Computer Industry Research Report: : How to look at the computer sector

Published on:

2023-05-08 15:43

1 Strong industry beta attribute

1.1 Industry trend is highly consistent with valuation trend, and the industry with beta attribute stronger than alpha

We believe that China's computer hardware and software industry is relatively backward compared with developed countries, the overall productization rate is low, most companies have poor business models, and combined with the impact of China's economic and policy cycles, the sustainability and predictability of sector performance growth is relatively weak.

1.2 Historical recovery, the index peaked in July 20 and continued to shock down

From the historical situation, a complete cycle of the computer sector lasts for about 5 years, in which the cycle of decline or rise usually lasts for 24-36 months. In the past 15 years, the sector has experienced 3 periods of sharp rise, especially in the first half of 2015, the sector rose strongly by 217%, significantly outperforming the market. After the plate peaked in July 2020, it continued to shock down. By March 16, 2022, the lowest point was 38% lower than the highest point of 6736.41 on July 10.

1.3 Valuation at three historical bottoms

There have been three historical bottoms in the computer sector in the past 15 years, and valuations have been very similar during these three bottoms.

Computer History Bottom Date: October 16, 2018

I have experienced the complete reversal of 18 computer plate, so I have a more intuitive understanding. In February 2018, there was a bottom feature and a wave of market prices, but it did not really reverse. Subsequently, it continued to adjust for half a year due to the Sino-US trade war and other factors until the end of 2015. (Source: Future Think Tank)

2 The core logic of growth: Technology + Policy Drive

2.1 Computer Core Logic: Technological change + Policy promotion

As a typical upstream industry, the main source of downstream demand of the computer industry is the informatization demand of the G end (government) and the B end (large, small and medium-sized enterprises), and the informatization demand of the G end and the B end is influenced by technological changes and policies. Therefore, the continuous growth logic of the computer industry in the past 15 years is as follows: On the one hand, policies accelerate the increase of localization rate and informatization rate; on the other hand, technological changes lead to new business models and market demands (such as Internet and cloud, among which Internet has been falsified 15 years later).

The introduction of national policies tends to have a certain periodicality, and in each cycle there is a direction supported by key policies. Although the development of technology is continuous, for the computer industry, the speed of technological change is slow and casual, and it often takes a long time to form a substantial breakthrough. Therefore, the demand of the computer industry also forms a certain periodicity with the periodicity of policies and technologies. The fundamental factor of the change of the demand end cycle is the change of technology and industry, while the driving force and signal of the market start are policies, and the variable of the market fluctuation is the 3-8 year replacement cycle of products in various segments.

In the past 15 years, the technological change in the computer industry has mainly experienced several major eras, such as hardware popularization, software informatization rate increase, Internet mobile Internet, cloud computing, etc. In the next five to ten years, the focus of technological change is expected to continue to iterate in 5G, AIOT, artificial intelligence and other fields. Although the technological changes in the computer industry are slow and casual, each technological change can bring new business models and new demand space, which may lead to major changes in the industrial pattern, and thus bring long-term investment opportunities.

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