20210824-招银国际-Beginning_of_multi-year_growth_cycle__Initiate_BUY_on_Willsemi_and_GalaxyCore_42页_3mb

Summary of China CIS Market Analysis

Core Content

The China CIS (CMOS Image Sensor) market is entering a multi-year growth cycle, driven by the global expansion of the CIS industry and the localization of China's semiconductor sector. The report highlights the potential for growth in key applications such as smartphones, automotive, medical, and emerging fields like AR/VR/MR. It also evaluates two leading Chinese CIS companies, Willsemi and GalaxyCore, with a BUY rating and target prices based on future earnings and market trends.

Main Points

Global CIS Market Growth

• The global CIS market is projected to grow from US$20.7bn in 2020 to US$31.5bn in 2026E, with a 7.2% CAGR.
• Mobile CIS is the largest segment, contributing 69% of revenue in 2020 and expected to grow at 6% CAGR through 2026.
• Automotive CIS is expected to double in market size to US$8.7bn by 2024E, driven by ADAS adoption.
• The VR/AR industry is expected to grow at 42% CAGR (2021E-25E), with global shipments surpassing 10mn in 2022E.
• CIS revenue accounts for 5.1% of the global semiconductor industry in 2021E, up from 1.7% in 2010.

Key Growth Drivers

• Smartphone Multi-Cam Trends: The number of cameras per device is expected to increase to 3.2/3.3 by 2023E/2024E.
• ADAS Adoption: The number of cameras per car is projected to double to 3.3 by 2024E.
• VR/AR Expansion: Increased demand for cameras in VR/AR headsets and applications.
• Medical Applications: Growth in low-cost, high-performance medical imaging modules.

Market Share and Competitive Landscape

• Willsemi and GalaxyCore are among the top global CIS players, ranking No.3/No.4 in terms of revenue and No.4/No.1 in terms of shipment in 2020.
• The top CIS players in 2018 included On Semiconductor, Willsemi, and Sony, which together held 68% of the automotive imaging sensor market.
• The CIS industry is dominated by companies like Sony, Samsung, and Willsemi, with Willsemi holding a significant share in both revenue and shipment.

Key Information

Investment Thesis

• Willsemi: Expected to deliver 42% EPS CAGR from FY20 to FY23E. Target price of RMB370.75 (37% upside) based on 50x FY22E P/E.
• GalaxyCore: Expected to deliver 47% EPS CAGR from FY20 to FY23E. Target price of RMB48.19 (34% upside) based on 50x FY22E P/E.
• Both companies are well-positioned to benefit from semi localization, high-end share gains, and growing global CIS demand.

Valuation Highlights

Risks

• Slower-than-expected market growth
• Intense competition
• Worse-than-expected semiconductor shortage
• Disruptive technology

Emerging Opportunities

• AR/VR/MR: These technologies are at an inflection point, with increasing demand for cameras.
• Medical Applications: Low-cost, high-performance camera modules are driving growth in endoscopy and other medical imaging applications.

Business Models

• IDM (Integrated Device Manufacturing): Dominated by companies like Samsung, Sony, and SK Hynix.
• Fabless: Companies like Willsemi and GalaxyCore focus on design and outsource manufacturing.
• Fab-lite: A hybrid model combining aspects of both IDM and Fabless, used by companies like On Semiconductor and STMicroelectronics.

Strategic Advantages

• Willsemi: Strong relationships with foundries (TSMC, SMIC), diversified product portfolio, and active collaboration with downstream players like NVIDIA and DMS companies.
• GalaxyCore: Plans to invest in 12-inch manufacturing lines, transitioning to a fab-lite model to increase production capacity for high-end CIS products.

Conclusion

The China CIS market is poised for significant growth, supported by global demand, technological advancements, and the push for semi localization. Willsemi and GalaxyCore are highlighted as strong performers with robust growth potential and attractive valuations, making them compelling investment opportunities.