I. Connectors: Bridges of Electronic Devices 1.1 Connectors Connecting devices are electronic components that transmit and exchange current or signals between electronic system equipment. Connector assemblies are components that integrate connectors with corresponding cables (including optical fiber cables, wire and cable, microwave coaxial cables, etc.) into corresponding circuit loops to realize signal connection and transmission between electronic devices. Connectors form circuits in electronic equipment mainly through cables or PCBs (printed circuit boards). Among them, using cables for circuit connection has the advantages of long-distance transmission and flexible wiring. Connector modules are products that assemble electronic devices into modules, usually requiring the integration of connectors, printed circuit boards, protective sealing devices, sheet metal structural parts, relays, etc. Connector assemblies integrate connectors with corresponding cables (including optical fiber cables, wire and cable, microwave coaxial cables, etc.) into corresponding circuit loops to realize signal connection and transmission between electronic devices. Connectors form circuits in electronic equipment mainly through cables or PCBs (printed circuit boards), and using cables for circuit connection has advantages such as long-distance transmission and flexible wiring. (1) Classified by transmission medium: electrical, optical, and microwave connectors According to the different transmission media, connectors are mainly divided into electrical connectors, microwave connectors, and optical connectors. Different types of connectors have different performance requirements: - Electrical connectors must meet the requirements of good contact and reliable operation. Among them, high-power electrical energy transmission requires low contact resistance, high current carrying capacity, low temperature rise, and high electromagnetic compatibility; high-speed data signal transmission requires good circuit impedance continuity, low crosstalk, low delay, and high signal integrity. - In addition to the requirement of contact reliability, microwave RF connectors have strict requirements on impedance design and compensation, and need to meet performance requirements such as insertion loss, return loss, phase, and third-order intermodulation. - Optical fiber connectors have strict requirements on the alignment accuracy of components, so they have high requirements on the processing accuracy of contact parts, with high cleanliness and accurate positioning. Due to the different manufacturing process requirements of connectors, connector manufacturers are generally single producers of electrical connectors, RF connectors, or optical connectors. Foreign connector giants such as TE Connectivity and Amphenol have the ability to produce electrical connectors, RF connectors, and optical connectors at the same time; most domestic manufacturers are limited to producing a single type of product, and there are few domestic enterprises with the ability to produce electrical connectors, RF connectors, and optical connectors simultaneously, among which Realtek is one. (2) Classified by downstream scenarios: communication, automotive, industrial connectors, etc. According to different application scenarios, connectors are mainly divided into communication connectors, automotive connectors, consumer electronics connectors, industrial connectors, etc. Automotive connectors are mainly electrical connectors, but with the development of automotive intelligence and connectivity, vehicle-mounted RF connectors have also begun to be applied. Automotive connectors are the largest application field of connectors. The automotive field is the largest market for connectors, accounting for 22% of the global connector industry. According to data from Bishop & Associates, the global connector market size reached 64.2 billion US dollars in 2019, with a compound annual growth rate of about 4.3% from 2014 to 2019; the global automotive connector market size in 2019 was 15.21 billion US dollars, with a compound annual growth rate of 5.33% from 2014 to 2019, higher than the growth rate of the global total connector market size during the same period. Due to the special safety requirements in the automotive field, connectors, especially new energy vehicle connectors, focus on electrical performance such as high voltage, high current, and anti-interference, and need to have good mechanical properties such as long mechanical life and resistance to vibration and impact in long-term dynamic working environments. 