The Internet of Things is an important direction for future technological development and an important starting point for the development of AI, big data, cloud computing, and blockchain. How to choose a high-quality subdivision track in the Internet of Things track? We believe that the current point in time is at the stage of transition from the initial stage of the Internet of Things to the high-speed growth stage. The core driving force of the development of the industry at this stage is still the rapid volume of the connection layer hardware devices, and the Internet of Things cellular module is used as the Internet of Things connection layer. The important links in the industrial chain have great potential. Analyzing the competitive landscape of cellular modules in the Internet of Things, we find that domestic module manufacturers have the advantages of the right time and place, and they have taken the lead in the competition with overseas module companies that started earlier; at the same time, domestic module companies are also in the process of competing with overseas module companies. After the baptism of the price war, the rapid increase in industry concentration has benefited leading companies for a long time; the competition of upstream chip companies and the emergence of downstream applications have also improved the upstream and downstream bargaining power of the module link. In summary, we believe that the cellular IoT module industry at the current time, as the “water seller” in the era of the Internet of Everything, is a high-quality investment subdivision track.
In the high-quality track, we believe that leading module companies have more advantages in mid- and long-term competition. The main reason is that the leading companies have opened a gap with the latter echelons in terms of technical barriers, product category barriers, and channel barriers. In the short term, the market share of leading companies will increase rapidly to earn profits from hardware scale effects; in the long term, leading companies can reuse massive fragmented customers, create a "module ecology" for long-tail customers, and reshape their business models. Looking into the future, we believe that the cruel price war in the module industry will gradually come to an end, replaced by a relatively stable price system and healthy price competition. In the future, the competitive landscape of the module industry will gradually solidify. Leading companies are not only competing for price, but also for technical service capabilities, channel capabilities, product quality, and the ability to build a "module ecology".
1. The overall trend of the Internet of Things communication module industry: high growth & high certainty, the competitive advantages of domestic module manufacturers are fully demonstrated
1.1. The Internet of Things communication module is the cornerstone of connecting "things" into the network, and is the "water seller" in the era of the Internet of Everything
The communication module is the key link to realize the communication function, and it is expected to be the first to benefit from the development of the Internet of Things. The communication module is a functional module that integrates chips, memory, and power amplifier devices on a circuit board and provides a standard interface. Various types of terminals can realize communication functions with the help of modules. Communication modules include cellular communication modules (2/3/4/5G/NB-loT, etc.) and non-cellular communication modules (WiFi, Bluetooth, LoRa, etc.). IoT terminals need communication modules to realize networking functions, and communication modules are in the upper reaches of the IoT industry chain, and the industry is becoming mature. With the rapid explosion of the number of Internet of Things connections, as a relatively front-end communication module in the network layer, it has become the first link to benefit.
The biggest feature of the Internet of Things industry-downstream application fragmentation is the fundamental reason for the long-term existence of Internet of Things modules. "Fragmentation" is mainly reflected in two aspects: First, the software and hardware requirements of different industries and different companies in the same industry are different, which makes the modules have a certain "customization" attribute; Under the order of tens of millions, this makes chip companies have a high fixed investment in custom chips for the Internet of Things, and the modules have long-term significance.
The communication module is an intermediate link between the "standardized" upstream and the "customized" downstream, which can best meet the fragmentation needs of the Internet of Things. The upstream of the communication module is electronic devices such as baseband chips, radio frequency chips, capacitors, and resistors. The core is standardized baseband chips. The chip accounts for more than 50% of the module material cost. The chip link provides basic communication capabilities; communications; The downstream of the module is the IoT device manufacturer or the IoT system integrator, and the downstream applications are fragmented, and the subdivisions are extremely scattered. The module link plays the role of connecting the previous and the next, inheriting the chip industry upwards and providing more complete radio frequency capabilities; connecting downstream channels and conducting secondary development to meet customers' customized software and hardware requirements, and to develop and maintain downstream application channels.
1.2. 5G brings the animal networking industry into a high-speed growth period, and the market for cellular communication modules is broad
According to the development stage of the cellular Internet of Things, we can roughly divide the development of the Internet of Things industry into three stages. Since the construction of the 2G network in early 2000, it has been the introduction period of the cellular Internet of Things. At this stage, with the development of chip technology and the improvement of base station infrastructure, the cost of connection layer equipment has decreased, and the number of cellular Internet of Things connections has increased. In some large-particle industries Bring economic benefits. 2020-2025 will be the high-speed growth period of the Internet of Things. With the arrival of the first year of 5G in 2020, 5G eMBB (enhanced mobile broadband), URLLC (ultra-high reliability and ultra-low latency communication) and mMTC (massive machine communication) ) It will greatly promote the leap of the Internet of Things technology, break through technical barriers, and bring application scenarios expansion and added value enhancement. After 2025 is the maturity period of the Internet of Things. After the Internet of Things connection reaches a certain level, massive data will be processed through AI, big data, and cloud computing technology, so that the deep value contained in it can be tapped, guiding the improvement of production efficiency and social management efficiency .
The downstream application scenarios of the Internet of Things continue to emerge, and the application fields of communication modules continue to expand. There are many downstream application fields in the communication module industry. The current large-scale fields include wireless payment, in-vehicle transportation, smart energy, smart cities, smart security, wireless gateways, industrial applications, medical health, and agricultural environments. At present, the domestic chip industry is gradually maturing, and various application scenarios are constantly emerging under the encouragement of the Internet of Things policy. The communication module industry is expected to develop continuously and steadily for a long time.
