According to the Zheshang Securities research report on the Star Daily, the Huawei Mate 70 series is being produced intensively. Earlier, Huawei revealed at the Huawei Developer Conference in June that Harmony NEXT will be officially released in the fourth quarter along with the launch of the Mate 70 series. In addition, PCs with Harmony desktop OS are coming soon. On September 20th, Yu Chengdong mentioned in a CCTV live broadcast that current Huawei PCs might be the last batch of laptops to run Windows. Currently, the Harmony ecosystem has over 15,000 applications and meta-services, growing over 10 times since April, far exceeding Huawei's initial target of supporting 5,000 applications. WeChat, TikTok, DingTalk, Taobao, RED, Weibo, and WPS have all released Harmony native versions that can be used in Harmony NEXT.

Zheshang Securities' main points of view are as follows:

Mate 70 is expected to drive large-scale installations of Harmony NEXT, and Harmony PCs are about to debut.

Huawei's Executive Director Yu Chengdong stated on Weibo that the historically powerful Mate will debut in November 2024. According to the Star Daily, the Huawei Mate 70 series is being produced intensively. Earlier, Huawei revealed at the Huawei Developer Conference in June that Harmony NEXT will be officially released in the fourth quarter along with the launch of the Mate 70 series. Since October, Harmony NEXT has entered the public testing phase, and users of devices such as Mate 60, Pura 70, Mate X5, and MatePad Pro 13.2 inches can apply to participate. In addition, PCs with Harmony desktop OS are coming soon. On September 20th, Yu Chengdong mentioned in a CCTV live broadcast that current Huawei PCs might be the last batch of laptops to run Windows.

Harmony NEXT: Bottom-level reconstruction, performance upgrade.

Harmony NEXT is the first Harmony system that has removed the Linux kernel and AOSP (Android Open Source Project) code, achieving full-stack self-development from the bottom system kernel, compiler to the upper AI big models. Compared to HarmonyOS 4.0 on the same device, Harmony NEXT performance is improved: equipped with Ark engine, the overall fluency is increased by 30%, battery life is extended by 56 minutes, and the operating memory is increased by 1.5GB; Xiaoyi becomes a system-level intelligent body, the assistant carries large models, making it smarter; equipped with self-developed Xingdun security architecture, prohibiting 9 types of unreasonable permissions, reducing privacy leakage risk from the source; achieving native interconnection through distributed softbus technology, allowing data and applications to switch freely between different types of terminals.

Xiao Yi smart assistant has been upgraded to an intelligent entity, equipped with the Pang Gu large model.

In Hongmeng NEXT, Xiao Yi intelligent entity is equipped with the Pang Gu large model, becoming a system-level permanent intelligent entity. Users can summon Xiao Yi anytime through voice or the navigation bar. After becoming a system-level intelligent entity, Xiao Yi's use will be more intelligent and convenient than regular AI applications: screen dialogue recognition, Xiao Yi can answer user questions based on the understanding of screen content context; drag to Xiao Yi, users can drag items or documents in the application to the navigation bar for Xiao Yi to recognize and analyze images and texts; Xiao Yi help to remember, Xiao Yi can record dates, addresses, events, cards, orders, etc., and later provide reminders for expiration and automatically fill in forms using the memory information.

Native application adaptation exceeds expectations, and the Hongmeng ecosystem is basically taking shape.

On the application side, the top apps have achieved Hongmeng's native integration. The Hongmeng ecosystem already has over 15,000 applications and services, a growth of more than 10 times since April, far exceeding Huawei's initial target of supporting 5,000+ applications. WeChat, Douyin, Dingding, Taobao, Xiaohongshu, Weibo, and WPS have all launched native versions for Hongmeng, available in Hongmeng NEXT. On the user side, Hongmeng has risen to the top two in the Chinese operating system market, with the total user base of the Hongmeng ecosystem surpassing 1 billion, with a future potential for migration to Hongmeng NEXT. On the developer side, the number of HarmonyOS developers has reached 6.75 million. Overall, the Hongmeng ecosystem is basically taking shape, and in the mobile sector, it is poised to compete with iOS and Android. The formation of the Hongmeng ecosystem will signify the success of China's independently developed operating system in the consumer OS market, marking a significant milestone for the tech industry.

In the future, Hongmeng will be self-sufficient, and there are various possibilities during the transitional period.

Due to Hongmeng NEXT eliminating the Linux kernel and AOSP, it is difficult to run Android applications directly. During the transition period, in order to run Android apps and enrich the application ecosystem, there are several possible approaches:

If a virtual machine is introduced, it may be possible to simulate the Android environment in the Hongmeng NEXT system, with the drawback of reduced efficiency. In addition, whether the use of a virtual machine is allowed depends on Huawei's official stance.

Transforming mini programs into Hongmeng applications with a single click, for example, FinClip can integrate WeChat mini programs into Hongmeng APPs, which can be used for tech industry transformation.

Open side loading, allowing users to install applications through unofficial channels, bypassing official app store review and download restrictions, depending on official attitude and laws and regulations (such as Apple being required to allow users to side load applications in the EU). In the medium to long term, due to different underlying technologies such as operating systems, and the concept of Hongmeng's multi-end interconnection, along with the improvement of the Hongmeng developer support system, Hongmeng will become independent, giving rise to more original native applications.

The operating system conference is being held, and the commercial release of the openEuler AI native version is forthcoming.

On November 15-16, 2024, the Operating System Conference themed "Empowering the World with Intelligence" & openEuler Summit 2024 is held in Beijing. OpenEuler has been open source for 5 years. In 2023, the market share of server operating systems in China has reached 36.8%, with a cumulative installation of over 10 million units so far. In this conference, 8 partners will introduce commercial releases based on openEuler 24.03 LTS (the first domestic AI native open source operating system version released in June 2024).

Recommend paying attention to,

Hongmeng related: Softcom Dynamics Co., Ltd. (301236.SZ), Jiangsu Hoperun Software Co., Ltd. (300339.SZ), Shijiazhuang Changshan Beiming Technology Co., Ltd. (000158.SZ), Jiulian Technology Co., Ltd. (688609.SH), Beijing Oriental Jicheng Co., Ltd. (002819.SZ), Talkweb Information System Co., Ltd. (002261.SZ), Shenzhen Farben Information Technology Co., Ltd. (300925.SZ), Chipsea Technologies(Shenzhen)Corp., Ltd. (688595.SH), Zhiwei Zhitong Intelligent Network Co., Ltd. (001339.SZ), Beyondsoft Corporation (002649.SZ).

Oula related: Kirin Information Security Co., Ltd. (688152.SH), Chinasoft International Ltd. (600536.SH), Archermind Technology(Nanjing)Co., Ltd. (300598.SZ), Ningsi Software.

Intelligent assistant related: iFlytek Co., Ltd. (002230.SZ), Edifier Technology Co., Ltd. (002351.SZ), Kunlun Tech Co., Ltd. (300418.SZ), Yuncong Technology Co., Ltd. (688327.SH), Shenzhen Transsion Holdings Co., Ltd. (688036.SH).

Risk warning

Technology risks, application compatibility not as expected, developer ecosystem not as expected, supply chain security risks, competition risks, product release not as expected, security and privacy risks.