Wanlian Securities 2025 Communications Industry Investment Strategy Report: Seizing Dual Core Mainline Investment Opportunities in the AI Computing Power Industry Chain and the Integration of Heaven and Earth

The Zhitong Finance App learned that Wanlian Securities released a research report saying that computing power is national power, seizing dual-core investment opportunities integrating the AI computing power industry chain and heaven and earth. The first core investment line in the communications industry in 2025 will still focus on the AI computing power industry chain to find investment opportunities brought about by technological progress combined with increased demand around the AI computing power industry chain. Furthermore, along with the successive successful launches of China's satellites and the introduction of a number of supporting policies in the field of space-earth integration, it is expected to become another core investment line for the communications industry in 2025, seeking investment opportunities brought about by policy support and the acceleration of industrial processes.

The main views of Wanlian Securities are as follows:

Looking back at 2024, the Shenwan Communications Industry Index surpassed the Shanghai and Shenzhen 300 and GEM Index by a large margin in 2024, ranking third among Shenwan's 31 Tier 1 industries, with excellent performance. In terms of valuation, the telecommunications industry's valuation level at the end of 2024 was slightly higher than at the beginning of the year, and slightly higher than the historical 3-year average, but it is still within a reasonable range. Looking ahead to 2025, 5G infrastructure construction in the communications industry is progressing in an orderly manner. Currently, 5G has formed large-scale applications, but the breadth and depth of applications need to be further strengthened.

Key investment points:

Main investment line 1: AI computing power industry chain

1) Artificial intelligence drives the demand for intelligent computing, and the process of building domestic computing power is expected to accelerate.

Computing power is national power, and China's computing power is at the leading level in the world. The global computing power structure has changed, and the importance of intelligent computing power continues to rise, and the scale of China's intelligent computing power and intelligent computing service market have maintained rapid growth. Both supply and demand sides have ushered in policy catalysis, and there is strong demand for domestic computing power construction.

2) The construction of intelligent computing centers has accelerated the rapid growth of server scale, and demand for liquid cooling continues to rise.

Computing power infrastructure is an important part of the new information infrastructure, showing characteristics such as diversified ubiquity, intelligence, agility, safety and reliability, and green and low carbon. China is strengthening the construction of computing power infrastructure to boost demand in the intelligent computing center industrial chain. In recent years, with the exponential increase in the number of AI large model parameters, the demand for underlying computing power for large model training has continued to increase, and the 10,000 card cluster has become the standard in the AI big model infrastructure arms race.

With the accelerated implementation of generative AI applications, demand for intelligent inference has ushered in rapid growth, and AI big model inference has become a new driving force for the current growth in intelligent computing demand. China has accelerated the rapid growth of the server market, and the share of the non-GPU server market has increased. China has clarified the trend of green and low-carbon construction of data centers, placed higher demands on PUE, and the liquid-cooled server market has maintained rapid growth.

3) In optical communication, demand for high-speed optical modules is strong, and there is plenty of room for domestic replacement of high-end optical chips.

Optical modules are the core component of AI infrastructure. They benefit from the rapid growth in capital expenditure of major Internet companies in the field of AI infrastructure, and demand for optical modules continues to maintain a high level of prosperity. With the accelerated construction of intelligent computing centers, demand for high-speed optical modules has also been further boosted, and demand for 400G and 800G optical modules is stronger; the industrial ecology of 1.6T optical modules is becoming more mature, and products are expected to be implemented at an accelerated pace, becoming one of the main products of optical modules in the future after 400G and 800G optical modules.

Optical chips are the core components of the optical communication industry. Data centers are one of its downstream core applications. Benefiting from data center construction and the demand for high-speed optical modules, the optical chip market is expected to maintain rapid growth. Currently, there is plenty of room for domestic replacement of high-end optical chips in China.

Main investment line 2: integration of heaven and earth

1) China attaches great importance to the development of low-altitude economy industries.

