5G Drives Information Consumption, ushering Electronics into a Golden Growth Era

Last Friday, the Ministry of Industry and Information Technology (MIIT) and the National Development and Reform Commission (NDRC) issued a notice on the 'Three-Year Action Plan for Expanding and Upgrading Information Consumption (2018-2020).' One of the main goals is to significantly promote the growth of consumption scale. By 2020, the scale of information consumption is expected to reach 6 trillion yuan, with an average annual growth rate exceeding 11%.

The role of information technology in driving consumption has been significantly enhanced, stimulating related sectors to achieve an output of 15 trillion yuan. Key focus areas include accelerating 5G infrastructure construction and ensuring its commercial deployment, improving innovation in consumer electronics supply, advancing new display product development, and deepening the development of intelligent connected vehicles — all of which are closely linked to the electronics industry.

Accelerate 5G Construction and Ensure 5G Commercialization:

The notice emphasizes advancing deep coverage of fiber broadband and 4G networks, accelerating 5G standards research and technical trials, promoting large-scale 5G network deployment and application demonstration projects, and ensuring the launch of 5G commercialization. Mobile communication technology undergoes major transformations every decade. China has successively followed 2G, made breakthroughs in 3G, and synchronized development in 4G. The goal for 5G is to achieve global leadership. This action plan clearly demonstrates the country’s firm commitment to investing in 5G, dispelling doubts about the timing of 5G deployment after the ZTE incident. We believe that both base stations and terminals will benefit from the rapid advancement of 5G.

Regarding base stations, 5G will significantly drive demand for high-speed, high-frequency, multi-layer PCBs, and optical modules. We suggest focusing on communication board leaders such as ShenNan Circuit, HuDian Co., and Shengyi Technology, which is involved in 5G high-speed and high-frequency copper-clad laminates. Meanwhile, the increase in 5G frequency bands will create the greatest flexibility in terminal radio frequency components. The usage of components like antennas, filters, and inductors will rise sharply. We continue to recommend chip inductor leader Sunlord Electronics and antenna leader Sunway Communication, while SAW filter breakthroughs have also been achieved.

Enhance Innovation in Consumer Electronics Supply:

On one hand, increase the proportion of mid- to high-end products in mobile phones, computers, color TVs, and audio equipment. On the other hand, leverage IoT, big data, cloud computing, and AI technologies to advance the development of new smart hardware such as wearable devices, VR/AR, consumer drones, health monitoring equipment, and home service robots. Following the previous wave of smart hardware, domestic consumer electronics leaders have rapidly developed and greatly enhanced their competitiveness. Going forward, they will continue to benefit from the increased share of high-end products and the growth of new smart hardware. We continue to recommend consumer electronics leaders Luxshare Precision and those with strong positioning in optical technologies, such as OFILM and Crystal-Optoelectronics.

Accelerate Development of New Display Products:

Support enterprises to increase investment in technological innovation, achieve breakthroughs in mass production technologies for new backplanes, ultra-high-definition, and flexible panels, and expand applications in health care, security monitoring, and smart home sectors. With strong policy support at the national strategic level, panel companies represented by BOE Technology and Tianma Microelectronics have gradually risen, breaking the monopoly once held by South Korea, Japan, and Taiwan. They are expected to further benefit from the development of new display products in the future.