[Introduction] Consumer electronics stocks are hot! Can I still get on the bus? The latest interpretation of the fund comes from China Fund News reporters Zhang Yanbei and Sun Xiaohui. Recently, the consumer electronics sector has become very popular and has become a scenery in t

China Fund News reporters Zhang Yanbei and Sun Xiaohui

Recently, the consumer electronics sector has been booming and has become a sight in the sluggish market.

data shows that the CSI Consumer Electronics Theme Index has increased by more than 20% since its low point on February 5 this year, with the highest increase exceeding 40%. Recently, Shenzhen Huaqiang and Kesen Technology have been closed continuously. all comes from this section.

html From September to October, consumer electronics events were intensively catalyzed. Huawei's three-fold folding screen mobile phone, Apple iphone16 series are about to debut, and meta's connect conference is held. The consumer electronics sector is "unprecedentedly popular."

What is the logic behind the strength of consumer electronics? Is the market sustainable? What are the industry development trends? Which segments deserve more attention?

In this regard, reporters from China Fund News interviewed professionals from Fuguo, Boshi, Chuangjin Hexin, Furong, and Pengyang. They are Pengyang Fund stock researcher Zhang Hongfan and the following four fund managers:

Deputy Director of Quantitative Investment of the Quantitative Investment Department of Wells Fargo Fund, Zhang Shengxian, Manager of the Consumer Electronics ETF Wells Fargo Fund

Assistant to the General Manager of the Research Department of Furong Fund, Fund Manager Li Yanzheng

According to the above-mentioned people, the strong performance of the A-share consumer electronics sector in this round is mainly due to the fact that end-side AI innovation will likely drive a new round of consumer electronics update cycles. The current fundamental trend of the consumer electronics sector is relatively good, and the valuation is also relatively reasonable. Considering that the AI ​​side has just begun to be implemented, and the market environment cooperates, there is a certain room for improvement in valuation, and the market has the potential to continue to rise.

From the perspective of the industry life cycle, consumer electronics is in the cycle recovery stage in the short term, and in the early stage of the new industry cycle driven by technological breakthroughs such as AI/AR in the long term. From the perspective of segmented fields, terminal brands, OEM/ODM manufacturers and important component suppliers deserve attention. Among them, Apple will usher in an innovation cycle starting in 2025, and the current Apple industry chain is more suitable for layout.

ai innovation expectations drive the market

China Fund News reporter: Why has consumer electronics been strong recently? What are the similarities and differences compared to previous uptrends?

Zhang Shengxian: The release of new products by major manufacturers, performance support from the industry chain, and the implementation of AI technology in consumer electronics are the main reasons why the short-term market pays more attention to consumer electronics. In terms of new products, September has entered a period of intensive release; in terms of performance, according to wind data, 73 of the 94 companies in the A-share consumer electronics sector achieved profitability in their semi-annual reports, accounting for 77.66%, and 57 companies achieved year-on-year net profit growth; In terms of AI technology, the combination of consumer electronics and AI and the implementation of business models are expected to bring about a new replacement cycle and a double-click innovation cycle. The time and logic of

's previous three rising prices are: the smartphone replacement cycle driven by Apple mobile phones from 2010 to 2015; the mobile phone industry chain entering an innovation cycle from 2016 to 2018 (such as 5g, ultra-thin, camera, and under-screen fingerprint scanner) and other new functions); from 2019 to 2022, new products led by tws wireless headsets will enter a structural innovation cycle.

The current market trend will start in 2024 and will be dominated by the inventory cycle. Subsequent interpretations can expect that the logic of AI integration on the end side will promote a new replacement cycle and a new innovation cycle, which will bring about an increase in the attractiveness and sales of consumer electronics categories.

Xiao Ruijin: Since late April this year, the A-share consumer electronics sector has been trending strongly, mainly due to end-side AI innovation or the birth of a new update cycle. Apple Intelligence, a collaboration between Apple and OpenAI, will be released in October. It requires higher hardware specifications, and the market is expected to stimulate demand for updates. Similar to the market situation from 2012 to 2017, both are driven by terminal upgrades. In the last round, feature phones were upgraded to smart phones. In this round, AI terminals drive sales and component value growth.

But there are also significant differences. The price of smart phones is orders of magnitude higher than that of feature phones, which has driven the prosperity of mobile Internet ; while AI mobile phones are more inclined to application-side improvement innovation, and industry dividends will also be more concentrated in consumption. Electronic terminal manufacturers, AI semiconductor manufacturers and a small number of application manufacturers have not formed a disruptive innovation situation in the existing industrial chain structure.

