An article on the ETC chip industry chain

What is ETC?

The ETC (Electronic Toll Collection) non-stop toll collection system is currently the most advanced road and bridge toll collection method in the world. Through the microwave dedicated short-range communication between the on-board electronic tag installed on the vehicle windshield and the microwave antenna on the ETC lane of the toll station, the computer networking technology is used to conduct back-end settlement processing with the bank, so that the vehicle can pay the road and bridge toll without stopping at the road and bridge toll station.

ETC Analysis

ETC equipment is mainly composed of RSU (roadside equipment) and OBU (on-board unit). RSU is usually placed on the ETC lane as a roadside base station. It is a key device for the non-stop toll collection system. It consists of a read-write antenna (RSU antenna) and a radio frequency controller (RSU controller), specifically a 5.8GHz transceiver, RSU antenna control board, microstrip antenna, and RSU controller control board. It can complete the initial transmission, modulation and demodulation, encoding and decoding, encryption and decoding of signals and data. OBU refers to an on-board device installed in the seat of the user's car to record vehicle traffic information, and is used for short-range communication with RSU.

ETC Analysis

ETC chip industry chain analysis shows that the number of users will exceed 180 million by the end of the year. ETC
terminals are accelerating their popularization, and the chip market concentration is high
. Since the national networking of the electronic non-stop toll collection system was realized in September 2015, the number of ETC users and ETC dedicated lanes in China have maintained rapid growth. According to the prospectus citing statistics from the Ministry of Transport, as of the end of February 2017, the number of ETC users nationwide exceeded 47.67 million, an increase of 15.67 million from the 32 million ETC users at the end of March 2016, with a growth rate of 48.97%. Despite such a large number of users, compared with the 200 million vehicles in China, it only accounts for 23.81%, and there is still a lot of room for growth. On June 4, 2019, the official website of the National Development and Reform Commission released the "Implementation Plan for Accelerating the Promotion of Electronic Non-Stop Quick Toll Collection Application Services on Expressways" jointly issued by the NDRC and the Ministry of Transport. The plan proposes that by the end of December 2019, the number of ETC users nationwide will exceed 180 million, achieving full coverage of expressway toll stations, ETC lanes becoming major toll lanes, trucks realizing non-stop toll collection, and the non-stop quick toll collection rate on expressways reaching more than 90%.

The composition of the ETC ecosystem and the key chips required for the ETC terminal
The ETC system is mainly composed of a vehicle automatic identification system, a central management system and other auxiliary facilities. Among them, the vehicle automatic identification system is responsible for collecting and processing information on passing vehicles, the central management system is responsible for identifying vehicle information and connecting with the electronic payment center, and other auxiliary facilities assist the operation of the system, mainly referring to auxiliary equipment such as barrier machines and traffic display screens. In this system, the vehicle automatic identification system responsible for vehicle information collection and processing is the core component, mainly composed of RSU and OBU. RSU is usually placed on the ETC lane as a road test base station. It is a key device for the non-stop toll collection system. It consists of a read-write antenna (RSU antenna) and a radio frequency controller (RSU controller), specifically composed of a 5.8GHz transceiver, an RSU antenna control board, a microstrip antenna, and an RSU microcontroller control board. The OBU stores the vehicle's identification information and is usually installed on the windshield in front of the vehicle for short-range communication with the RSU.

Working principle of ETC equipment OBU and RSU:

Source: Haitong Securities Research Institute, Electronic Engineering Album

In the ETC system, the dedicated short-range communication standard protocol (DSRC) is used for half-duplex communication between OBU and RSU. Since the 900IDHz and 2.45GHz bands are close to the mobile communication bands and have large background noise interference, the international community is tending to use the 5.8GHz system as the standard ETC system. For example, the United States uses 900MHz or 5.8GHz, and Japan and Europe both stipulate that 5.8GHz is the frequency band for ETC. China's ISO/TC204 Technical Committee has proposed to allocate the 5.8GHz frequency band to short-range communications in the ITS field, including the ETC system, and approved the test of the ETC system on the 5.8GHz frequency band with a communication distance of 10m. The use of the 5.8GHz microwave frequency band is consistent with the Chinese ISID industrial frequency band and is not affected by mobile communications. At present, the ETC system frequency bands used in China are mostly 900IDHz and 2.5GHz.

