradually slowed down since June, mainly due to the high base last year and the shortage of chips, which led to poor growth in vehicle shipments and affected the lack of momentum for automotive lenses. From July to October 2021, automotive lens shipments increased by 8%, 1%, -21%, and -23% year-on-year. From January to November 2021, global automobile sales reached 73 million units, a year-on-year increase of 7%. From July to October 2021, global automobile sales decreased by -6%, -11%, -20% and -17% year-on-year.

Looking ahead, thanks to the improvement of chip shortage and accelerated intelligence, the automotive camera market is expected to increase by 44% in 2022, the automotive lens market will reach 26.1 billion yuan in 2025, and the automotive camera market will reach 78.2 billion yuan, with a CAGR of 32% from 2020 to 2025.

Forecast of automatic assisted driving penetration rate: Based on the S-shaped curve of smartphone penetration rate, we assume that the global L2 automatic assisted driving penetration rate will be 28%, 40%, 50% and 60% from 2022 to 2025. Considering that more car companies will be equipped with L3 automatic assisted driving, we assume that the L3 automatic assisted driving penetration rate will be 0.5%, 1.5%, 3% and 5%.

Prediction of cameras installed on a single vehicle: Assuming that in 2020, a single L2 level autonomous assisted driving vehicle will be equipped with 6 cameras, the corresponding L1 and below single vehicles will be equipped with 1.4 cameras, and assuming that a single L3 autonomous assisted driving vehicle will be equipped with 8 cameras. Considering that the number of cameras continues to increase during the iteration of vehicle models by various car manufacturers, it is assumed that the number of cameras installed on a single vehicle will increase by 5% each year in the future.

Lens and camera price forecast: Referring to the 2020 automotive lens price of Sunny Optical Technology (40 yuan) and the automotive camera BOM table, the cost of the lens accounts for about 30%, corresponding to a 2020 automotive camera price of 120 yuan. Considering that most car models in 2020 use 2M cameras, new models such as NIO have begun to gradually be equipped with 8M cameras. With the upgrade of specifications, it is assumed that the price will increase by 5% every year in the future.

The market structure of automotive camera lenses presents a "one super and many strong" situation, and Sunny Optical is the absolute leader.

1) In 2020, Sunny Optical ranked first in terms of shipments, with a market share of over 30%. Japan's Maxell, Nidec Sankyo, Japan's Fujifilm, and South Korea's Sego Optoelectronics ranked second to fifth. Thanks to the country's developed automobile industry and the high proportion of Japanese companies, Japanese companies occupy 5 of the top eight manufacturers.

2) In ADAS lenses with higher specifications and barriers, Sunny Optical is far ahead with a market share of over 50%.

3) Automotive lenses have high technical barriers, and the products usually need to be used in conjunction with sensor chips for parameter adjustment. After a 1-2 year R&D cycle, they are delivered to Tier 1 for assembly, and are required to undergo 1-2 years of on-road verification by the vehicle manufacturer before they can be supplied. The certification cycle is 3-5 years, and customer stickiness is strong. The leading companies have a solid first-mover advantage.

In addition to Sunny Optical Technology, domestic companies such as Lianchuang Electronics, Liding Optoelectronics, and Yutong Optics are all actively deploying in the field of automotive lenses, but their current market share is relatively low. We believe that with the rise of new domestic car-making forces in the future, domestic second-tier companies will have great potential in the field of automotive lenses.

Sunny Optical Technology: The company has entered the automotive lens field since 2004 and mass-produced 8-megapixel automotive lenses in 2018. The company is the absolute leader in automotive lenses, with revenue of 2.4 billion yuan and shipments of 56 million automotive lenses in 2020. From January to November 2021, shipments of automotive lenses were 63KK, a year-on-year increase of 25%.

Lianchuang Electronics: The company has entered the field of automotive lenses since 2015. In 2016, it cooperated with Tesla and became its exclusive supplier of in-cabin lenses. In 2020, it began to cooperate with NIO and won the bid for all 7 8-megapixel ADAS automotive lens modules for ET7. In 2020, the company's automotive lens shipments were 770,000 units and revenue was 24 million yuan. In 2021, the company's top five customers received orders for automotive lenses and modules of 150 million yuan. It is expected that the company's automotive projects will increase rapidly in 2022. The company currently has a molded glass lens production capacity of 2KK/month. In December 2021, Dr. Zeng Jiyongrong (formerly Vice President of Lianchuang Electronics and General Manager of the Optical Business Unit) was promoted to Chairman, and the company will further focus on the optical industry in the future.

