物联网芯片行业深度报告.pdf

FoundationMMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research.Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of this report.+=Analysts employed by non-U.S.affiliates are not registered with FINRA,may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company,public appearances and trading securities held by a research analyst account.Greater China Technology SemiconductorsIoT Semis Welcome to the Wireless World We believe short-range wireless communication technology is an attractive way to play the IoT uptrend.We expect Bluetooth to dominate on further spec migration,with the market set to double by 2025.We view Bestechnic as the key proxy,but the trend should also benefit Realtek and Mediatek.April 22,2021 09:01 PM GMTFoundationMMorgan Stanley Taiwan Limited+Daniel Yen,CFAEquity Analyst+886 2 2730-2863Daniel.Y Contributors Morgan Stanley Taiwan Limited+Charlie ChanEquity Analyst+886 2 2730-1725Charlie.CMorgan Stanley&Co.LLCCraig HettenbachEquity Analyst+1 212 761-6435Craig.HMorgan Stanley Taiwan Limited+Sharon ShihEquity Analyst+886 2 2730-2865Sharon.SMorgan Stanley Asia Limited+Andy Meng,CFAEquity Analyst+852 2239-7689Andy.MMorgan Stanley Asia Limited+Daisy Dai,CFAEquity Analyst+852 2848-7310Daisy.DMorgan Stanley Taiwan Limited+Ray Wu,CFAEquity Analyst+886 2 2730-2871Ray.WMorgan Stanley Taiwan Limited+Dylan LiuResearch Associate+886 2 2730-1723Dylan.LFoundationMGreater China Technology SemiconductorsIoT Semis Welcome to the Wireless World We believe short-range wireless communication technology is an attractive way to play the IoT uptrend.We expect Bluetooth to dominate on further spec migration,with the market set to double by 2025.We view Bestechnic as the key proxy,but the trend should also benefit Realtek and Mediatek.IoT.not a buzzword anymore:The Internet of Things is playing an increasingly important role in our daily lives.Our consumer team,led by Lillian Lou,expects Chinas smart home appliances market to grow 12%annually,driving penetration from 20%now to 100%by 2030.Our downstream tech analyst,Sharon Shih,expects the industrial IoT to take off in China as the government strives to increase effi-ciency by mapping out a detailed IIoT ecosystem development plan through 2025.Globally,we believe the number of IoT devices will reach 2.1 billion by then,up from 1.2bn now,implying 11%annual growth.Wireless communication is the key enabler of IoT,from longer and short range:What is enabling the IoTs growth is wireless com-munication technology.Cellular networks cover longer-range data communications and are mostly used by smartphones.Wi-Fi tech-nology covers the mid-range and complements 5G networks(see our Wi-Fi 6 report).However,both 5G and Wi-Fi are more complex and consume more power than short-range communication devices.Some applications,therefore,are more suited to short-range com-munications,such as wireless earbuds,location services,smart appli-ances,and wearables.We thus believe there will be increasing demand for short-range communication technology to complement the 5G and Wi-Fi ramp.Bluetooth to dominate short-range wireless communications,with a US$3bn TAM by 2025:Several short-range communication technologies have tried to challenge Bluetooths position,with lim-ited success.The most recent is ultra-wide band(UWB)technology,first adopted in Apples iPhone 11,which uses its own U1 chip to pro-vide location services.However,there has not been much adoption of this technology since then as the ecosystem is not comprehensive and there has been another upgrade to Bluetooth specs.We believe Bluetooth will continue to dominate given features like audio streaming,location services,and simple data transfers,as well as migration to BT5.2).We expect the market for Bluetooth chips to double to US$2.8bn by 2025 from US$1.4bn now.Stock implications:We initiate on Bestechnic at OW with a price target of Rmb344,reiterate our OW ratings on Realtek and Mediatek,and raise our Realtek price target to a Street-high of NT$666.Bestechnic is a design house and the Bluetooth leader in China,with more than 80%revenue exposure to Bluetooth-related products.We believe the Street is too concerned about the slow-down of truly wireless stereo(TWS)Bluetooth earbuds and product concentration risk.We see ample room for the company to grow in both the TWS earbud market and the Bluetooth Low Energy System on Chip(BLE SoC)market,and we estimate the companys earnings will increase by 50%annually through 2023.We believe the stock will trade up to 71x our 2022 EPS from the current 55x,justified by strong earnings growth and a low PEG premium vs.China IC design peers.Separately,we lift our Realtek price target to NT$666 given stronger IoT semiconductor growth and pricing increases from 3Q21.Exhibit 1:Whats changedPrice UpsideNewOldNewOldClose%688608.SSBESO344.0 