CMSC: The wave of intelligent driving equality is coming, and the intelligent automobile industry chain is ushering in an accelerated turning point.

CMSC released a research report stating that intelligence is gradually becoming the key to competition in the automotive industry, and by 2025, high-level intelligent driving is expected to enter a period of rapid development. With the maturity of software and hardware algorithms, cost reduction of hardware solutions, increased consumer awareness, and intensified competition among automotive companies, it is expected that high-level intelligent driving will quickly popularize in 100,000-200,000 vehicle models in China in the next two years. It is recommended to pay attention to the progress of new car smart driving landing by domestic automotive manufacturers and the development opportunities in related intelligent driving industry chain links. The main points of CMSC are as follows: High-level intelligent driving is accelerating penetration and is expected to rapidly popularize in the 100,000-200,000 market in the next two years. By 2024, domestic high-speed NOA technology will be basically mature, with urban NOA becoming a new battleground for leading companies, and some car manufacturers have completed nationwide opening. Along with continuous software algorithm upgrades driving the improvement of intelligent driving experience, as well as the continuous cost reduction of core components such as LiDAR and the landing of sensor solutions such as wireless transmission, in the next two years, companies such as BYD Company Limited will accelerate the penetration of NOA features into mid-range to low-end vehicle models. For example, BYD Company Limited has self-developed the "Tianshenzhiyan" high-level intelligent driving system, while cooperating with Huawei's GanKun intelligent driving, investing in Zhuoyu Technology to enhance the competitiveness of intelligent driving technology. In February, they will hold a smart strategy release conference, and it is expected that in the next two years, high-level intelligent driving will be popularized in various models priced at under 200,000 yuan. Huawei's Hongmeng Smart Driving system is gradually being upgraded to the end-to-end ADS 3.0, and the scope of cooperation of its intelligent car solutions is expanding to include Avita, FAW Audi, GAC, SAIC, Geely, BYD Company Limited, and Lantu, hoping to further increase the market share of Huawei's smart driving. The Xiaomi SU7 is priced at 215,900-299,900 yuan, with high-level intelligent driving accounting for about 70%, and it is expected to launch more cost-effective models in the future. In November, they launched the HAD super intelligent driving, fully integrated into the end-to-end large model, aiming to mass-produce vehicles from 2025 from spot to spot. Xiaopeng Technologies has gradually realized cost reduction, launching the new generation Xiaopeng AI Eagle Eye vision solution and MONA M03, Xiaopeng P7+ models, promoting the downscaling of high-level intelligent driving to the 100,000-200,000 market. Analogous to smartphones, by 2025, the automotive intelligence will enter a period of rapid development, and technology-based leading enterprises with core technologies and ecological advantages will eventually succeed. Referencing factors such as the pace of software and hardware innovation, the penetration rate of intelligence, important new products, and network infrastructure, we believe that 2025-2030 is a period of rapid development for high-level intelligent driving, similar to the rapid development trend of smartphones from 2010 to 2016. During this period, high-level intelligent driving represented by urban NOA will rapidly penetrate, while the competition in the intelligent automobile market will intensify. Analogous to smartphones, the concentration of the automobile industry will further increase, and we believe that technology-based enterprises with core technologies and ecological advantages will be the most competitive. The domestic intelligent automobile industry chain enjoys better policy support, industry chain support, cost advantages, etc., and is expected to give birth to a group of enterprises with international competitiveness. Automotive intelligence drives the value and volume of the automotive industry chain, and the domestic industry chain will significantly benefit. In terms of chips, under the trend of intelligence, the computing power and comprehensive performance requirements of intelligent driving/cabin chips are increasing, offering vast opportunities for domestic replacements. In the domain controller sector, with the transformation of electronic and electrical architectures and the continued decoupling of software and hardware, new types of Tier 1 companies with rapid response and integration capabilities and close cooperation with downstream customers are expected to rise. In the connectivity sector, the wiring harnesses and connectors for core applications such as automatic driving, intelligent cabin, and vehicle networking are rising in both quantity and value, while the application of in-vehicle Ethernet technology is driving the growth of PHY chips and switching chip market size, and the rapid development of technologies such as 5G and C-V2X is driving a new round of growth opportunities in the vehicle wireless communication chip market. In the field of perception sensors, the sinking of intelligence driving is expected to drive the accelerated growth of essential perception sensors represented