1.2 Automotive connectors: diverse types, applied in different on-board systems New energy vehicles are integrated products that include needs from different types and fields such as safety, entertainment, information transmission, power, and energy storage. This means that on different modules, the performance requirements for connectors will vary according to their application directions. Currently, the main types of on-board connectors are: 1. High-voltage connectors, mainly used in power motors, distribution boxes, inverters, AC/DC and other batteries and electric drive units; 2. Swappable connectors, a type of high-voltage connectors, installed in the vehicle to achieve rapid battery swapping; 3. RF connectors, mainly used in sensors, cameras, and entertainment terminals; 4. Ethernet connectors, connecting the on-board high-speed network—Ethernet system, linking various core domain controllers together; 5. Low-voltage harness connectors, responsible for brake systems, door harnesses, transmission and steering systems, and other body control fields. 1.3 Communication connectors: the second largest downstream, with rapid technological iteration Communication connectors: Communication connector products need to meet electrical indicators such as characteristic impedance, insertion loss, and voltage standing wave ratio, and need to achieve functional requirements such as low signal loss, low standing wave ratio, and low microwave leakage. Communication connector products are mostly customized and use electrical connectors, RF connectors, and optical connectors simultaneously. In different segments of the communication sector, the types of connectors also vary: - On the communication data center or server side, the demand for high-speed connectors accounts for a relatively high proportion; - On the wireless base station side, due to the emergence of 5G MASSIVE MIMO technology, the demand for RF connectors accounts for a relatively high proportion. Communication high-frequency connectors are prone to loss attenuation, waveform interference, and other issues that affect communication quality during microwave signal transmission; at the same time, 5G communication technology puts forward higher requirements for the floating tolerance function of connectors. Therefore, the impedance compensation design and simulation capabilities of connectors are technical difficulties in product design processes. According to data from Qianzhan Industry Research Institute, the value proportion of connectors in general communication equipment is about 3-5%, while in some large equipment, the value proportion exceeds 10%. Communication is the second largest downstream of connectors, accounting for about 20% of the global connector market. In 2019, the global communication connector market size grew to 14.269 billion US dollars, with a compound annual growth rate of 5.85% from 2014 to 2019, higher than the growth rate of the global total connector market size during the same period. II. New energy vehicles & 5G construction drive, opening up long-term growth space for the connector industry 2.1 Domestic connectors: accounting for 30% of the global market, with a market size of about 20 billion US dollars The global connector market size grew from 48.9 billion US dollars in 2011 to 64.2 billion US dollars in 2019, with a compound annual growth rate of about 3.46%. It is expected that the global connector market size will exceed 90 billion US dollars by 2023; benefiting from the rapid development of downstream application industries such as communication, automotive, and consumer electronics in China, China's connector market size increased from 11.296 billion US dollars in 2011 to 19.477 billion US dollars in 2019, with a compound annual growth rate of 7.05%, significantly higher than the global growth rate during the same period. In 2019, China accounted for about 30.35% of the global connector market share. In terms of regional market size proportion, China has surpassed Europe and North America to become the world's largest connector market, with its market size proportion increasing from 23.10% in 2011 to 30.35% in 2019. With the rapid development of downstream new energy vehicles and the Internet of Things, the market size of automotive connectors and communication connectors will continue to expand in the future. 2.2 The value of new energy vehicle connectors is much higher than that of traditional vehicle connectors Value: Traditional cars require nearly 100 types of electronic connectors, and a single model uses about 600 connectors, mainly concentrated in engine management systems, safety systems, entertainment systems, etc. Compared with traditional fuel vehicles, new energy vehicles have a significantly increased demand for connectors. The value of low-voltage connectors used in a single traditional fuel vehicle is about 1,000 yuan, while the value range of connectors used in a single pure electric passenger vehicle is 3,000-5,000 yuan, and that in a single pure electric commercial vehicle is 8,000-10,000 yuan, which is significantly higher than that of traditional vehicles. Volume: With the increasing penetration rate of new energy vehicles, new energy vehicle connectors are expected to see both volume and price growth. In 2018, the market size of new energy vehicle connectors in China was 3.373 billion yuan. Global new energy vehicle sales increased from 546,000 units in 2015 to 1.621 million units in 2017, with a compound annual growth rate of 72.30%. It is expected that sales will reach 6 million units by 2022, with a compound annual growth rate of 29.92%. With the rapid growth of new energy vehicle production and sales, the market size of new energy vehicle connectors is expected to exceed 10 billion yuan by 2024, with a compound annual growth rate of more than 24%. 