264.1830%2379.TWRealtekOO666.0 600.00505.0032%TickerCompanyRatingPrice TargetSource:Morgan Stanley Research estimates.Note:Prices in the report are as of the market close on April 20,2021,unless otherwise indicated.Prices above are in local currency.Industry ViewGreater China Technology Semiconductors In-LineFoundationM4 Contents 5The Story in Charts 6Order of Preference 7IoT is triggering growth in wireless technologies;Bestechnic is a pure proxy in Greater China18Debate#1:Could 5G and Wi-Fi 6 replace short-range wireless communication?22Debate#2:Can Bluetooth continue to dominate?27Debate#3:Will Bluetooth SoC be commoditized?33Bestechnic(BES;688608.SS):A good IoT proxy;initiate at OW36Bestechnic Financial Summary37Bestechnic A quality IoT proxy41Investment Positives and Concerns42Bestechnic:Earnings outlook43Bestechnic:Valuation Methodology45Bestechnic:Company Profile48 Realtek Estimate Revisions 49 Realtek Valuation Methodology50 Realtek Financial Summary53MediaTek Financial Summary FoundationMMorgan Stanley Research5Exhibit 2:We expect the number of IoT devices globally to increase over the next five years 05001,0001,5002,0002,500201520162017201820192020e 2021e 2022e 2023e 2024e 2025eIoT devices(mn unit shipment)Source:IDC,Morgan Stanley Research estimates.The Story in Charts Exhibit 3:Market size of Chinas IoT-enabled smart home appliances Source:iResearch,All View Cloud(AVC),Morgan Stanley Research estimates.Exhibit 4:Bluetooth audio and BLE SoC TAM to double1,376 2,804 05001,0001,5002,0002,5003,00020202025eBluetooth audio and BLE SoC TAM(USD mn)Source:Gartner,Morgan Stanley Research estimates.Exhibit 6:We expect Bestechnic to record a 46%revenue CAGR through 2023 05001,0001,5002,0002,5003,0003,500201920202021e2022e2023eBES Rev(Rmb mn)Source:Company data,Morgan Stanley Research estimates.Exhibit 5:Bluetooth will continue to dominate UWB and Zigbee0.01.02.03.04.05.06.07.02018201920202021e2022e2023e2024e2025eDevice shipment(bn unit)BluetoothZigbeeUWBSource:Bluetooth SIG,Zigbee Alliance,UWB Alliance,Morgan Stanley Research estimates.Exhibit 7:IoT revenue contribution in 2020 Bestechnic is the key proxy in Greater China semis 0%10%20%30%40%50%60%70%80%90%BESSilicon LabsSynapticsRealtekMediatekIoT exposureSource:Company data,Morgan Stanley Research estimates.FoundationM6Exhibit 8:Order of preference for Bluetooth-and IoT-related semiconductor companies Source:Morgan Stanley Research estimates.Note:Share prices as at April 21,2021.Order of Preference FoundationMMorgan Stanley Research7Exhibit 9:Market size of Chinas home appliance industrySource:iResearch,All View Cloud(AVC),Morgan Stanley Research estimates.Our views on three key debatesDebate#1:Could 5G and Wi-Fi 6 replace short-range wireless communications?Our view:Not likely.We believe short-range wireless communications technology is as important as cellular networks and Wi-Fi,and will help enable the IoTs future.Debate#2:Will Bluetooth continue to be the dominant technology in short-range wireless communications?Our view:Yes.Bluetooth offers well-balanced features and a comprehensive ecosystem.It also offers audio streaming with ongoing spec upgrades.Bestechnic is a good proxy in Greater China.Debate#3:Will Bluetooth system-on-chip(SoC)be commoditized?Our view:No.There is ongoing market growth(for IoT devices),product segmentation,and further spec migration.We conducted a case study of a pure-play company from Europe,Nordic Semiconductor,which improved its gross margin after increasing exposure to IoT.IoT is triggering growth in wireless technologies;Bestechnic is a pure proxy in Greater ChinaIoT is happening everywhereThe Internet of Things used to be just a buzzword,but we believe the space has become more attractive recently as IoT becomes more enmeshed in our daily lives.Our China consumer team recently took a deep look at consumer demand in the country.With respect to consumer IoT,our team believes Chinese consumers are less concerned about privacy issues than their counterparts in many other countries.As such,they have a higher acceptance of both wearable devices and smart home appli-ances.In addition,younger Chinese consumers have grown up with the internet and like connected devices.We believe there will be higher penetration of smart appliances in China than in many other countries.We forecast 12%annual growth for smart appliances through 2030,based on our forecast that 100%penetration will be achieved by then.This compares with a 2019-30 CAGR of 5%for the overall home appliances segment.In turn,we project the number of IoT appliances per household will rise to 7 units by 2030 from just 1 today.Exhibit 10:Market size of Chinas IoT-enabled smart home appliancesSource:iResearch,All View Cloud(AVC),Morgan Stanley Research estimates.FoundationM8On the industrial side,IoT technology is being integrated with manu-facturing