Generally speaking, an OBU product generally uses only four dedicated IC chips (including one card reader chip, one MCU chip, one ESAM chip, and one RF chip, and other general-purpose chips are not included in the statistics). RSU is specifically composed of a 5.8GHz transceiver, an RSU antenna control board, a microstrip antenna, and an RSU microcontroller control board. Some models of a single RSU product use as many as 130 kinds of ICs. Generally speaking, the RF chip has the highest value, followed by the MCU chip, while the card reader chip and ESAM chip have relatively low value.

What are the domestic ETC manufacturers?
OBU: At present, there are about 240 million cars in China, and about 80 million cars are equipped with OBU. The annual sales of new cars are about 28 million. The annual new installation volume is about 15 million, the unit price is about 110 yuan/set, and the current market size is about 1.7 billion yuan. According to the plan of the Ministry of Transport, the number of OBUs installed will reach 180 million by the end of 2019, and the market size in 2019 will suddenly explode 7 times to 11 billion yuan. The main competitors are Jinyi Technology, Juli Technology, Wanji Technology, etc., among which Jinyi Technology has a market share of 35%-40%.

RSU: The unit price is about RMB 35,000 per set, which is similar to the engineering market. It accounts for a relatively small proportion of the ETC market size. Taking Jinyi Technology as an example, it accounts for less than 20%.

According to the 2018 annual reports of Jinyi Technology and Wanji Technology, they sold 5.11 million and 2.92 million OBUs respectively, and Huaming Intelligent announced that Juli Technology sold 5.02 million OBUs in 2018. Jinyi Technology, Juli Technology and Wanji Technology together account for about 85% of the ETC market.

Summary of domestic ETC chip suppliers
The top two domestic ETC chip suppliers are Broadcom Integrated and Skarely. Broadcom Integrated accounts for about 70% of the domestic ETC market and is a key supplier to companies such as Jinyi Technology, Wanji Technology, Chenggu Technology, and Etes. Its competitor Skarely's customers include Juli Technology and Wanji Technology.

Broadcom Integrated
Broadcom Integrated has a large market share in the product segment market. The increase in operating income in 2018 was mainly due to the company's 5.8G products. With the expansion of ETC market share, sales are expected to increase. The BK5823 chip is the first fully integrated chip suitable for China's ETC national standard. At present, Broadcom Integrated has successfully developed four chips for ETC equipment: BK1308, BK5822, BK5823 and BK5121. Among them, the chips used for ETC terminals include integrated RF chips (BK5822, BK5823), contactless card reader chips (BK1308), and security module ESAM chips (BK5121). The integrated RF chip is mainly used for modulation and demodulation of 5.8GHz RF signals between OBU and RSU, the contactless card reader chip is mainly used for reading and writing between OBU and IC cards, and the ESAM chip is used for the built-in security module of OBU.

In the currently popular dual-chip OBU, each device uses one of the three types of chips mentioned above. At the same time, since most of the OBUs promoted this year support Bluetooth functions, the company's Bluetooth data transmission chips also benefit. In the single-chip OBU promoted in the future, the contactless card reader chip will be eliminated, but the chip integration may be improved, integrating RF, MCU, ESAM, Bluetooth and other functions in one chip. In addition, the company's BK5822 chip can be used on the RSU side in addition to the OBU side.

Broadcom Integrated is in a leading position in the domestic ETC chip market and has a significant first-mover advantage in the market. Broadcom Integrated has an absolute dominant position in the ETC chip market. Broadcom believes that as China clearly promotes the ETC5.8G platform, the company, as the first and leading manufacturer of domestic ETC chips, is expected to continue to gain benefits and consolidate its leading position.

Skyreli
(Beijing) Technology Co., Ltd. was established in 2010 and is headquartered in Shangdi Information Industry Base, Beijing, China. The company is committed to the research and development of world-leading RFID radio frequency chips, providing terminal manufacturers with highly integrated, high-performance, low-power radio frequency chips and solutions. Based on the world's leading RF-CMOS transceiver design technology and innovative digital signal processing systems, the company has successfully developed the industry-leading 5.8GHz RF ASK transceiver series chips and contactless reader and writer series chips, which have been adopted by many ETC terminal manufacturers. At present, Skyreli has successfully developed three chips for ETC equipment: ET6601, ET6602 and SKY6605.