Original title China 5G industry chain is expected to stand on the global air

Author Yin Hao

5G is the "fifth generation" mobile communication technology, and vigorously developing 5G is a strategy that the country has continuously promoted in recent years. Entering 2020, 5G construction is accelerating significantly. At the same time, with the strong advancement of "new infrastructure", it will help promote economic construction and play an important role, and 5G network is the core, which is of great significance for China to achieve high-quality economic development. , The investment value is further highlighted. The author believes that with the advantages of domestic scale market, cost advantage and certain technological advantages, companies in China's 5G industry chain are expected to stand on the global 5G outlet. At the same time, in the context of technological competition, the "quality" and "quantity" of the domestic supply chain will usher in a double rise, and the long-term investment value of China's 5G industry chain is optimistic in the future.

"Quality" and "Quantity" both rise, the industry chain has a bright future

Compared with the traditional old infrastructure concept, the new infrastructure is the infrastructure construction focusing on the technology side. The current new infrastructure mainly includes seven major areas: 5G infrastructure, UHV, intercity high-speed railway and intercity rail transit, new energy vehicles Charging pile, big data center, artificial intelligence and industrial Internet. Under the influence of the current epidemic situation, China's economic growth is under certain pressure. A new round of infrastructure construction can not only lay the foundation for economic structural transformation, but also conform to the future direction of economic development, and has broad room for growth.

Concern for "new infrastructure" must have a strong sustainability. First, the endogenous economic growth theory believes that technological progress can promote sustained economic growth, and technological innovation is an important condition for sustained economic growth in China. The basis for improving technological innovation capabilities will be long-term; second, compared with traditional infrastructure, the overall scale of China's "new infrastructure" is still not high, and the future growth space is also broader.

From the ultra-high requirements of the three major application scenarios defined by the International Telecommunication Union for 5G (enhanced mobile broadband, high reliability, low latency, and large-scale machine communications), we can see the epoch-making significance of 5G, and the construction of 5G infrastructure will drive 5G software and hardware. Continuous investment in equipment. 5G will be the virtual highway of the future information economy. Through 5G networks, new applications such as driverless, VR / AR, Internet of Things, and industrial Internet will emerge, which will lead to the formation of new economic models and unlock the potential for economic growth. The 5G upstream, midstream and downstream industry chain will have broad development space.

In the current 5G development process, China is also entering the first batch of commercial camps for the first time and leading the world with a larger construction scale. China ’s industrial chain is on the same starting line with foreign countries for the first time. With domestic market advantage, cost advantage and certain technical advantages, companies in China's 5G industry chain are expected to stand on the global 5G outlet and stand out in the global market. At the same time, under the background of technological competition, the localization process of the 5G industry chain will continue to accelerate, and the "quality" and "quantity" of the domestic supply chain will usher in a double rise. Therefore, the author is optimistic about the development prospects of the 5G industry chain, especially China's 5G industry chain.

Lead the next investment cycle

In the current 5G development process, China entered the first batch of commercial camps for the first time and led the world with the largest construction scale. China ’s industrial chain is on the same starting line with foreign countries for the first time. Therefore, the author believes that the large-scale commercialization of 5G in 2020 will first bring about the construction of 5G infrastructure, and the construction of 5G infrastructure is first of all the construction of large-scale base stations. 5G adopts millimeter wave technology to determine that 5G needs to build a large number of base stations, especially small base stations. China will build 130,000 5G base stations in 2019, and it is expected to build 700,000 new ones by 2020. As of the end of 2019, the number of 4G base stations in China was 5.44 million, and the number of global 4G base stations exceeded 7.5 million. In the future, the number of 5G base stations will be much more than 4G, and it is currently at the beginning of scale construction.

Such a large-scale construction of 5G base stations will lead the upstream hardware equipment providers to develop and produce 5G hardware and software. Secondly, the formation of 5G networks will promote the research and development and production of new terminal equipment, including smart terminals such as mobile phones, drones, testing equipment, and smart homes. The combined development of 5G and the industry will also bring new applications and new business models, which will produce significant economic benefits and opportunities. 5G will use the entire industry chain from upstream equipment, midstream terminals and downstream to lead the next round of investment cycle.

Investment opportunities emerge

"4G changes life, 5G changes society", the investment opportunities brought by 5G run through the entire 5G industry chain. Upstream opportunities are mainly concentrated in the construction of 5G base stations, and major equipment vendors will be the first to benefit. These major equipment vendors can provide base stations, transmission and core network transmission equipment; during the 5G network construction phase, the demand for upstream module and component companies is relatively determined and the performance is more It is flexible and also a subject of concern for investment. The upstream modules and components focus on the growth of demand for filters, PCBs, antennas and optical modules. For midstream terminals, mass production of 5G mobile phones will bring a large number of mobile phone baseband chips, RF front-end chips, and antennas. In terms of downstream applications, the current 5G applications are still in the exploration period, and the upgrade of media entertainment consumption is still a big business opportunity in the 5G era. 5G will enhance the experience through various immersive and interactive new technologies, which will fully release the content consumption potential of online games, augmented reality (AR), virtual reality (VR) and new media markets, and even subvert the traditional media and entertainment industry.

In 2020, A-shares are more likely to be the performance of technology growth stocks and cyclical stocks. From the perspective of the risk-benefit ratio, the current valuation of cyclical stocks represented by infrastructure is low, and the institutional allocation is low. The income is a good target, but it is limited by financing constraints. The traditional infrastructure investment may be lower than expected, and the future space is limited. The author believes that the recent rise in the information technology index is caused by multiple factors. First, the epidemic triggered investors' optimistic expectations for the outbreak of online office, online education and other sectors; followed by a new round of technology cycle led by 5G large-scale commercial It will drive the demand for enterprise informatization, especially cloud computing, data centers, AI and other business needs. Finally, the global currency easing cycle and new refinancing regulations will further raise the valuation level of the information technology sector. Under the new technology cycle led by 5G, technology growth stocks can better reflect the direction of China's future economic transformation, and the prospects are broader, but investors need to identify technology companies that are truly long-term competitive among technology growth stocks.

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