by cameras, while the high certainty of penetration of LiDAR in the next two to three years will lead to a profit turning point for leading manufacturers. Additionally, 4D mmWave is expected to help popularize intelligence driving as a new type of sensor, accelerating the commercial process. In the intelligent cabin field, the multi-technology route of AR-HUD continues to iterate, with domestic manufacturers overtaking in bends; in-car acoustic solutions are continuously upgrading in terms of components such as power amplifiers, AVAS, and speakers, as well as in multimodal input and output; the car light industry is developing towards high pixel, personalization, and interactability, expanding application scenarios. In the intelligent chassis field, linear control, wire-controlled steering, active suspension, and other sectors have high growth potential, and attention should be paid to the development opportunities of domestic replacements and the reshaping of cooperation models. Investment advice: It is recommended to pay attention to the progress of new car smart driving landing by domestic automakers and the development opportunities in related intelligent driving industry chain links. With the maturity of software algorithms, the cost reduction of hardware solutions, the increase in consumer awareness, and the intensification of competition among car companies, high-level intelligent driving will accelerate its penetration from high-end to the 100,000-200,000 mid- to low-end popular market in the next two years, with ample market space. 1) Focus on Huawei Automotive Chain and XIAOMI-W (01810), which are more advanced in automotive intelligence technology and commercial landing, and pay attention to BYD Company Limited's automotive chain which is accelerating the promotion of intelligent driving. 2) Monitor the rapid increase in market share of domestic NOA high-level intelligent driving solutions, and benefit from domestic replacements of intelligent driving chips from Horizon Siasun Robot & Automation (09660) and BLACK SESAME (02533), as well as the more advanced cabin chip sector in China such as Chip Engin Technology and Chip Drive Semiconductor, actively positioned Amlogic (688099.SH) and Rockchip Electronics (603893.SH), etc.; 3) Focus on platform-type Tier1 companies with quick response and integration capabilities in the domain control field, such as Luxshare Precision Industry (002475.SZ) and BYD ELECTRONIC (00285), as well as Huizhou Desay SV Automotive (002920.SZ), which closely cooperates with upstream SoC manufacturers. Overall, it is expected that the automotive industry will undergo significant transformation and development with the increasing focus on intelligent driving systems and technologies.Beijing Jingwei Hirain Technologies (688326.SH), etc.4) Pay attention to the benefits of intelligent driving harnesses and connectors from leading manufacturers such as Luxshare Precision Industry (002475.SZ), Electric Connector Technology (300679.SZ), Kunshan Huguang Auto Harness (605333.SH), Wcon Electronics (301328.SZ), as well as domestic leading car-mounted PHY chip manufacturers such as Motorcomm Electronic Technology (688515.SH), and Lontium Semiconductor Corporation (688486.SH) focusing on Serdes chip layout for cars. 5) Pay attention to the lens and module manufacturers such as SUNNY OPTICAL (02382) and DongGuan YuTong Optical Technology (300790.SZ) benefiting from the increased use of car interior perception sensors, CIS chip manufacturers such as Will Semiconductor (603501.SH), Smartsens Technology (688213.SH); pay attention to laser radar manufacturers such as Hesai Group Sponsored ADR (HSAI.US), ROBOSENSE (02498), as well as upstream core component manufacturers such as COWELL (01415), SUNNY OPTICAL (02382), Zhejiang Lante Optics (688127.SH), Ningbo Yong Xin Optics (603297.SH), Zhejiang Crystal-optech (002273.SZ); pay attention to millimeter-wave radar manufacturers and solution providers such as Luxshare Precision Industry (002475.SZ), Huizhou Desay SV Automotive (002920.SZ), Huayu Automotive Systems (600741.SH), etc. 6) With the accelerating trend of intelligent chassis layout by BYD Company Limited, Huawei, Geely, NIO Inc. Sponsored ADR Class A in 2024, pay attention to the domestic replacement process of core suppliers in areas such as wire-controlled steering, wire-controlled braking, and active suspension, such as Bethel Automotive Safety Systems (603596.SH), Fudi Power, Ningbo Tuopu Group (601689.SH), Shanghai Baolong Automotive Corporation (603197.SH), and monitor the progress of new Tier1 manufacturers in the supply chain cooperation model reshaping, such as Luxshare Precision Industry (002475.SZ), BYD ELECTRONIC (00285). 7) Additionally, it is recommended to pay attention to other intelligent cockpit component suppliers, such as Foryou Corporation (002906.SZ) and Zhejiang Crystal-optech (002273.SZ), leading HUD suppliers expected to benefit from increased market share of AR-HUD, Suzhou Sonavox Electronics Co., Ltd. (688533.SH), AAC TECH (02018), Goertek Inc. (002241.SZ), Guoguang Electric (002045.SZ) benefiting from upgraded cabin acoustic solutions, and companies benefiting from the upgrade from traditional car lights to smart car lights such as Huayu Vision, Changzhou Xingyu Automotive Lighting Systems (601799.SH), SUNNY OPTICAL (02382). Risk warning: macroeconomic risks, risks of demand falling short of expectations, risks of autonomous driving penetration falling short of expectations, risks of intensified industry competition.