With the frequent breaking news about Huawei, many lithium battery giants are rushing to buy upstream!

If you were to use one word to summarize the hot topic in the industry chain this week, it would be "Huawei".

In the past week, news about Huawei has been coming one after another. When the industry's attention was still focused on Huawei's mass production of OLED driver ICs next year, Huawei returned strongly with the P50 series; in addition to Huawei's self-developed OLED driver ICs that are expected to change the development of the domestic OLED panel industry, the list of suppliers for the P50 series has also been talked about.

In addition, the development of the equally hot new energy vehicle sector has also seen some changes. In addition to chips, the shortage of materials in lithium batteries continues to expand. In response to this situation, many industry giants have begun to purchase goods upstream.

Huawei's OLED driver IC will be mass-produced next year

my country is highly dependent on imports of OLED driver ICs, which has severely restricted the development of China's OLED panel industry. However, this situation is expected to change.

The latest news shows that Huawei HiSilicon's first self-developed OLED driver chip has entered the trial production stage. In this regard, the author confirmed with industry insiders that "Huawei HiSilicon OLED driver IC will be mass-produced in the first half of next year, with a production capacity of about 200,000 to 300,000 pieces per month", which also indirectly confirms the trial production statement.

Recently, according to media reports, Huawei HiSilicon's first self-developed OLED driver chip has completed tape-out in 2021 and has now entered the trial production stage. It will soon be officially delivered to suppliers, and Huawei's own products are also expected to adopt it.

In this regard, the author confirmed with industry insiders that "Huawei HiSilicon OLED driver chips will be put into production at a 40nm production line of a foundry in mainland China, and mass production is expected to start in the first half of next year, with a production capacity of about 200,000 to 300,000 pieces per month." This also indirectly confirms the statement of trial production. As for whether the production of OLED driver ICs will be restricted by the United States, the above-mentioned person said "there are no restrictions at present", and another industry insider also said, "I heard that it has been allowed by the United States."

The person in charge of the wafer foundry also said, "Of course we have cooperation with HiSilicon, but we also follow the compliance path." From their statement, the company has cooperation with HiSilicon, but they did not mention which products they have manufactured for Huawei HiSilicon. "Huawei's production capacity is small, and the main wafer foundry has released too little 40nm production capacity."

The above-mentioned person added that currently only Samsung, TSMC, and UMC are foundry companies, and OLED driver chips mainly use 40nm/28nm processes. In the context of tight wafer production capacity, OLED driver IC production capacity is also limited. "In addition to tight production capacity, the main reason is that Huawei is a customer with too much uncertainty."

Another industry insider said, "Huawei not only faces production capacity issues, but also market competition issues. Even if it can successfully mass-produce, its competitiveness is still relatively weak."

However, it also believes that Huawei's entry into the OLED driver IC field is expected to break the monopoly of international manufacturers, accelerate the localization of driver chips, and help ensure the security of the supply chain. It is worth mentioning that in addition to Huawei, Zhongying Electronics, Chipone and other manufacturers who take the path of self-research, other Chinese companies are also striving to break my country's disadvantages in the OLED driver IC field through acquisitions.

Not only have Huawei's own actions in the industrial chain attracted industry attention, but its supply chain has also attracted much attention.

Inventory of core suppliers of P50 series

Regarding the chip used in the P50, the supply chain has previously reported that it will be divided into two versions, a 5G version and a 4G version. The 5G version will use the Kirin 9000 series, while the 4G version will use the Qualcomm platform's Snapdragon 888 chip. We all know that Qualcomm's Snapdragon 888 is a 5G communication chip. According to industry insiders, "(The United States) wants to make money from Huawei, but is also worried about Huawei's rise, so it simply removes the X65 5G baseband and sells it to Huawei."

In fact, for Huawei's suppliers, the performance has been under severe pressure in the past year or so. According to a supplier in Huawei's ICT field who told the author: "The company's development has been very difficult in the past year. Although we have entered ZTE, ZTE is also subject to overseas supervision and we have had a very difficult time." In the field of consumer electronics such as smartphones, after Huawei's smartphone shipments declined rapidly, related suppliers also quickly switched customers and expanded into new tracks. As far as I know, many companies have achieved good results by adopting these two methods.

Now that the Huawei P50 series has been released, what are the core suppliers in the A-share market? In this regard, the author has compiled a list of Huawei's core suppliers recently.

