Don't miss it! Hundreds of pages of in-depth information on investment strategies for the electronics industry in 2020

Latest update time：2019-12-30

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Investment Points

With the acceleration of 5G innovation and domestic substitution, the total amount of electronics will turn upward in 2020. In 2019, global semiconductor output value, smartphones, servers, PCBs, etc. all achieved negative growth. In 2020, driven by a new round of innovation trends such as 5G/AI, the total amount of electronics is expected to turn upward: 1) Global semiconductor output value will resume growth, memory prices are expected to bottom out and rebound, and wafer fab capital expenditure will accelerate; 2) Smartphones are growing positively, 5G has ushered in a wave of smartphone replacement, and TWS/Watch/AR/VR and other terminals are flourishing; 3) Cloud computing capital expenditures have rebounded, and servers have returned to growth. In the upward trend of total volume, gross profit expenses are expected to improve simultaneously, and profit elasticity will increase.
Consumer electronics: Huawei/Apple/Samsung lead the 5G replacement trend, terminals are flourishing, and RF/optical/TWS are optimistic. Huawei, Apple, and Samsung are the three major players. 1) Smartphones: A slight negative growth in 2019, and positive growth is expected in 2020. We believe that 5G mobile phone shipments are expected to reach 300 million units in 2020, with Huawei, Apple, and Samsung as the main driving forces. 5G mobile phones bring comprehensive innovations in RF, antennas, heat dissipation, and appearance parts, as well as ASP increases; 2) TWS headphones: Airpods headphones lead the high growth of TWS, and are expected to exceed 90 million units in 2020; non-Apple TWS are accelerating to catch up, with a faster growth rate. 3) AR/VR: It is expected to become the most beneficial direction for 5G terminals, and optical innovation will guide the future direction of consumer electronics.
Semiconductor: The prosperity of the entire industry chain has improved, and the trend of domestic substitution has accelerated. We are optimistic about storage, design, equipment materials, and packaging and testing. In 2020, the global semiconductor output value will resume growth, and the prosperity of the entire industry chain will improve. TSMC's 7nm production capacity is full (5G/AI) upstream, and the 8-inch wafer foundry capacity is in short supply (MEMS/power/drive/fingerprint/CIS, etc.), and the utilization rate of downstream packaging and testing capacity has also increased significantly. TSMC/MTK/Qualcomm/Qorvo/Intel exceeded expectations in Q3, and memory prices are also expected to bottom out and rebound; Huawei has accelerated the localization process of Chinese terminal manufacturers. 1) Storage: Prices are expected to bottom out and rebound; 2) Design: RF, CIS, power and other directions; 3) Equipment materials: TSMC revised up Capex, SMIC and Yangtze Memory expanded production; 4) Packaging and testing: With the dual support of total volume growth and domestic substitution, revenue growth and gross profit expenses are expected to improve simultaneously.
Panel: South Korea's LCD production capacity is accelerating, supply is shrinking, and prices are expected to stabilize and rebound. In 2019, China's 10.5/11 generation line capacity continued to be released, and the capacity utilization rate was the lowest in 6 years. On the supply side, South Korea's 7/8/ generation LCD lines began to close or switch to OLED production, and the progress was accelerated. A capacity gap will begin to appear next year . There will be no new LCD production capacity in China after 2021, and the industry's supply and demand structure will begin to change. The current LCD price is close to or even lower than the cash cost, and the entire industry is in a loss, and it is expected to gradually stabilize and rebound.
Recommended stocks to watch: 1) Consumer electronics: Goertek, Luxshare Precision, Foxconn Industrial Internet, Avionics Holdings, Crystal Optech, Sunway Communications, and Dianlian Technology, etc.; 2) Semiconductors: Maxus Microelectronics, GigaDevice, North Huachuang, AMEC, Changdian Technology, Huatian Technology, Tongfu Microelectronics, Ingenic, Will Semiconductor, and Wingtech Technology, etc.; 3) Panels: BOE A, TCL.
Risk warning : Risk of declining prosperity in the semiconductor industry; risk of uncertain demand for the electronics industry due to Sino-US trade frictions; risk of 5G construction being slower than expected; risk of uncertain pace of LCD panel production capacity reduction.

1. The total volume of the electronics industry will turn upward in 2020, marking the beginning of a new round of technology cycle

2. Consumer electronics: The 5G replacement wave has begun, and terminals are flourishing

3. Semiconductors: The prosperity of the entire industry chain has improved, and domestic substitution has accelerated

4. Panel: LCD panel production capacity is accelerating and clearing out, ushering in a long-term turning point

5. Science and Technology Innovation Board: Pay attention to investment opportunities in the Science and Technology Innovation Board during adjustments

Investment advice and risk warning

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