Liding Optoelectronics: The company mainly deals in overseas security lenses, with excellent technical capabilities. In 2021, the revenue from vehicle-mounted business accounted for 10%, mainly in the aftermarket. In 2021, the company provided whole-vehicle supporting lens products for domestic new-energy SUV models, including surround-view lenses, blind spot monitoring lenses, ADAS front-view lenses and other products. It is expected that the volume of pre-installed products will increase rapidly in 2022. The company's molded lens production capacity reaches 0.8KK/month.

Yutong Optics: The company is a leader in security lenses and is actively developing automotive lenses. It has already shipped aftermarket products and has a 1KK/month molded glass lens production capacity. In November, the company announced an equity incentive plan, with unlocking conditions of no less than RMB 3 million, RMB 36 million, and RMB 110 million in sales of automotive front-mounted lenses in 2022, 2023, and 2024. The company plans to launch a 360-degree surround view product first, which is relatively easy to develop and produce. The 360-degree product has good versatility, which is conducive to faster customer introduction. Currently, we have contacted more than a dozen potential customers. We expect the company to complete product development in January 2022 and enter the automotive front-mounted mass production stage in the second half of the year.

At present, automotive camera modules are mainly assembled by Tier 1 and Tier 2, and the main companies are Magna of Canada, Panasonic of Japan, Valeo of France, Bosch of Germany, ZF TRW, Continental Lens, etc., and the industry structure is fragmented. We believe that with the rise of new forces in car manufacturing, the relationship between traditional vehicle manufacturers and Tier 1 may gradually blur. At the same time, with the increase in camera pixels, the difficulty of module assembly increases. It is expected that automotive lens manufacturers will be able to obtain part of the module share in the future.

2021 is the first year of LiDAR, with a total of 19 models announced to be equipped with LiDAR, and the industry penetration rate is expected to rise rapidly in 2022. At the Guangzhou Auto Show in November, a number of models equipped with LiDAR were unveiled, among which the Great Wall Mecha Dragon became the world's first model equipped with 4 LiDARs, the Xiaopeng G9 was equipped with dual LiDARs, and the Alpha S Huawei version of the Polar Fox was equipped with 3 LiDARs.

The Zhiji L7 released in December also announced that it will be equipped with LiDAR in the future. According to our statistics, a total of 19 models announced to be equipped with LiDAR in 2021. The current LiDAR models are generally priced above 400,000 yuan, and the price of pre-installed LiDAR in vehicles is generally over 7,000 yuan. Previously, Huawei announced that the cost of LiDAR will drop to the 1,000 yuan level in the future. We believe that with the decline in the price of LiDAR in the future, the industry penetration rate is expected to increase rapidly.

Demand side: Yole estimates that the ADAS LiDAR market will reach $2.3 billion in 2026, with a CAGR of 110% from 2020 to 2026. According to Yole's latest data in September 2021, the global automotive and industrial LiDAR market reached $1.8 billion in 2020, of which ADAS LiDAR accounted for approximately $200 million, accounting for only 2%.

It is estimated that the global automotive and industrial lidar market will reach US$5.7 billion in 2026, with a CAGR of 21%. Among them, the ADAS lidar market will reach US$2.3 billion, with a CAGR of 110%, accounting for 41%. The industry's growth rate is far ahead of human driving, smart infrastructure, logistics, highway monitoring and other fields.

Thanks to the increase in L3 penetration rate, we expect the global automotive lidar market to increase fourfold in 2022 and exceed 30 billion yuan in 2025.

Forecast of automatic assisted driving penetration rate: We have counted that in 2021, a total of 19 models announced to be equipped with lidar. Some models will be mass-produced and delivered at the end of 2021, and some models will be mass-produced and delivered in 2022. We assume that the penetration rate of intelligent assisted driving equipped with L3 or above will be 0.1%, 0.5%, 1.5%, 3% and 5% from 2021 to 2025.

