20220401-招银国际-China_CIS_Sector__Can_non-mobile_CIS_strength_offset_handset_weakness__We_remain_cautiously_optimistic_20页_1mb

China CIS Sector Summary

Core Content

The China CIS sector experienced a near flat revenue in 2021, with a slight 1.0% YoY decline. Despite the overall stagnation, the security and auto CIS segments showed strong growth of 32.5% and 14.1% YoY, respectively. The mobile CIS segment, however, remained under pressure with a -6.6% YoY decline, due to a weak mobile market, supply chain constraints, and a strong Apple presence. The report remains cautiously optimistic about the CIS sector, particularly driven by growth in non-mobile segments and the increasing adoption of AR/VR applications.

Main Points

1. CIS Market Overview

• Total CIS revenue in 2021: US$20.5bn, nearly flat with a 1.0% YoY decline.
• Mobile CIS was the largest segment but faced declining market share due to slower growth compared to non-mobile CIS.
• Auto CIS and security CIS were key growth drivers, with auto CIS reaching US$1.6bn (8% of total market) and security CIS at US$2.2bn.
• AR/VR growth: Global VR/AR device shipments reached 11.2mn units in 2021 (+92% YoY) and are expected to grow further.

2. Mobile CIS Challenges

• Weak growth: Mobile CIS revenue declined to US$13.1bn in 2021.
• Market share: Expected to shrink to 64% in 2022, down from 69% in 2019.
• Android OEMs faced challenges such as strong Apple sales, lukewarm consumer response to new Android models, high inventory levels, and partial lockdowns due to resurging COVID cases.
• Willsemi and GalaxyCore are highlighted for their potential to gain market share and benefit from a favorable product mix.

3. Auto CIS Outlook

• Auto CIS revenue in 2021: US$1.6bn, with 14.1% YoY growth.
• Growth drivers: Transition to electrified intelligent vehicles and ADAS adoption.
• Camera per car: Expected to grow at 10% CAGR (2021-2027), with 2.78 cameras per car in 2021.
• Willsemi is a key player in auto CIS, with 85% YoY growth in 2021 and a broad client base including Mercedes-Benz, BMW, and Tesla.

4. Security CIS Growth

• Security CIS revenue in 2021: US$2.2bn, with rapid growth of 27.6% / 36.2% / 32.5% YoY from 2019 to 2021.
• Key demand areas: Touchless access control, remote monitoring (e.g., healthcare), and surveillance.
• Willsemi is a leading supplier in the security CIS segment, with 70% YoY growth in 2021.
• Downstream players: Hikvision and Dahua dominate the security camera market with a combined 53% market share.

5. Consumer CIS Trends

• High-end demand: VR/AR is a key growth driver, with 11.2mn units shipped in 2021 (+92% YoY).
• Expected growth: VR/AR shipments to reach 16.5mn in 2022 (+46.9% YoY) and 50mn units by 2026.
• Willsemi is a major supplier for Oculus Quest 2, with 78% market share in the VR headset segment.

Key Information

• Willsemi (603501 CH):

  • TP: RMB292.0, BUY.
  • Market Cap: RMB169,365mn.
  • 2021 auto CIS sales: RMB2.3bn, 85% YoY growth.
  • 2022 outlook: Auto CIS growth expected at 23.5% YoY, security CIS at 20.8% YoY.
  • New products: 50MP/100MP/200MP CIS chips released in 2022, with a world's smallest 0.56-micron pixel size CIS announced in February 2022.

• GalaxyCore (688728 CH):

  • TP: RMB28.5, BUY.
  • Market Cap: RMB52,627mn.
  • 2021 revenue: RMB23,989mn.
  • Market share: 47% in Africa and 19% in MEA.
  • CIS for Transsion: GalaxyCore is a major supplier for Transsion, a leader in Africa's smartphone market.

Conclusion

Despite challenges in the mobile CIS segment, the CIS sector is expected to recover in 2022, with auto and security CIS leading the growth. Willsemi and GalaxyCore are highlighted as top picks due to their diversified market exposure, strong product mix, and technological leadership. The report remains cautiously optimistic, noting that AR/VR applications and global re-opening will provide tailwinds to the sector.