Looking at the segment segment, semiconductor equipment continues to recover in 24H1. The cyclical upward expansion of equipment production and increased demand for localization are the two major driving forces for the recovery of the equipment sector.
The Zhitong Finance App learned that Huafu Securities released a research report saying that with the end of the peak season inventory removal in the second half of the year, the electronics industry is expected to continue to recover. Looking at the segment segment, semiconductor equipment continues to recover in 24H1. The cyclical upward expansion of equipment production and increased demand for localization are the two major driving forces for the recovery of the equipment sector. The test end also benefited from the procyclical trend, and profits grew rapidly year on month. However, digital ICs maintained a strong growth trend in 24Q2 due to an increase in overseas demand such as overseas consumer electronics and low-end penetration of headphone bracelets. As the traditional peak season approaches in the second half of the year, the remaining sectors are also expected to add momentum to recovery as downstream manufacturers' inventories are fully removed.
Semiconductor equipment: Inventories and contract liabilities indicate rapid growth in subsequent performance. In 24Q2, the total revenue of the main semiconductor equipment targets selected by Huafu Securities was 14 billion yuan, up 43% year on year, up 26% month on month, maintaining a good growth rate; the total net profit of the 24Q2 equipment sector to mother was 2.96 billion yuan, up 8% year on year. The year-on-year profit growth rate in the equipment sector was lower than revenue performance. Huafu Securities believes that the influencing factors include an increase in R&D expenses. Inventory and contract liabilities in the 24Q2 equipment sector grew well month-on-month, or reflected an increase in subsequent equipment shipments, which led to the release of performance from the second half of the year to next year.
Closed beta: Q2 results showed a recovery trend. In 24Q2, the revenue of the closed testing sector of Huafu Securities was 20.5 billion yuan, up 26% year on year and 19% month on month; due to the low profit base for the same period last year, the net profit of the 24Q2 sealed sector increased 88% year on year, a significant increase from month to month. Considering that the second half of the year is generally a peak season for electronics demand, it is expected that the operating rate of the sealed testing sector will continue to rise in the second half of the year, thus driving performance to continue to improve month-on-month. On the other hand, the capital expenditure of the 24Q2 testing sector was 4.9 billion yuan, an increase of 15% over the previous year, reversing the negative growth of 23Q4-24Q1.
Digital chip: CPU/GPU: domestic replacement is a top priority, and I am optimistic that 24H2's performance will be further released. Both Haiguang Information and Cambrian have strong asset-side reserves. Haiguang Information's final inventory at 23Q4/24Q1/24Q2 reached 1.07/1.71/2.46 billion yuan respectively, +57%/59%/44% month-on-month. At the end of Cambrian 24Q2, inventory reached 0.235 billion yuan, an increase of 83% month-on-month, and prepayments of 0.55 billion yuan, an increase of 169% month-on-month. Huafu Securities expects the company to have sufficient supply and is expected to release significant results in 24H2. Huafu Securities expects to drive the company's revenue to a new level after the release of new products. SoC: Strong recovery in downstream demand and rapid growth in performance. SoC manufacturer 24q2 achieved total revenue of 5.82 billion, up 36% year on year, up 24% month on month, and achieved total net profit of 0.61 billion yuan to mother, up 149% year on year and 131% month on month. The market continues to improve in this round, and Huafu Securities anticipates that the SoC industry will benefit from: 1) the wearable market sinks further, opening up room for growth; 2) domestic SoC companies further enhance their competitiveness in the overseas market and continue to increase their market share.
Storage: 24Q2 memory chip manufacturers improved their performance, and the profit side improved significantly. 24Q2 revenue was 5.02 billion yuan, 28% YoY, +19% YoY. While the Q1 off-season was not weak, 24Q2 revenue still showed a month-on-month growth trend. Huafu Securities believes that memory chip makers' 24Q2 performance is driven by cyclical recovery, and they are generally optimistic about 24H2. Affected by the slowdown in module price growth, domestic module companies' Q2 profits declined month-on-month. The total net profit of the Q2 sector to mother was 0.49 billion yuan, -190% year-on-year and -34% month-on-month. Looking ahead to 24H2, on the demand side, demand for high-speed, high-capacity storage products in the server sector has increased significantly. In addition to servers, important downstream markets such as mobile phones and PCs were affected in the second half of the year by peak season effects and the increase in stand-alone capacity brought about by the expansion of AI functions in terminal devices, and demand in related fields is still growing.
MCU: The industry's price war is expected to slow down, and companies' gross profit and profit levels will rise at the bottom. After 23 years and 24Q1 inventory elimination, companies benefited from the recovery of the consumer electronics market and improved business conditions. The 24Q2 sector's revenue was 3.19 billion yuan, +25% year-on-month, +20% month-on-month, and net profit to mother was 0.36 billion yuan, 260% year-on-year and 74% month-on-month. Market demand in the 2024H1 global integrated circuit industry has entered a recovery period. Although MCU prices are still showing adjustment pressure, prices are not the only demands of customers. Industrial supply and demand are also gradually being adjusted for the better, and competitive pressure on chip prices is expected to slow down.
