The demand for new Apple phones is high, the Android folding screen continues to iterate, and the current time point valuation is low, so the proposed layout. VR is in the stage of high-certainty volume, and the introduction of new products has boosted the scene, but the price rise and inflation of old products have a certain impact on demand, which is firmly optimistic for a long time; smartwatches are expected to benefit from the continuous improvement of health functions and continue to grow. In the middle and upper reaches of the industrial chain, key companies improved month-on-month in July and August in 2022, and Apple Inc's certainty is stronger than Android.

Smartphone terminal: the demand for new phones on Apple is high, the Android folding screen continues to iterate, and the current time point valuation is low, so the layout is recommended.

On Sept. 8, Apple Inc released the iPhone 14 series, which is divided into four versions of iPhone 14/iPhone 14 Plus/iPhone 14 Pro/iPhone 14 Pro Max. The starting price is 5999Accord 6999Universe 7999Unix 8999. This year, the new product cancels the mini series and adds the Plus model. The starting price of the 14/14Pro/14ProMax is the same as that of last year, which is better than our previous price increase expectations. In terms of functions, the main upgrade points are chips, optics, communications, screens and so on. From the point of view of the reservation: the reservation stage is from September 8 to September 9 before 8: 00 p.m. Before the start of pre-order on September 9, Apple JD.com 's self-operated flagship store showed that the total number of iPhone14 reservations reached 3.609 million, an increase of 7.89% over last year's iPhone 13 series, and maintained growth under the influence of platform diversion and shorter appointment time (from September 15 to 8 pm on September 17 in the same period), indicating that the new machine is booming.

Android launched a number of new models in July and August, with high, medium and low coverage, focusing chip, optics, charging upgrade; multi-brand folding machine ushered in iteration (Samsung released Galaxy Z Flip 4, Galaxy Z Fold 4, the price is 7499 Moto 13,999 yuan; Moto released Razr 2022, the price starts at 5999 yuan; XIAOMI releases MIX Fold 2, the price starts from 8999 yuan), the driver specification is upgraded and the price goes down.

At the valuation level, the average monthly dynamic PE of the Consumer Electronics (CITIC) index from January 2020 to the present is 42x, and the dynamic PE on September 9, 2022 is 28x, which is lower than that of 29x on August 1, 2022, and is still at a historically low level.

AIoT terminal: VR is in a high certainty volume stage, the introduction of new products to boost the bearing, but the price of old products, inflation has a certain impact on demand, long-term firm optimistic; smartwatches are expected to benefit from the continuous improvement of health functions and continue to grow.

In terms of VR, we have tracked the data of the world's major VR application platforms. At the end of August, the number of VR applications launched by Steam was 6915, with a total of 1757 applications compared with + 0.48%, and a total of 3608 applications with a ratio of-0.11% and + 2.73%.

In terms of shipments, according to wellsenn XR,2022Q2, global VR hardware shipments are 2.3 million units (year-on-year + 30.7%), including domestic shipments of 330000 units (year-on-year + 371.4%) and overseas shipments of 1.97 million units (year-on-year + 16.6%). The VR hardware market is still dominated by overseas demand.

In terms of new VR products, Skyworth launched three consumer-grade 6DoF (six degrees of freedom) Pancake (short focus) VR all-in-one PANCAKE 1C/1/1Pro products. In the short term, although the introduction of new products has boosted the scene, the price increase and inflation of old products have a certain impact on demand. We expect VR hardware shipments to reach 14 million units in 2022. In the medium and long term, with multi-brand participation and iterative upgrading of product technology, VR shipments are expected to increase year by year, and we expect global VR shipments to reach 20 million units in 2023.

In terms of smartwatches, 28.34 million smartwatches were shipped worldwide according to Counterpoint,2022Q2, which was + 13% compared with the same period last year and-16% compared with the previous year. Apple Inc has a market share of 29.3%, firmly ranking first, with shipments of + 8% compared with the same period last year. In terms of TWS, according to Canalys data, 2022Q2 shipped 63 million TWS headphones worldwide, + 8% year-on-year and-8% month-on-month. We expect shipments to reach 343 million units in 2022 (+ 17% compared with the same period last year), 394 million units in 2023 and about 16% CAGR in 2 years.

In terms of smart speakers, according to Strategy Analytics data, 2022Q2 shipped 35.3 million smart speakers worldwide,-4.3% compared with the same period last year. We expect shipments to reach 196 million units in 2022 (+ 10% year-on-year). It is suggested that investors should focus on the high-growth VR/AR and smartwatch segments. Among them, VR is in the stage of high certainty, and AR is starting rapidly at the initial stage of development. Smartwatch is expected to benefit from the continuous improvement of health functions and continue to grow.

Middle and upper reaches of the industrial chain: we focus on tracking the monthly shipments and performance data of some companies in the industrial chain. Business improved month-on-month in July and August in 2022, and Apple Inc's certainty is stronger than Android.

In the optical section, Sunny Optical Technology shipped 92.57 million mobile phone lenses (year-on-year-26.2%, month-on-month + 3.9%), mobile phone CCM 38.72 million (year-on-year-30%, month-on-month + 5.2%), car lens 7.04 million (year-on-year + 29.0%, month-on-month + 9.4%). Qiu Ti Technology shipped 37.46 million mobile phone camera modules in July,-3.9% year-on-year and + 26.3%. Daliguang earned NT $3.89 billion in July, + 2.0% year-on-year and + 14.5% month-on-month. Yujingguang achieved operating income of NT $1.946 billion in July, + 18.1% year-on-year and + 68.9% month-on-month. We believe that the Android side is still in the inventory phase, and we still need to observe the changes in downstream demand, but Apple Inc is more certain than Android. In the short term, the upgrade of mobile phone optical specifications is under pressure, but long-term high pixel, periscope, 3D sensing and so on are still expected to gradually infiltrate. We are optimistic about the continuous improvement of the competitiveness of domestic leading manufacturers, but we need to continue to pay attention to the ASP fluctuations that may be brought about by changes in the lens-end pattern.

FPC plate, Pengding Holdings (quote 002938) achieved operating income of 3.515 billion yuan in August, + 11.2% year-on-year, + 27.8% month-on-month. From January to August, the company achieved a total revenue of 20.456 billion yuan, + 16.0% compared with the same period last year. Taiwan stock PCB soft board revenue in July was 5.465 billion New Taiwan dollars (1.232 billion yuan), + 12.2% year-on-year.

OEM plate, Huanxu Electronics (quote 601231) achieved operating income of 7.082 billion yuan in August, + 51.58% year-on-year, + 25.50% month-on-month. The total revenue of the company from January to August was 41.666 billion yuan, which was + 34.37% compared with the same period last year. Medium-and long-term logic, we also recommend that investors pay attention to RF, OEM, display and other plate-related manufacturers.

Risk factors:Repeated epidemic situations at home and abroad; increased turbulence in the international situation; lower-than-expected demand; raw material price fluctuations and supply chain risks; lack of technological innovation risk; exchange rate fluctuations; intensified competition in the industry.