Prediction of the number of LiDARs installed on a single vehicle: Considering that L3-level intelligent assisted driving is generally equipped with 1 to 3 LiDARs, and popular models NIO ET7 and Xpeng P5 are equipped with 1 and 2 LiDARs respectively, it is assumed that the number of LiDARs installed on a single vehicle will be 1.5 in 2021, and it is assumed that the number will increase by 10% every year in the future.

LiDAR price forecast: According to industry chain information, the unit price of LiDAR is estimated to be RMB 7,000 in 2021. With technological progress and economies of scale, the price will drop by 20% year-on-year in the future. It is estimated that the global automotive LiDAR market will reach RMB 4.2 billion in 2022, a four-fold increase. The global LiDAR market will reach RMB 33.7 billion in 2025, with a four-year CAGR of 152%.

Supply side: 1) Global LiDAR players include Valeo, Luminar, Denso, Continental, Innoviz, and domestic companies such as Huawei, DJI, Hesai Technology, RoboSense, and Wanjie Technology. In 2020, Valeo and RoboSense had market shares of 28% and 10%, respectively, leading the industry.

2) From the perspective of technical routes, LiDAR can be divided into mechanical, semi-solid and solid types according to the beam manipulation method. Mechanical LiDAR is currently the most mature and has the highest output, and is mainly used in unmanned driving, but its service life is limited to meet the requirements of automotive regulations; MEMS micro-vibration mirrors, rotating mirrors, prisms and other semi-solid LiDARs have successively passed automotive regulations, and have been mass-produced in small quantities, and may be put into large quantities in recent years; in the long run, FLASH and OPA solid-state solutions may become the dominant route. In 2020, mechanical LiDAR accounted for 66% of the global automotive and industrial LiDAR market, MEMS accounted for 17%, and Flash accounted for 10%.

3) From the perspective of technology, Velodyne and Hesai Technology mainly provide mechanical products, but mechanical products are difficult to enter the original equipment market due to their limited lifespan. Luminar, RoboSense, Innoviz, DJI, Huawei and other companies are actively developing semi-solid/solid-state LiDARs.

The optical system is an important component of LiDAR. Depending on the different scanning types of LiDAR, the requirements for the design of the optical system are also different. Taking MEMS as an example, the main task of the transmitting optical system is to reduce the divergence angle of the transmitting light beam to make it have better beam quality. The main design difficulty is that the mirror area of ​​the MEMS scanning galvanometer is small, which limits the diameter of the light beam and directly affects the divergence angle of the collimated light beam.

The main task of the receiving optical system is to receive the echo beam within a larger field of view while ensuring the aperture. The main design difficulty is the limited area of ​​the photodetector, which will limit the relative aperture and field of view of the receiving optical system. In general, the lidar lens is the most difficult part of the vehicle lens. It needs to have large aperture, high brightness, wide field of view, high contrast, low signal-to-noise ratio, etc. At the same time, it has the characteristics of small size, dustproof, waterproof, and shockproof in terms of mechanics, which puts forward very high requirements for optical design and processing technology.

Domestic LiDAR component suppliers include Sunny Optical, Novel Optics, Juguang Technology, Lantech Optics , and Crystal Optech. 1) Sunny Optical has the ability to manufacture LiDAR optical components and complete machines, including mechanical, rotating mirror, MEMS, FLASH, and OPA solutions. It has cooperated with Magna, Huawei, DJI and other LiDAR solution providers, and it is expected that some projects will enter mass production next year.

2) In 2018, Nova Optics reached an order for 25,000 laser ranging lenses with Quanergy Systems. Currently, it has introduced a number of lidar lens products in cooperation with Hesai and Innovation. They are currently in the verification and introduction stage and have not yet entered mass production.

3) Juguan Technology's lidar transmitting module has signed a RMB 400 million framework agreement with Continental of Germany, and has reached cooperation intentions with a number of well-known lidar companies such as Velodyne and Luminar. In 2020 and the first half of 2021, the company's sales revenue in the intelligent assisted driving industry was RMB 31 million and RMB 21 million respectively.

4) Lantech Optics mainly provides aspherical lenses for LiDAR manufacturers. 5) Crystal Optech mainly provides window glass for LiDAR manufacturers.