Power devices: Inventory in the sector began to decline and gradually bottomed out and improved. The power sector's revenue clearly recovered in Q2, reflecting an improvement in downstream demand. Net profit from the 24Q2 power sector increased 19% year over year and 51% month on month. The gross margin of the 24Q2 power sector was 25.6%, a slight decrease of 0.6 pcts from month to month, and the decline continued to narrow; inventory in the 24Q2 sector began to decline month-on-month, and inventory levels have already begun to be optimized. Furthermore, due to relatively good growth in the revenue cycle, it is expected that the inventory turnover situation in the power sector will improve further. Overall, low-voltage power devices took the lead in recovering, while Huafu Securities believes that high-voltage power devices such as IGBTs are also expected to bottom out and improve in the second half of the year.
Analog chips: Consumer electronics demand has rebounded significantly, and the industry is entering an upward cycle, focusing on changes in H2 demand. The simulation sector business continued to improve month-on-month, and profitability increased significantly. The total revenue of the simulation sector in 24Q2 was 7.67 billion yuan, +26% year over year and +12% month over month. Total net profit to mother was 0.24 billion yuan, +617% year over year and +619% month over month. Huafu Securities believes that the performance of 24H2 simulation manufacturers is expected to continue to improve.
Computing power hardware: AI drives data center upgrades and expansion, and the revenue and profits of enterprises in the computing power hardware sector are growing rapidly. In the first half of 2024, North American cloud service vendors scrambled to release their open source models. Leading cloud service providers raised their annual capital expenses one after another, continuously increased AI-related investment, and promoted cloud infrastructure construction and data center upgrades and expansion. Benefiting from increased demand for cloud infrastructure, the revenue and profits of enterprises in the computing power hardware sector grew rapidly in the first half of the year.
Consumer electronics: 2024, the upward cycle of recovery from the bottom will meet the first year of AI on the upper end. In the first half of 2024, the smart terminal market continued to warm up. In 24Q2, global mobile phone shipments were +6.5% year-on-year, and 24Q2 global PC shipments were +3.2% year-on-year. Consumer electronics companies' Q2 revenue continued to pick up, and the industry's recovery trend is clear. On the profit side, camera module manufacturers have experienced significant improvements in profitability due to increased shipments and high value-added products. At the same time, end-side AI is expected to continue to see product-level implementation in 24 years, becoming a new hot trend in consumer electronics. Listed consumer electronics companies are optimistic that end-side AI will further stimulate market demand.
Procyclical sector: Prosperity continues to pick up, and AI is clearly driving performance. Pro-cyclical sector prosperity continues to pick up, and Huafu Securities is optimistic about the continued driving effect of AI carriers from servers to C-side hardware. The 24H1 off-season in the passive components sector continued to grow, and the revenue/profit of leading domestic passive components increased across the board. PCB prosperity has increased, and the performance growth of Shanghai Electric Co., Ltd. is particularly prominent, benefiting from the obvious wave of AI. Consumer PCBs are expected to benefit from AI in the future. Prices in the panel sector rose moderately, supply+demand picked up in an orderly manner, market price competition eased, and manufacturers generally entered the profit range.
Investment advice: The performance of the electronics sector bottomed out and rebounded, while superimposing terminal AI innovation, and optimistic about the direction of AI terminal innovation, recovery chain, and localization chain. AI terminal innovation direction suggestions include Lixun Precision (002475.SZ), Dongshan Precision (002384.SZ), Lingyi Intelligent Manufacturing (002600.SZ), Lansi Technology (300433.SZ), Pengding Holdings (002938.SZ), Shanghai Electric Power Co., Ltd. (002463.SZ), Shennan Circuit (002916.SZ), Huaqin Technology (603296.SH), Audio Holdings (688036.SH), etc. The recovery chain suggests focusing on consumer IC, storage, and procyclical sectors. The storage target proposals focus on Zhaoyi Innovation (603986.SH), Lanqi Technology (688008.SH), and Pran Co., Ltd. (688766.SH). Recommended consumer IC standards focus on: Hengxuan Technology (688608.SH), Jingchen Co., Ltd. (688099.SH), Shengbang Co., Ltd. (300661.SZ), Lexin Technology (688018.SH), etc. The pro-cyclical sector suggests focusing on: Sanhuan Group (300408.SZ), Shunluo Electronics (002138.SZ), Jiemei Technology (002859.SZ), etc. The localization chain suggests focusing on sectors such as computing power chips and semiconductor equipment. Recommended hashrate chip standards focus on: Cambrian Period (688256.SH), Haiguang Information (688041.SH), Longxin Zhongke (688047.SH), etc. For semiconductor equipment, it is recommended to focus on Beifang Huachuang (002371.SZ), China Micro (688012.SH), Huahai Qingke (688120.SH), Tuojing Technology (688075.SH), Zhongke Flying Test (), Xinyuan Micro (Dubai), Precision Electronics (300567.SZ), and Chipboard Microelectronics (). 688223.SH 688037.SH 688630.SH
Risk warning: Technology development and implementation fall short of expectations; downstream terminal shipments fall short of expectations; downstream demand falls short of expectations; market competition enhances risks; geopolitical risks; electronics industry recovery falls short of expectations.