Zhou Zhimin: The recent strength of consumer electronics may be due to the following three reasons.

First of all, in the early morning and afternoon of September 10th, Beijing time, both Apple and Huawei will hold the most important press conferences of the year. The market is looking forward to the progress of iPhone 16 in AI, as well as the world's first three-fold mass-produced mobile phone. actual experience.

Secondly, the interim report has been disclosed. In particular, Android supply chain companies have generally improved year-on-year. As the second half of the year enters the new machine cycle, there are strong expectations for performance improvement.

Finally, leading consumer electronics companies, especially the leading companies in the Apple industry chain, have better quality and are expected to "break out of the circle."

Compared with the previous rising market (such as the 5G replacement wave), the same point is the expectation that product upgrades will drive sales growth. The difference is that this time it is mainly the expectation that the AI ​​terminal will drive replacements.

Li Yanzheng: Consumer electronics have both technology and consumption attributes. In the short term, they will be affected by the economic cycle. In the long term, innovation is the core driving force. The reasons for the recent strength of consumer electronics are mainly due to two points:

First, there are some expected innovations in consumer electronics itself, such as ai phone, ai pc, ai glasses and tri-fold screens under ai end-side innovation.

Second, in the third quarter, many procyclical technology sub-sectors are experiencing or may experience sluggish peak seasons. In contrast, consumer electronics with innovation and growth expectations are more scarce. Compared with the market driven by Huawei Mate 60 last year, this round of rise in

has the expectation of innovative products or innovative products. The difference is that expectations are now more abundant.

Zhang Hongfan: The main reason for the strength of consumer electronics is that there are many innovations in terminals, including Apple’s release of Apple Intelligence, Huawei’s upcoming tri-fold folding screen mobile phone, Lenovo’s launch of AI PC, etc.;

Compared with the previous rising market, this round’s largest The biggest change is the combination of AI and end-side devices.

The market has the potential to continue to rise

China Fund News reporter: What is the current fundamentals and valuation of the sector, and is the market sustainable? The market is talking about recovery picking up. What do you think of this?

Xiao Ruijin: ’s current fundamental trend in the consumer electronics sector is relatively good, and its valuation is also relatively reasonable. First, from the perspective of the inventory cycle, the consumer electronics industry cycle peaked in early 2022 and bottomed out in the first quarter of 2024 after two years of inventory destocking. Currently, we may be in the middle of this round of rising consumer electronics inventory cycles. Although inventory replenishment has temporarily come to an end in the third quarter, as external demand picks up after the U.S. dollar interest rate cut, inventories are expected to return to low levels in the fourth quarter, and may enter the inventory replenishment cycle again in the first quarter of next year.

Secondly, Apple plays the role of a closed loop in generative artificial intelligence technology innovation. Through cooperation with openai, it continues to explore the application scenarios of end-side AI in consumer electronics and builds positive feedback on large investments in upstream semiconductors and cloud computing.

Finally, there is a high probability that Apple’s iPhone will enjoy the benefits of end-to-end AI. Foreign brokerages generally estimate that iPhone sales will be close to 250 million units in 2025, an increase of more than 10% compared to 2024. At the same time, iPhone 16 has significant advantages in processor chips, Specifications have been upgraded in many areas such as memory, camera, and appearance, which will be beneficial to Apple's industry chain as both volume and price increase.

Zhang Shengxian: The fundamentals of have entered the bottoming out stage, and the sector valuation is also at a low position. In the 2024 semi-annual report, some consumer electronics companies have emerged from the downward trend and begun to bottom out. With the increase in capacity utilization brought about by inventory reduction, the profit margin of the consumer electronics sector is expected to continue to recover. In terms of valuation, as of September 5, 2024, the 10-year price-earnings ratio quantile of the S&W Consumer Electronics Index is only 4.81%, which has great upward flexibility. Empowered by technological innovations such as AI and VR, new growth points are expected to drive industry recovery and enter a sustained double-click market for valuation and performance.

Zhou Zhimin: The pace of recovery in the consumer electronics sector has diverged. The Android system recovered in the second half of last year, and the Apple industry chain may begin in the second half of this year. The mid-term report shows that the performance of the Android system has improved significantly, and the destocking of the Apple industry chain is coming to an end.The leading company's PE this year is 20-30 times. If the AI ​​replacement logic is fulfilled, the PE may drop to less than 20 times next year. Driven by the decline of the AI ​​terminal, there is room for improvement in valuation, and the market has upward potential.