The development of network infrastructure drives the demand for the Internet of Things, and the demand for communication modules is expected to achieve rapid growth. With the gradual improvement of the communication foundation, the trend of interconnection of everything is unstoppable. The IoT market is still growing during the epidemic. According to statistics from IoT analtytics, in 2020, the number of global IoT connections (such as connected cars, smart home devices, and networked industrial equipment) will surpass non-IoT connections (smartphones, laptops, and computers) for the first time. By the end of 2020, of the 21.7 billion actively connected devices worldwide, 11.7 billion (or 54%) will be IoT device connections. By 2025, it is estimated that there will be more than 30 billion IoT connections, with about 4 IoT devices per capita. In terms of cellular Internet of Things (2G-5G), Ericsson predicts that by 2025, the number of global cellular Internet of Things connections will exceed 5 billion, of which nearly half will be 4G/5G high-speed connections. We believe that if the past two decades are the "Internet +" era, and now the "cloud computing + era", then the next ten years must be the "Internet of Things +" era, and the communication module industry is irreplaceable in the Internet of Things industry. The important links in the industrial chain will enjoy development dividends in the rapid growth of the Internet of Things.
1.3. The cellular module industry is "advancing in the east and retreating in the west", the concentration of the domestic module industry has increased, and the bargaining power of the industry chain has increased
Currently, major overseas cellular module suppliers include Sierra Wireless, Telit, Gemalto and U-Blox. Major domestic module suppliers include Quectel, SIMCom, Guanghetong and Youfang Technology. Sierra Wireless (Canada) is the leader and leader in the global wireless communication module business, mainly providing customers with wireless communication products and solutions. Telit (Italy) is a manufacturer of wireless communication modules. The module products cover various stages of wireless communication cellular products, short-range communication module products and positioning module products, including GSM/GPRS modules, CDMA/HSDPA/UMTS modules . Gemalto (Netherlands) was established by the merger of the world's two largest smart card manufacturers, Axalto and Gemplus, and is a global leader in the field of digital security. Committed to providing services to customers in the areas of mobile connectivity, identity and data protection, credit card security, health care and transportation services, e-government and national security, Cinterion, a subsidiary of Germany, is a provider of cellular communication modules and solutions. U-Blox (Switzerland) started by relying on positioning modules and can design and produce GPS chips and modules on its own. It has achieved great success in the European car GPS market. As a member of the European Automotive GPS Navigation Committee and the Galileo Committee, it has participated in the formulation of multiple standards.
1.3.1. Overseas module companies gradually withdraw from the market, and domestic module companies step onto the global stage
The market share of leading overseas companies is rapidly declining, and domestic manufacturers are quickly replacing them. According to statistics from ABI Research, from 2015 to 2018, the market share of leading overseas companies such as Sierra Wireless, Telit, Gemalto, and U-Blox and other cellular module companies dropped significantly from 65% to 31%. In 2019, it rebounded slightly to 38%. During the same period, domestic manufacturers quickly seized the market. Although they entered the market late, their market share increased rapidly, from 25% in 2015 to 54% in 2019. Among them, domestic manufacturers Quectel, Sunsea Intelligent (SIMCom) and Guanghetong gradually occupy a large number of cellular communication module market shares. In 2019, Quectel ranked first in the communication module market share, accounting for 25%, and Sunsea Intelligence ranked second with 17%.
my country's current development of the Internet of Things industry has all-round advantages, and it can be said that the time and place are favorable.
From the demand side, my country has a large population, sufficient government financial funds, and the world’s largest "mid-end manufacturing" base. Therefore, the market prospects of consumer Internet of Things, smart cities or industrial Internet are the world’s broadest. The Internet of Things industry has a huge connection demand, and it is the largest single market for the world’s Internet of Things communication modules;
In terms of basic conditions, my country trains the world’s largest number of engineering students each year and enjoys engineer dividends. At the same time, after more than 10 years of hard work, my country has built the world’s largest information and communication network, regardless of the number of base stations, coverage, or technical level. All are far ahead.
From a policy perspective, my country has given full play to the institutional advantages of socialism with Chinese characteristics. Since the 12th Five-Year Plan, the development of the Internet of Things industry has been officially put on the agenda. This year, the "Notice on Further Promoting the Comprehensive Development of the Mobile Internet of Things" has been issued. Make a reasonable, long-term and comprehensive plan for the industrial ecology of the Internet of Things.
On the demand side, China has the world's largest Internet of Things market and is a global manufacturing production base. The upgrade of industrial intelligent network connection will bring excellent matching opportunities for module manufacturers. With a population of 1.4 billion, China has the largest population in the world, and it contains potentially huge IoT connectivity requirements. As a global manufacturing production base, with the upgrading of intelligent manufacturing, China has the world's largest demand for communication modules. Since 2015, China has replaced North America as the single market with the largest demand. With the migration of "mid-end manufacturing" such as home appliances, automobiles, computers, and new energy equipment to the country, Chinese module manufacturers have ushered in excellent matching opportunities. At the same time, under the promotion of my country's policies, public utilities such as smart water meters, mobile payments and smart security markets are developing very rapidly. At the same time, with the increasing demand for the automotive market and smart medical care, the transportation market is also expected to explode in the next few years.