processes across supply chains,products and services.IIoT allows a network to collect significant amounts of data from con-nected manufacturing tools,equipment,and/or various sets of hard-ware devices.We believe China is undertaking five key steps to transition to Industry 4.0.These are:1)automate machines;2)collect data;3)create production profiles;4)provide predictive data analytics;and 5)innovate business models(Exhibit 11).We believe the first two stages of this process are taking place.Further resources and tech-nology improvements will be needed to proceed to the following stages,which we believe will drive and upgrade hardware and soft-ware demand in the industrial space.Given Chinas sizeable number of factories,workers and data in man-ufacturing,we think there is significant potential in developing IIoT Exhibit 11:Industrial IoT Positive data flow for value creationSource:Morgan Stanley Research.technologies.According to Boston Consulting Group data,as of 2015 US manufacturing costs were less than 5%higher than in China.China is therefore facing pressure to upgrade its industries,particularly in view of greater competition from cheaper markets in the rest of Asia.We believe its push to develop an industrial IoT and create its own ecosystem will help it maintain a competitive edge in manufacturing.Given stronger growth from the Greater China IoT space,we think the data era is emerging:In April 2018,our global tech team published a report on the upcoming data era.We highlight that the next computing cycle in 2020-30 will be mainly driven by data with growth from IoT,artificial intelligence,augmented and virtual reality(AR/VR),and automation.This will be powered by substantial improvements in computing power,data transmission speeds,and various application develop-ments.Exhibit 12:China IIoT ecosystem adoption phase and respective beneficiariesSource:Morgan Stanley Research.Note:Refers to Sany Heavy Industries.Exhibit 13:We are entering the next computing cycle,centered on dataSource:Morgan Stanley Research.FoundationMMorgan Stanley Research9Wireless communications are enabling the IoT trend 5G is the key enabler of outdoor/wide-ranging wireless commu-nications technologyWe believe the 5G cycle will be one of the most important themes within the semi space over the next five years.5G offers faster wire-less data transmission,enabling new features like autonomous cars or AR/VR on smartphones.There are multiple ways to play the 5G upgrade cycle,mainly in two categories infrastructure and smart-phones.In infrastructure,Field Programmable Gate Arrays(FPGAs)are the key beneficiary given the increasing number of base stations for 5G infrastructure.This is positive for companies like Xilinx(covered by Joseph Moore).For 5G smartphones,RF and SoC are the key compo-nents that need to be upgraded.This is positive for companies like Mediatek(smartphone SoC).Wi-Fi is the mid-range wireless communication technology we expect the Wi-Fi SoC market to nearly double by 2024We expect the penetration of Wi-Fi 6 in key end devices(smart-phones,notebooks,routers,and smart homes)to increase to more than 80%by 2024.The key component that needs to be upgraded is the Wi-Fi SoC.Wi-Fi 5 SoC pricing is currently close to US$2/unit,and the Wi-Fi 6 SoC ASP is above US$4/unit and even as high as US$8/unit.We expect the Wi-Fi 6 SoC ASP will come down over time but still be more than double Wi-Fi 5 by 2024,thanks to fast adoption within end devices.Exhibit 14:5G smartphone penetration1%20%38%40%0%10%20%30%40%50%60%70%80%90%100%201920202021e2022e4G5GSource:IDC,Morgan Stanley Research estimates.Exhibit 15:We expect Wi-Fi SoC market revenue to increase by 80-90%through 2024-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,0002017201820192020e2021e2022e2023e2024eWifi SoC TAM(USDmn)Source:IDC,Morgan Stanley Research estimates.FoundationM10.but we think the market is missing the significance of short-range wireless communicationsInvestors in general are more familiar with 5G and Wi-Fi than short-range communication technologies.Some investors even think short-range technologies will be replaced by 5G and Wi-Fi.In con-trast,we believe short-range communication technology will com-plement rather than replace 5G and Wi-Fi,for the following reasons:1.Higher data transfer efficiency:Data transfer via 5G or Wi-Fi is less efficient than technologies like Bluetooth given that the data needs to be transferred through an interme-diate device such as base stations for 5G and routers for Wi-Fi.2.Lower power consumption and cost:Short-range commu-nications tend to use less power and thus extend battery life.The cost is also lower as their SoC prices are generally much lower than 5G and Wi-Fi SoC(Exhibit 17).3.More applications,audio and location services:Short-range SoC could offer some different applications.For example,Blue