Li Yanzheng: At present, the fundamentals of consumer electronics are relatively stable, and the product capabilities and operating conditions of many listed companies are in a state of continuous improvement in the long run. For the valuation level, refer to the valuation quantile of consumer electronics in the Shenwan industry. The current valuation level is not high.

We do not believe that the market is recovering in transaction consumption. The recent strong trend of the consumer electronics sector, especially some of its stocks, is due to everyone's expectations for innovation. At present, the overall prosperity has not yet seen a strong recovery and a continuously strengthening recovery.

The highlights lie in the effect of hardware upgrades and large AI model access.

China Fund News reporter: In September, consumer electronics catalyzed events intensively. What are the main highlights?

Xiao Ruijin: According to media reports, Apple will release a new generation of iPhone 16 smartphones on September 10, as well as new products Apple Watch and AirPods headphones. In October, Apple will officially release Apple Intelligence. At the same time, between September and October, domestic smartphone manufacturers will release new products. The main highlights include end-side AI functions, folding screens, large-capacity batteries, audio upgrades, periscope camera modules, etc.

Zhou Zhimin: The most important thing about is the autumn conference held by Apple and Huawei respectively on September 10. There will also be a meta connect conference starting on September 25, when the next generation of AR glasses may be released. In addition to paying attention to the hardware upgrades of these products, you can also pay attention to the effect of AI large model access.

Li Yanzheng: consumer electronics can be mainly divided into Apple industry chain and Android and Huawei related. Huawei's tri-fold screen mobile phone will be launched in mid-September. The interconnection capabilities of Huawei's mobile phones, PCs and other terminals may be greatly enhanced, and the pure-blood Hongmeng system may also have certain AI capabilities. There are also certain similarities in the

fruit chain. Although the iPhone 16 itself may be in terms of hardware and there are not many innovations that consumers can intuitively feel, this year iPhone has obviously increased its emphasis on AI capabilities. Major changes in hardware, and even changes in the structure of the iPhone family, may be seen in the next generation product, iPhone 17.

Zhang Shengxian: There are two main highlights of . One is the autumn conference of leading foreign mobile phone companies. The theme of this conference is "Highlight Moment", and a series of innovative products and technology upgrades may be announced. The most eye-catching one is undoubtedly the new model equipped with AI assistant.

The second is the new product launch conference of major domestic mobile phone and communications manufacturers. The world's first tri-fold screen mobile phone will be officially released.

Chapter Hongfan: The main highlights of include: At 1 a.m. on September 10th, Beijing time, Apple held its autumn conference. The logo on the invitation used a neon light effect that echoed the new version of Siri, symbolizing Apple Intelligence, an artificial intelligence tool. It is the core of the conference and will be deeply integrated into the new iPhone in the future. Huawei is expected to launch the world's first tri-folding mass-produced mobile phone on September 10. Code-named mate xt under the Extraordinary Master brand, the internal screen of this new phone will reach 10 inches, significantly improving the user experience. A number of new notebook computer models equipped with Lunar Lake will be released in the third quarter, and AI PC will usher in a new trend.

The current sector is in the growth stage of the update cycle

China Fund News reporter: From the perspective of the industry life cycle, what stage is consumer electronics in? How do you view future industry trends?

Li Yanzheng: In the short term, consumer electronics is in the stage of forming expected responses. Different subdivisions are different. For example, some consumer electronics supply chain companies for Huawei's tri-fold screen may have reached the second half of the expected stage. Next, it depends on the logic and performance realization; and some Apple chain and mate70 related companies may still be in the stage of constantly reflecting new market expectations in the short term.

We feel that the development of consumer electronics is an upward spiral in small product cycles and demand cycles.

Xiao Ruijin: The current consumer electronics sector may be in a relatively good growth stage of the update cycle.The current competitive landscape of the consumer electronics industry has been basically stable, and the industrial chain has gradually matured. It is expected that this round of terminal-side AI will be basically popularized in the next 2-3 years. Smartphones will become an important carrier for large-scale model applications, and human-computer interaction methods will be improved. Upgrade, large models will develop into personal intelligent assistants, and further improve user experience and work efficiency.

Zhou Zhimin: From the perspective of the industry life cycle, consumer electronics is in the cycle recovery stage in the short term, and in the early stage of the new industry cycle driven by technological breakthroughs such as AI/AR in the long term.