2.3 Accelerated construction of 5G base stations, leading to geometric growth in connector demand The development of mobile communication technology has gone through GSM (2G), 3G, LTE (4G) stages, and is gradually evolving to 5G. The transmission speed of 5G is about 100 times higher than that of 4G, which greatly increases the requirements for the transmission speed and channel function of the connection system. For example, a single 4G base station basically has 4-8 channel transmissions, while a 5G base station basically has 32-64 channel transmissions, which not only increases the demand for connectors geometrically but also has stricter performance requirements. According to data from the Ministry of Industry and Information Technology, currently, the number of 5G base stations in China has reached 1.159 million, accounting for more than 70% of the global total. The number of 5G terminal connections has reached 450 million, an increase of 247 million compared with last year. The gigabit network has the ability to cover more than 200 million households. According to the forecast of Qianzhan Industry Research Institute, the construction rhythm of 5G base stations in China will show a trend of acceleration followed by a decline but still remain at a high level. The number of new 5G base stations is expected to peak in 2024, reaching 2.65 million. According to the current mainstream antenna scheme, each base station will use 64 RF connectors. According to the current mainstream architecture of 5G base stations, each macro base station needs 192 sets (using dielectric filter structure) or 384 sets (using metal filter structure) of board-to-board connectors. The increase in the number of 5G base stations brings broad growth space to the communication connector market, and communication connector enterprises will achieve sustained development. By 2025, the global and domestic communication connector market sizes will reach 21.5 billion US dollars and 9.5 billion US dollars respectively. III. Competitive landscape: European, American, and Japanese enterprises lead, domestic enterprises actively layout automotive electronics 3.1 Late start in China, obvious trends of manufacturing & consumption transfer The global connector market has a high concentration: The connector industry is a fully competitive industry with a large number of product categories and highly fragmented segmented markets. Many small and medium-sized connector enterprises focusing on segmented markets have low market shares. At the same time, the global connector market is gradually showing a trend of concentration, forming an oligopolistic competition situation. The market share of the top ten global connector enterprises increased from 41.60% in 1995 to 61.44% in 2019. Three major American manufacturers, TE Connectivity, Molex, and Amphenol, rank high in various segments, and their combined market share accounts for more than 30% of the global total. (Report source: Future Think Tank) Current situation of China's connector industry: It started late, mainly composed of small and medium-sized enterprises, with low market concentration, and mainly middle and low-end products. Except for the military field, high-end markets such as automotive, medical, and communications in China are occupied by foreign enterprises. Under the active guidance of Chinese policies and the promotion of demand in downstream fields such as automotive and communications, the overall technical level of China's connector industry has been greatly improved and is in a stage of rapid catch-up. With the rise of large electronic manufacturing service (EMS) providers such as Celestica, Foxconn, Jabil, and Sanmina, Asia has shown obvious advantages in supply chain, labor costs, and consumption. Currently, only Luxshare Precision from mainland China ranks among the top ten global connector enterprises. There is a certain deviation between supply and demand in the Chinese market, and domestic enterprises have broad space for domestic substitution. 