Consumer Electronics Demand Brings Opportunities to the Electronic Components Industry

With the rapid development of the IT industry in recent years, the electronic components industry has also maintained stable growth. The prosperity of consumer electronics products will become an important driving factor in the development of the industry, bringing better cyclical investment opportunities for VC/PE. Although China’s electronic components industry has formed a certain industrial base and scale, its strength in R&D and design is still weak.

ChinaVenture Investment Group's analysis believes that with the intensified competition in the international market, the increase in labor costs, and the rapid appreciation of the renminbi, the survival model that simply wins the market with low cost and low price will be difficult. Therefore, industrial upgrading will be the theme of the future development of electronic components industry. Relevant companies should transfer labor costs through technological innovation and increase the added value of products to enhance their competitiveness in the international market.

Electronic components industry continues to develop VC/PE investment "cooling"

Electronic components are the general term for components and devices. Electronic components refer to finished products that do not change the molecular composition during production and processing in the factory, such as resistors, capacitors, and inductors. Because they do not generate electrons themselves, they have no control and conversion effects on voltage and current, so they are also called passive devices. Electronic devices refer to finished products that change the molecular structure during production and processing in factories, such as transistors, electron tubes, and integrated circuits. They can also be used as active devices because they can generate electrons and have a control over voltage and current.

Electronic components are an important part of the electronic information industry. They are in the upstream of the electronic information industry chain and are the basis for the development of systems and terminal products such as communications, calculators and networks, digital audio and video, and they are crucial to the development of the electronic information industry. The important role. As far as the electronic components industry itself is concerned, the industrial chain mainly consists of research and development, design, production, and sales.

In the past few years, China's electronic components and components industry continued to develop under the backdrop of huge market demand, abundant low-cost labor force, and strong government support for emerging industries. From 2008 to 2009, affected by the international financial crisis, China's electronic components industry has been greatly impacted, and the industry's total output value and profit growth have declined. In 2010, driven by the overall growth of the domestic industry, especially the rapid development of emerging industries, the electronic components industry has recovered to the highest level in history. As of the end of 2010, the total output value of the electronic components industry reached 1.1 trillion yuan, and the industry's profits reached 629 trillion yuan. The total output value of the electronic device industry was 882.6 billion yuan, and the industry profit reached 48 billion yuan.

The electronic components industry has been the focus of VC/PE institutions in recent years. According to ChinaVenture Investment Group's financial data product CVSource statistics, there have been 260 VC/PE financing cases disclosed by China's electronic components industry since 2007. More than 1.8 billion U.S. dollars. However, due to the weak macroeconomic environment this year, VC/PE investment in the electronic component industry has shown a “cooling down” trend, and the number and size of financing companies have both declined.

Continuing development of consumer electronics demand-driven industry growth policies Following the panic recession that experienced the financial crisis, since 2010, the demand for electronic products downstream of the electronic components industry has gradually recovered, especially driven by new technologies, new products, and new applications. Demand for consumer electronics products continues to grow. The consumer electronics products here are in the narrow sense. They mainly refer to PCs represented by netbooks and ultrabooks, mobile terminals represented by smart phones and tablet computers, and LCD TVs and LED TVs.

With Apple's successive launches of iPhones, iPads and other products, there has been an upsurge in the development of smartphones and tablets. In 2011, global smartphone shipments reached 491 million units, a year-on-year increase of 61%. In terms of market share, global smartphone shipments accounted for 30.7% of the total in 2011, more than double the 11.8% in 2008. At the same time, the domestic smart phone market has also developed rapidly. In 2011, China's smart phone shipments reached 72.1 million units, an increase of more than 100% year-on-year. In addition, in 2011, the global shipment of tablet PCs reached 69 million units, of which shipments of domestically-made tablet PCs exceeded 10 million units. With price advantages, domestic shipments of tablet PCs are expected to maintain rapid growth. Breakthrough 40 million units.

China is a populous country with huge market potential. With the continuous decline in prices, mobile terminals represented by smart phones and platform computers will be further popularized. The upgrade and prosperity of downstream consumer electronics products will further increase the demand for electronic components. Therefore, the prosperity of consumer electronics products will become an important driving factor in the development of electronic components industry, and bring better cyclical investment opportunities for the industry.

At the same time, the introduction of a series of favorable policies has also provided strong support for the electronic components industry. In October 2010, the State Council's "Decision on Accelerating the Cultivation and Development of Strategic Emerging Industries" clearly pointed out that the new generation of information technology is one of the seven strategic emerging industries that will be the key development in the future, with particular emphasis on the development of integrated circuits, new displays, etc. Core basic industry. In February 2012, the “Twelfth Five-year Development Plan for Electronic Information Manufacturing Industry” of the Ministry of Industry and Information Technology pointed out: During the 12th five-year period, China’s electronic components industry will grow at an average annual rate of 10%, and its sales revenue will exceed RMB1.8 billion by 2015; the average annual electronic device industry With an increase of 25%, sales revenue will reach 180 billion yuan in 2015. The average annual growth of the flat panel display device industry will exceed 30%, sales revenue will reach 150 billion yuan, and the proportion of the global market will increase from the current 5% to more than 20%.

ChinaVenture Investment Group analysis believes that with the rapid development of the IT industry in recent years, the electronic components industry has also maintained a steady growth; the prosperity of consumer electronics products will become an important driving factor in the development of electronic components industry, bringing VC/PE Good cyclical investment opportunities. Although China's electronic components industry has formed a certain foundation and scale, R&D and design capabilities are still relatively weak, mainly relying on the introduction of external technologies; the overall scale of production processes is large, but the production process is backward and the technology content of products is low, mainly relying on low labor costs. And product prices win market competitive advantage.

With the intensification of competition in the international market, more and more emerging countries and regions will gradually become the main production areas for new electronic components, which poses a threat to China’s status as a “world factory” in the industry. At the same time, with the increase in labor costs and the rapid appreciation of the renminbi, the survival model that simply wins the market with low costs and low prices will be difficult. Therefore, industrial upgrading will be the theme of future industry development. Relevant companies should transfer labor costs through technological innovation, and improve their competitiveness in the international market by increasing product added value.