Zhang Shengxian: We are full of confidence in the future of the consumer electronics industry. Although the industry has experienced adjustments in the industry chain and stock prices in the past two years or so, it is expected to usher in an important turning point in the near future. The interpretation of the industry cycle may be analogous to 2019. The consumer electronics sector has experienced the superimposed effects of the three major cycles of innovation, policy and capital, achieving a reversal in the industry. From the perspective of the industry cycle, the performance growth rate of the consumer electronics industry has exceeded that of other industries since the third quarter of 2019. The current cycle is expected to create greater value through the integration of AI and terminal equipment, stimulate an upsurge in equipment replacement, and promote the application of new technologies and industry development.

The Apple industry chain is more worthy of attention

China Fund News reporter: Which subdivisions are currently more worthy of attention? Under the innovation cycle brought by AI, which segments will see new opportunities?

Zhou Zhimin: recommends paying attention to the leading company in the Apple industry chain, because it will benefit from the wave of replacements that may be driven by the launch of the AI ​​terminal.

Zhang Shengxian: The industrial chains related to major foreign mobile phone manufacturers and the field of automobile intelligence deserve special attention. XR and AI applications may bring new opportunities. Driven by the stocking up of new machines and AI upgrades, performance and valuation are expected to increase; the layout of domestic automobile brands in the field of automobile intelligence deserves attention. In the field of XR and AI applications, the release of new products by technology giants and the accelerated implementation of AI end-side applications heralds new investment opportunities. As the industry chain invests in AI technology, terminal equipment such as PCs, mobile phones, robots, etc. will usher in a wave of AI innovation. Investors should seize the investment opportunities of AI end-side innovation.

Xiao Ruijin: In the consumer electronics sector, the subdivisions worthy of attention include terminal brands, OEM/ODM manufacturers and important component suppliers. Among them, terminal brands have mastered the entrance resources and traffic advantages of large AI models, and the market share of terminal brands with outstanding model and application capabilities is expected to continue to increase. Secondly, manufacturers with the design, assembly and production capabilities of AI terminals such as smartphones, watches, and headphones are expected to enjoy the increase in volume and price brought about by the update cycle and enter a new growth cycle. Finally, AI terminals have put forward new specification requirements for processor chips, memory, batteries, and heat dissipation. Manufacturers with relevant product capabilities are expected to obtain additional value growth dividends.

Zhou Zhimin: recommends paying attention to the leading company in the Apple industry chain, because it will benefit from the wave of replacements that may be driven by the launch of the AI ​​terminal.

Li Yanzheng: is a product innovation in the large-scale market promoted by major manufacturers, and the first one is AI mobile phones. The second is unexpected hits. Many times, product development is not planned. For example, Ray-Ban's AI glasses are well accepted in overseas markets, and it is difficult to think of them in advance. New opportunities are likely to emerge in both of the above areas. In addition, the combination of AR glasses or other wearable products and AI capabilities is also a direction worthy of continued attention and tracking.

Zhang Hongfan: The current Apple industry chain deserves more attention. Apple will usher in an innovation cycle starting in 2025. The AI ​​function is expected to drive existing users to actively replace their phones, and new investment opportunities will appear in aspects such as cooling and batteries.

Pay attention to technological innovation risks and personal data privacy risks

China Fund News reporter: What are the main risks of investing in the consumer electronics sector? Any advice for individual investors investing in this area?

Xiao Ruijin: The main risks of are technological innovation risks and personal data privacy risks. For individual investors, we recommend that while closely following the technology and product innovation trends of leading companies in the industry, they should always pay attention to the above risks.

If individual investors want to invest in this field, it is recommended that they first distinguish whether it is a concept-driven theme investment or a real industry cycle stage where concepts are implemented and driven by performance. If the former is not careful, it is easy to chase high prices for a long time.

Zhou Zhimin: The short-term risk of is that after recovery, it is difficult to further improve the prosperity. This situation is often due to a lack of innovation in the end product. The mid- to long-term risk is that expectations for innovation are too high. As a result, new technologies and new products are delayed in getting off the ground, causing a double kill in valuation and performance.

Li Yanzheng: The charm of consumer electronics lies in innovation. The main risk of investing in the consumer electronics sector is that the innovation is falsified and the stock price faces "a kill", and this situation is not uncommon.

For individual investors, if they cannot have a reasonable and self-consistent investment framework, conduct in-depth research and closely track the industry, it is recommended that they consider looking for a professional investment institution.

Zhang Hongfan: The main risk of comes from the fact that the actual AI function is lower than expected, and the sales data of new machines are not up to optimistic expectations.

Editor: Captain