Central and local policies were introduced intensively. In March 2024, the low-altitude economy was first included in the government work report. Since 2024, about 30 provinces (cities and autonomous regions) across the country have included the “low-altitude economy” in local government work reports. In December 2024, the Low Altitude Economic Development Department of the National Development and Reform Commission was officially unveiled. The formal establishment of the Low Altitude Division shows that China attaches great importance to the development of the low-altitude economy industry. It is also expected that the low-altitude economy industry will be better managed in an integrated manner to accelerate the development process of the low-altitude economy industry.

As the most important basic support in the low-altitude economy industry, the air traffic control system is expected to take the lead in benefiting from the development and construction of the low-altitude economy industry. The construction of integrated space-earth networks such as Beidou navigation and satellite communications is expected to accelerate the construction of low-altitude economic industrial air traffic control systems and intelligent networking systems. The market size of China's low-altitude economy is expected to maintain a rapid growth trend.

2) The large-scale implementation of the Beidou application is expected to accelerate.

The deployment of the Beidou-3 global satellite navigation system constellation was fully completed. On November 28, 2024, the “Beidou Satellite Navigation System Development Plan until 2035” was released. It is planned to complete the construction of the next Beidou system by 2035. In July 2024, the General Office of the Ministry of Industry and Information Technology issued the “Notice on Launching the Selection of Pilot Cities for Beidou Large-scale Applications in the Industrial and Information Technology Field”. The pilot work is expected to accelerate the large-scale implementation of Beidou applications.

3) The satellite Internet market space is vast, and the process of satellite and terrestrial integration is accelerating.

Satellite Internet is an important component of the satellite communication industry. Low-orbit satellites are more suitable for satellite Internet services. Cost reduction and technological breakthroughs upstream in the industrial chain are an important driving force for the acceleration of the development of the satellite Internet industry. The global space launch process is speeding up. China ranked second in the number of launches in 2024. The rapid deployment of the US SpaceX Starlink is forcing China's satellite internet process to speed up.

Currently, China's benchmark for “Starlink” mainly includes the “Thousand Sails Constellation” and the “State Grid Constellation.” The “Thousand Sails Constellation” plans to launch more than 150 million satellites, and the “State Grid Constellation” plans to launch a total of 12,992 satellites. The direct connection of mobile phones to satellites is expected to accelerate the large-scale implementation of commercial applications of satellite communication, and it is also an important scenario for 5G and 6G applications.

Investment recommendations:

The 5G field suggests focusing on: the accelerated implementation of large-scale 5G applications and the comprehensive and in-depth empowerment of 5G;

The AI computing power industry chain suggests focusing on: 1) policies on both supply and demand to catalyze domestic computing power construction; 2) intelligent computing center construction is driven by demand for accelerated servers; 3) green data center construction demand boosts demand for liquid-cooled servers and increases in the penetration rate of liquid cooling in energy-saving equipment; 4) AI infrastructure construction boosts demand for high-speed optical modules and optical chips; 5) increasing the level of localization of high-end optical chips.

Suggestions in the field of space-earth integration focus on: 1) the formal establishment of the Low Altitude Division to accelerate the development process of the low-altitude economy industry; 2) Increased demand for infrastructure construction such as air traffic control systems; 3) Accelerated implementation of large-scale applications of the Beidou system in key areas; 4) Cost reduction and technological breakthroughs upstream in the satellite Internet industry chain; 5) Accelerated deployment of China's low-orbit satellites “Starnet” such as the “Qianfan Constellation” and the “State Grid Constellation”; 6) The implementation of commercial applications of 6G in the field of satellite communication landing.

Risk warning: Technological friction between China and the US; technological development and computing power demand in the AI industry fall short of expectations; the progress of the green and low-carbon transformation of data centers falls short of expectations; the implementation of low-altitude economy industrial policies falls short of expectations; large-scale applications of Beidou fall short of expectations; and China's satellite Internet “constellation” launch and deployment process falls short of expectations.