3.2 High industry concentration, relatively stable competitive landscape among leading enterprises There have been continuous mergers and acquisitions in the connector industry, improving industry concentration. According to statistics from Connector World Network, there have been 589 mergers and acquisitions in the connector industry from 1985 to 2018. Among them, 126 were conducted from 1985 to 1999, and 463 from 2000 to 2018, with mergers and acquisitions accelerating significantly. In the wave of mergers and acquisitions, the three major connector giants, Amphenol, TE Connectivity, and Molex, have been actively acquiring some competitors. From 1999 to 2018, Amphenol acquired 52 companies, while Molex acquired 27 and TE acquired 25 during the same period. Although the positions of the top ten global connector enterprises have changed greatly, the overall competitive landscape among the industry leaders is relatively stable. Since 1980, TE Connectivity has been the largest connector company, and after several name changes, it was finally renamed TE Connectivity. Molex and Amphenol have remained in the top ten. Companies that were in the top ten in 1980 but failed to remain in the top ten in 2018 include ITT Cannon, DuPont (Berg), 3M, Winchester, Augat, Cinch Connectivity Solutions, and Burndy, most of which were acquired by leading enterprises. 3.3 Major manufacturers layout automotive electronics, with broad space for domestic substitution In the upstream market of automotive electronics, enterprises from developed countries and regions such as Europe, the United States, and Japan still have competitive advantages relying on long-term technology and customer accumulation. For example, TE Connectivity, Molex, Amphenol, and other enterprises have strong competitive advantages in the automotive connector field; Leoni, Yazaki, and other enterprises occupy a large market share in the automotive wiring harness field. Foreign manufacturers such as TE Connectivity, Amphenol, and Rosenberger have a complete range of automotive connectors and have profound accumulation in high-voltage and high-speed connectors; domestic manufacturers such as AVIC Optoelectronics, Realtek, and Yonggui Electric focus on high-voltage connectors in automotive connectors, while Dianlian Technology and Yihua Co., Ltd. specialize in high-speed connectors. IV. Analysis of key companies 4.1 Laimu Co., Ltd.: continuously increasing investment in automotive business, actively expanding to new forces The company has high-quality customer resources. In the automotive electronics field, it has supplied products to well-known companies such as Valeo Group, Kostal Group, Visteon, BYD, Harman, Continental Automotive Electronics, TRW Automotive Group, Magna, and CATL, and its products are used in models of major vehicle manufacturers such as Volkswagen, General Motors, Mercedes-Benz, Ford, Toyota, Honda, SAIC, FAW, BYD, Great Wall, Geely, and Nissan. Continuous investment in automotive product research and development. With the continuous progress of the automotive industry, the accelerated replacement of new energy vehicles for traditional fuel vehicles, the accelerated penetration of autonomous driving technology, the increasing intelligence and electronization of automobiles, the number of connectors used in automobiles is increasing, and the automotive electronic connector market has broad growth space. To seize the development opportunities in automotive electronics, the company has continuously invested in research and development of automotive products, with more than 70% of its research and development expenses invested in automotive products in the past three years. Fund-raising projects to increase investment in new energy vehicle business. In June 2021, the company released a private placement plan for A-shares, intending to raise a total of no more than 700 million yuan (including 700 million yuan), of which 400 million yuan is planned to be used for new energy vehicle connector projects, and 100 million yuan for the construction of a new energy vehicle research and development center. After the project reaches production capacity, it will add an annual production capacity of 5 million high-current and high-voltage connectors for new energy vehicles and 12 million (sets) of connectors for auxiliary driving modules. 4.2 Shenglan Co., Ltd.: automotive connectors and blade battery components are booming Founded in 2007, Shenglan Co., Ltd. is a high-tech enterprise specializing in the research and development, production, and sales of electronic connectors and precision components. Its main products have been widely used in consumer electronics, new energy vehicles, and other fields. The company has established stable cooperative relations with well-known domestic and foreign customers such as Foxconn, Luxshare Precision, Xiaomi, TCL, Nidec, Hitachi Group, BYD, and Great Wall Motors. The company's new energy-related businesses include automotive connectors and PACK components. The company's revenue from 2017 to 2020 was 460 million yuan, 645 million yuan, 724 million yuan, and 915 million yuan, with a compound annual growth rate of 25.7%. In the first three quarters of 2021, the operating income was 940 million yuan, a year-on-year increase of 62%. From the revenue structure in the first half of 2021, consumer products accounted for 71.5%, while automotive products accounted for 21% with a growth rate of 274%, mainly due to the increase in downstream market demand for the company