Smart cockpit: In 2020, the global automotive smart cockpit market size reached US$37 billion, with an industry penetration rate of 45%. It is expected to reach US$56 billion in 2025, with a CAGR of 8% and an industry penetration rate of 59%. Smart cockpits mainly include central control screens, instrument panels, HUDs and other fields. In 2020, the central control screen accounted for 59% of the Chinese smart cockpit market, the instrument panel accounted for 29%, and the HUD accounted for only 5%. At present, the main players in the smart cockpit industry are traditional tier 1, with overseas companies mainly including Bosch, Continental, etc., and domestic companies mainly including Yanfeng Visteon, Desay SV, etc.

1. In-vehicle display: Large screen + multi-screen drive demand growth, and screen manufacturers are expected to extend to downstream assembly

Demand side: Driven by large-screen and multi-screen, the demand for in-vehicle displays is expected to increase by 14% in 2022, and steady growth is expected in the future. In 2020, global in-vehicle display shipments were 140 million units, with a market size of US$7.2 billion. In the first three quarters of 2021, global in-vehicle display shipments reached 120 million units, a year-on-year increase of 30%. It is expected that global in-vehicle display shipments will reach 180 million units in 2021, a year-on-year increase of 29%.

It is estimated that the shipment volume of in-vehicle display screens will reach 200 million units in 2022, up 11% year-on-year, and the market size of in-vehicle display screens will reach US$10.6 billion, up 14% year-on-year. It mainly benefits from the demand for display screens driven by the intelligentization of automobiles (large screen + multi-screen).

Display module competition landscape: It is expected that the market share of Shenzhen Tianma and BOE will continue to rise in the future. 1) In the first half of 2021, the global automotive display competition landscape is: Shenzhen Tianma (14%), AUO (13%), JDI (12%), BOE (12%), LG (10%), Innolux (8%), and others (31%). In terms of regions, the mainland has a market share of 31%, Taiwan has a market share of 24%, and Japan has a market share of 18%. Among them, the market share of domestic manufacturers Shenzhen Tianma, BOE, and Longteng Optoelectronics continues to rise.

2) Compared with the concentration of tablet computers (CR2 of 61%) and the market share of mainland manufacturers (63%), the current concentration of the automotive field (CR2 of only 26%) and the market share of mainland manufacturers (31%) are relatively low. We believe that in the long run, whether from the perspective of investment willingness in new equipment or service response speed, we believe that the market share of domestic companies is expected to continue to rise. We believe that the market share of Shenzhen Tianma and BOE is expected to rise to 20%~30%.

The display module is the most important component of vehicle-mounted display, accounting for 40% of the cost.

1) In-vehicle displays generally include a central control screen and an LCD instrument. The central control screen is a touch screen and the LCD screen is a display. It is expected that the main growth in the industry in the future will come from touch screens.

2) From the product structure of the touch display screen, it can be divided into an upper touch screen and a lower display screen, which are seamlessly bonded in the middle by transparent optical glue. The upper touch layer includes cover glass and touch sensor. The cover glass is the outermost layer, which plays a role in protecting the touch screen and transparent display; the touch sensor is located in the middle layer, responsible for receiving touch signals, converting them into electrical signals and transmitting them to the control IC for analysis through the flexible circuit board; the lower display layer is mainly composed of glass substrate, TFT substrate, liquid crystal, color filter, polarizing plate, and is responsible for luminous display.

3) From the perspective of the material cost structure of the touch screen, the display module cost accounts for about 35%, the touch module cost accounts for 15%, and the driver chip, PCB, and structural parts cost account for 50%. Among the display module material costs, the panel cost accounts for 20%, and the chip, PCB, and backlight cost account for 10%.

We are optimistic about the extension of screen factories to downstream assembly. 1) The representative enterprises of display modules are Shenzhen Tianma and BOE Varitronix (BOE's in-vehicle display platform, with panels supplied by BOE), the representative enterprises of touch modules are Changxin Technology and Laibao Hi-Tech, and the representative enterprises of cover plates include Lens Technology and Bern Optics. 2) We believe that from the perspective of the display module industry chain, compared with the fields of touch modules, cover plates, PCBs, backlight sources, and downstream assembly, screens have higher technical and financial barriers. In the long run, we believe that screen factories will gradually extend downstream to seize the 100 billion system assembly market.

