Huawei, big spending.
Every year, Huawei devotes 6 billion yuan to incentivize HarmonyOS system development and innovation, attracting more ecosystem partners to join.
Software development companies such as Changshan Beiming, Runhe Software, iSoftStone, and Zhiwei are among them.
Because of this, the domestic market share of the HarmonyOS system will rise to 17% in the first quarter of 2024, surpassing Apple's iOS for the first time. And as of the end of June, the number of HarmonyOS ecological devices exceeded 900 million, with 2.54 million developers.
It can be seen that the Hongmeng ecosystem can grow up so quickly, and open source has contributed a lot. Later, Huawei proposed open source Euler and open source Gauss.
So, what exactly is open source? It's really about letting go of the original code and allowing anyone to view and modify it. On the other hand, closed source, e.g. Windows, Android.
Therefore, the role of open source is to enable software developers to become the creators of the language, so as to achieve the effect of everyone collecting firewood.
At this point, we can't help but think that if chips can also be open source, then it will be much easier and more secure to build a chip ecosystem.
In the world of CPU chips, the instruction set is similar to a "language" and is the command that the chip performs a task.
At present, the two dominant instruction sets in the world, one is Intel's X86 instruction set, which monopolizes the computer chip market. In 2022, the market share of X86 instructions in the global computer chip market will exceed 91%.
The other is the ARM instruction set, which was invented by overseas ARM companies and monopolized the mobile device chip market for mobile phones and other mobile devices.
Domestic CPU companies mainly include Haiguang Information, Huawei HiSilicon, Loongson Zhongke, Zhaoxin, Pingtouge, Feiteng, etc., most of which pay a high price to buy their licenses, and every new generation, they have to buy again.
For example, Huawei HiSilicon's Kirin and Kunpeng chips are based on the ARM instruction set, and Haiguang Information is the X86 instruction set. Therefore, from this point of view, Kirin chips have not reached 100% self-development.
However, there are also a few self-developed instruction sets from manufacturers, such as Huawei Lingxi instruction set and Loongson Zhongke LoongArch instruction set. However, it is difficult for self-research to break the barriers of Intel and ARM, and the performance of Loongson Zhongke has not been released so far.
(Loongson Zhongke's performance)
In addition to X86 and ARM, RISC-V, the only open-source company, forms the third pole of the global CPU instruction set.
By 2023, the global shipment of chips based on the RISC-V instruction set will exceed 10 billion, and the growth rate will be twice that of the original ARM instruction set.
In addition, the RISC-V instruction set is especially suitable for some products with lower performance and simpler, and is a better choice for the current variety of smart speakers, bracelets, Internet of Vehicles and other intelligent IoT applications.
Ali is the first technology giant to invest in RISC-V in China. In 2018, Pingtou was established, and the following year the RISC-V-based XuanTie C910 processor was launched.
Within two years of its launch, 2.5 billion CPUs were shipped, contributing 25% of the 10 billion shipments.
With the extension of AI to the device side (various IoT terminal devices), RISC-V has received more and more attention from companies.
It is estimated that the number of chips using RISC-V architecture will increase to 62.4 billion by 2025, with a compound annual growth rate of 146% from 2018 to 2025.
Allwinner Technology, a chip design company, cooperated with Alibaba to build a RISC-V ecosystem and released the world's first RISC-V chip equipped with Pingtou Xuantie C906, which is expected to usher in the release of orders.
In addition, the company has a number of competitive advantages:
First of all, the product range is comprehensive.
IoT devices are fragmented and diverse. Allwinner products are widely used in industrial control, smart home appliances, tablet computers, automotive electronics, robots, intelligent Internet of Things and many other fields.
(Some of Allwinner Technology's chip products and downstream applications)
Secondly, R&D advantages.
Allwinner Technology spends a lot of money on R&D every year, especially in 2022, the company's R&D expense ratio has risen significantly to 27.64%, surpassing companies such as Jingchen and Rockchip in the same industry.
And the company's R&D expense ratio of nearly 30% is also in the forefront of the entire semiconductor industry, far surpassing chip design companies such as Unisplendour, Guowei, GigaDevice and Weir.
Again, the customer advantage.
Thanks to the company's rich product range and technical advantages, Allwinner Technology's downstream customer resources are numerous and high-quality, and it provides stable supply to leading companies such as Huawei, Xiaomi, Baidu, Alibaba, Tencent, iFLYTEK, Midea, and Roborock.
Many of the company's overseas customers are industry benchmarks, such as Google, Microsoft, ARM, etc.
Moreover, Allwinner Technology does not rely on large customers, and the company's top five customers will account for 45.65% of the total sales in 2023. Among them, the largest customer sales accounted for only about 11%.
In 2022, the industry will destock, and the company's performance will be greatly affected. However, growth will resume in 2023.
In the first half of 2024, the company's performance will recover significantly, achieving revenue of 1.063 billion yuan, a year-on-year increase of 57.3%, and a net profit of 191 million yuan, a year-on-year increase of 80.091 billion yuan.
What's next, how is the company's growth?
As we said earlier, we are now moving towards the Internet of Everything. The intelligent Internet of Things (AIoT) industry has a huge room for growth.
It is estimated that the global AIoT market will grow from $82 billion in 2023 to $495 billion in 2031, with a compound annual growth rate of more than 25%. The company's downstream is bound to so many leading enterprises in the industry, and the order volume is guaranteed.
For example, the recently growing Internet of Vehicles (vehicle-road-cloud integration) is an important branch of the Internet of Vehicles, which is based on the electrification and intelligence of vehicles. And smart electric vehicles are inseparable from automotive chips everywhere.
According to the data, the number of automotive chips required for traditional fuel vehicles is 600-700, and the number of electric vehicles required is increased to 1600 per vehicle, while the demand for chips for smart cars is about 3000 per vehicle, which is 4-5 times that of traditional vehicles.
It is estimated that the global automotive semiconductor market size will be about $54 billion in 2023 and will reach $104 billion by 2029, with room for nearly double.
In the first half of 2024, Allwinner Technology has a number of automotive-grade chip projects in the R&D stage, and some automotive products have been successfully mass-produced, such as AR-HUD (head-up display), smart laser headlights, etc.
(Part of Allwinner Technology's R&D projects in 2023)
In summary, in the IoT end market where AI applications are diverse, the open-source RISC-V instruction set is more used and is not controlled by any one company alone.
Allwinner Technology has a first-mover advantage in RISC-V chips, and has also cooperated with many leading companies, with both growth and certainty in performance.
The above is only for the analysis of listed companies and does not constitute specific investment advice.
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Source: Flying Whale Investment Research