According to the author's understanding, Huawei's core suppliers include BOE, BYD, Xinwei Communication, Will Semiconductor, Micro-Bionics, Lingyi Intelligent Manufacturing, Lens Technology, Q Technology, Shengbang Electronics, Zhanrui Microelectronics, Dianlian Technology, Magetech Technology, Sunlord Electronics, Microcap Technology, Sanhuan Group, Fenghua High-Tech, Shenzhen South Circuit, Xinsen Technology, Everwin Precision, Crystal Optech, Goodix Technology, Anjie Technology, Lianchuang Electronics, Xinwanda, Desay Battery, and AAC Technologies.

It is understood that BOE, BYD, Lens Technology, Will Semiconductor, Leading Edge Intelligent Manufacturing, Sunway Communications, Microchip, Q Technology, Elec-Tech, Magetech, Crystal Optech, AAC Technologies, Xinwoda, and Desay Battery were previously suppliers of Huawei's P series.

According to an industry insider who revealed to the author: "In fact, starting from Huawei P30, Huawei has adopted a domestic supply chain cultivation plan for high-end series. After being blocked by the United States, Huawei has further accelerated the cultivation of domestic supply chains. In particular, the high-end series is the soul of Huawei mobile phones. At present, Huawei is still blocked by the United States in terms of chips, which will also accelerate Huawei's procurement of domestic suppliers for the flagship phones of the P and Mate series. Although Qualcomm provided the processor chip this time, it does not have a 5G baseband."

According to the author's understanding, benefiting from Huawei's accelerated procurement of domestic suppliers, RF front-end companies such as Zhanrui Micro and Magetech have benefited greatly. Among them, Zhanrui Micro's net profit in the first half of this year has increased significantly. According to industry insiders who revealed to the author, Magetech's filter products this year will show multiple-fold growth, both on the mobile phone side and on the base station side.

In addition, connector-related manufacturers such as Dianlian Technology have also received further support from Huawei. Optics has always been the focus of mobile phones, and manufacturers such as Lianchuang Electronics and Crystal Optech have also benefited from market development.

Also showing a favorable situation is the lithium battery industry, which continues to grow in prosperity thanks to the expansion of the new energy vehicle market.

Lithium battery giants start rushing to stock up

With the surge in sales of new energy vehicles, the price of lithium hexafluorophosphate continues to rise. The high price is closely related to the production schedule of midstream companies.

According to an analysis by Tianjin Jinniu, an electrolyte manufacturer, "lithium hexafluorophosphate accounts for about 40% of the cost of the electrolyte, so its price directly determines the price trend of the electrolyte. The price of lithium hexafluorophosphate rose from less than 70,000 yuan/ton in July last year to over 300,000 yuan/ton in early June 2021, and now the price has reached 400,000 yuan/ton."

Although lithium hexafluorophosphate is not cheap at present, the announcement of the signing of a major contract between Dofluoro and Tianji Shares last weekend shows that BYD is aggressively buying up lithium hexafluorophosphate. In addition to investing in upstream, "grabbing up" is another model that is beneficial to the company's battery production capacity expansion.

A person close to BYD told Jiwei.com that "ensuring stable supply is the core goal for this year and next year. From the manufacturing side, the production of 1GWh of lithium iron phosphate batteries requires about 125 tons of lithium hexafluorophosphate. According to the current battery business plan, BYD's current production capacity is 80GWh, so purchasing 10,000 tons of lithium hexafluorophosphate can ensure the normal supply of the current production capacity by the end of next year; the production capacity under construction and planning is 110GWh, and these capacities are expected to be put into production in 2023, so the supply in 2023 in the long-term cooperation agreement with the material company will only be more."

In fact, in the first half of this year, new energy vehicle sales were booming, and upstream raw material lithium hexafluorophosphate benefited from this. The mainstream judgment of the market is that the tight supply of lithium hexafluorophosphate will continue until the first half of next year, and the price will rise steadily.

A private equity person pointed out to Jiwei.com that "for the development logic of the current power battery industry chain, purely looking at the fundamentals, the performance of upstream material-related companies such as lithium hexafluorophosphate will be strong in the third quarter." The background of his prediction is the current gap in production capacity supply. Taking lithium hexafluorophosphate as an example, the industry predicts that the total demand for lithium hexafluorophosphate in 2021 will be 65,000 tons. Combined with the current market stock production, the gap will be 6,000 tons, the gap will be 17,000 tons in 2022, the gap will be 35,000 tons in 2023, and the gap will exceed 60,000 tons in 2024.