With the popularization of autonomous driving assistance systems and car networking, the amount of information that needs to be presented on the dashboard and central control has exploded. From the initial speed information and warning lights to navigation, road condition information, communication and entertainment functions, drivers need to frequently lower their heads and lose their field of vision and concentration, leading to safety hazards. HUD (Head-Up Display) came into being, which displays information such as road conditions, navigation, communication, and entertainment functions on the windshield or the glass above the dashboard, allowing the driver to obtain necessary driving information while keeping his eyes forward, greatly improving safety.

HUD has gone through three generations of products. The first generation is C-HUD (Combiner HUD), the second generation is W-HUD (Windshield HUD), and the third generation is AR-HUD (Augmented Reality HUD). Currently, W-HUD is the mainstream in the market, C-HUD is gradually being eliminated, and AR-HUD will be the upgrade trend in the future.

The HUD market is expected to reach RMB 29.2 billion in 2025, with a five-year CAGR of 26%.

HUD penetration rate forecast: In 2020, global HUD shipments will be 6.87 million units, with a penetration rate of 7.5%. China's penetration rate will be 4% in 2020 and 5% in the first half of 2021. According to Zoss Automotive Research, W-HUD solutions accounted for 70%, 80%, and 90% in 2018~2020, with the rest being C-HUD, and AR-HUD penetration is relatively low.

Currently, AR-HUD is used in high-end models with a price of more than 300,000 yuan. In 2020, the proportion of models with a price of more than 300,000 yuan in my country reached 18%. It is expected that with the increasingly fierce arms race among automakers in the future, the penetration rate of W-HUD and AR-HUD will increase rapidly, and C-HUD will exit the market. It is assumed that the penetration rate of W-HUD will be 20% and the penetration rate of AR-HUD will be 2% in 2025.

HUD price forecast: In 2020, the price of W-HUD will be 1,700 yuan, and the price of AR-HUD will be 4,000 yuan. Considering that the automotive supply chain will drop by 5% annually, the price of W-HUD will be 1,300 yuan in 2025, and the price of AR-HUD will be 3,000 yuan.

The HUD industry is dominated by foreign capital, with a high degree of concentration, and domestic manufacturers are emerging. In 2016, the global HUD market was occupied by world-renowned Tier 1 manufacturers such as Seiki, Continental, Denso, Bosch, and Visteon, accounting for 95% of the market share, with a high degree of market concentration.

According to statistics from Gaogong Intelligent Automobile Research Institute, the top five W-HUD suppliers in the Chinese market in the first half of 2021 were Nippon Seiki, Denso, Huayang Group, E-Lead Electronics and Continental AG, with a CR5 of 96.0%. Their market shares were 29.8%, 29.7%, 14.4%, 13.5% and 8.5% respectively. Domestic HUD manufacturers are gradually breaking the monopoly of foreign capital.

Looking ahead to 2022, we are optimistic about the opportunities of in-vehicle cameras, laser radars, displays, and HUDs under the automotive intelligence. Sunny Optical Technology (the leader in in-vehicle lenses, actively deploying in-vehicle modules, laser radars, HUDs, and smart headlight businesses), Yutong Optics (the leader in security lenses, actively deploying in the field of in-vehicle lenses, and it is expected that after-sales products will be mass-produced in 22 years), Lianchuang Electronics (the first-mover advantage of in-vehicle lenses is obvious, and it is the supplier of in-vehicle lenses for Tesla and NIO), Liding Optoelectronics, Yongxin Optics (the core supplier of laser radar lenses and optical components), Juguan Technology, Lantech Optics (the core supplier of aspherical glass lenses for in-vehicle lenses and laser radars), Wanjie Technology (has released a hybrid solid-state 128-line automotive-grade laser radar, and the company's laser radar achieved revenue of more than 100 million yuan in 2020), Crystal Optech (supplier of AR-HUD and laser radar window glass), BOE Varitronix (the leader in large-size in-vehicle displays), Shenzhen Tianma (the global leader in in-vehicle displays), and Changxin Technology.