Intelligent Finance News APP learned that China International Capital Corporation (CICC) released a research report stating that from cloud to edge, hardware manufacturers are actively exploring new computing platforms and human-computer interaction methods; capital and fundamentals are at the starting point of a new cycle. AI catalysis may drive the industrial chain to welcome Davis double-hit. In the era of edge AI, the Hong Kong stock mobile phone chain focuses on the acoustic, heat dissipation, optics, appearance parts and terminal brands and other subdivided links. Based on the above, the team is bullish on Apple's entry into the innovation of edge AI, which will drive the resonance of interaction innovation, function upgrade/appearance modification, and closed-source ecology, and Android manufacturers may also join in. From 2H24-2025, the Apple and Android industrial chains may usher in common prosperity, and the Hong Kong stock mobile phone chain is expected to participate deeply in the wave of innovation.

In the era of edge AI, the three elements of interaction innovation, function upgrade/appearance modification, and closed-source ecology complement each other and are expected to promote a new replacement cycle. Looking back at the releases of iPhones from 2007 to 2010, from iPhone 1 to iPhone 4, Apple's innovation in "interaction methods" was one of the main reasons for its large user base. From 2010 to today, Apple has also continuously promoted users to upgrade their phones through its "closed source ecology" and "function upgrade/appearance modification" in innovative and changing years. Looking forward to the era of edge AI, CICC is optimistic about Apple's entry into the innovation of edge AI, which will drive the resonance of interaction innovation, function upgrade/appearance modification, and closed-source ecology, and Android manufacturers may also join in. From 2H24-2025, the Apple and Android industrial chains may usher in common prosperity, and the Hong Kong stock mobile phone chain is expected to participate deeply in the wave of innovation.

Reason

From cloud to edge, hardware manufacturers are actively exploring new computing platforms and human-computer interaction methods. As of 1Q24, the ratio of NVIDIA's quarterly data center revenue to the capital expenditures and operating cash flow of the four major CSP manufacturers (Microsoft, Google, Amazon, Meta) has reached 50.9%/22.8%. CICC is optimistic about AI investments driving the formation of a new computing platform that combines "cloud infrastructure + edge AI". Considering that 54% of the global population (4.3 billion people) owns smartphones, CICC is optimistic about AI phones becoming another important hardware realization interface after AIPC, and new interaction modes may be simultaneously iterated and changed.

Capital and fundamentals are at the starting point of a new cycle, and AI catalysis may drive the industrial chain to welcome Davis double-hit. From the valuation perspective, according to Bloomberg's expectations, Apple's forward one-year PE valuation is slightly higher than the median of the past two years, showing that investors' attention to edge AI has gradually increased after WWDC 24. At the same time, in terms of the Hong Kong stock market, with the emergence of the trend of edge AI, the valuation level of the Hong Kong stock consumer electronics industry chain (forward one-year PE) has been continuously restored to 17x since June, and it is at a new starting point of the cycle. From the perspective of fundamentals, CICC sees that the capacity, inventory, and profitability of the Chinese mainland fruit chain companies are all at a low level since 2020. CICC believes that edge AI is expected to bring a new replacement cycle and recommends that investors wait and see the AI catalysis. The appearance of the terminal pulling point.

In the era of edge AI, the Hong Kong stock mobile phone chain focuses on the subdivided links such as acoustics, heat dissipation, optics, appearance parts, and terminal brands. In "Investment Opportunities in the Fruit Chain in the Apple AI Era", CICC summarized the AI upgrade trend of iPhone components (Figure 10 in this article). Focusing on the Hong Kong stock mobile phone chain, CICC believes that the upgrading of AI functions will drive new hardware parameter changes. The Hong Kong stock mobile phone chain has good competitive advantages and industry positions in some tracks. It is recommended to pay attention to the potential revenue growth and elasticity brought by AI innovation.

Profit forecast and valuation

CICC maintains its profit forecast, rating, and target price for the covered companies unchanged. In the era of edge AI, CICC recommends giving priority to the Apple industrial chain, and Android is expected to follow closely. Regarding the Hong Kong stock fruit chain, CICC recommends paying attention to: Cowell Electronics, Fit Hon Teng, AAC Technologies, Sunny Optical, BYD Electronic, etc.; for A-share fruit chain relevant companies, CICC recommends focusing on: Luxshare Precision, Avary Holding, Lens Technology, Zhejiang Crystal-Optech, Universal Scientific Industrial(Shanghai)Co., Foxconn Industrial Internet, Lingyi Itech, Zhejiang Lante Optics, Suzhou Anjie Technology, Zhuhai Guanyu, Goertek Inc., Shenzhen Desay Battery Technology, Sunwoda Electronic, etc.

Risk

The progress of AI algorithm technology and its application landing is not as expected, resulting in a sluggish demand for asiavet consumer electronics intelligent terminals.