Good News on Listing | Frost & Sullivan Assists Hezhu Smart International Holdings Limited to Successfully List on the Hong Kong Stock Exchange (2533.HK)

Heishizhi Intelligent International Holdings Limited (Stock Code: 2533.HK) successfully listed on the Main Board of the Hong Kong Capital Market on August 8, 2024. The company is a provider of automotive-grade computing SoCs and SoC-based intelligent vehicle solutions, aiming to drive the future of mobility with chips. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services for the listing of Heishizhi Intelligent International Holdings Limited. We hereby extend our warmest congratulations on its successful listing.

Investment highlights

Overview of the Autonomous Passenger Vehicle Market

Autonomous driving technology refers to the application of a series of advanced software and hardware that enables vehicles to travel without much or no human driver intervention. Depending on the degree of human intervention and the scope of driving scenarios, autonomous driving is divided into levels L0 to L5. Systems that achieve L1 to L2 (including L2+) automation are commonly known as Advanced Driver Assistance Systems (ADAS), while systems that support L3 to L5 autonomous driving are referred to as Autonomous Driving Systems (ADS). Currently, autonomous driving technology is developing towards L2+ functions, including features such as NOA (Autonomous Navigation), allowing vehicles to automatically follow the navigation route set by the driver on highways or urban areas, providing an experience similar to Level 3 autonomous driving.

In 2023, autonomous passenger vehicles were widely popular around the world, with a global penetration rate of 69.8%, and 74.7% in China. With continuous reduction in technical costs and increasing consumer acceptance, autonomous passenger vehicles are being widely applied. The global sales of autonomous passenger vehicles are expected to reach 68.8 million units by 2028, with a penetration rate of 87.9%. In China, both automakers and consumers are becoming increasingly interested in autonomous passenger vehicles, with sales expected to reach 27.2 million units by 2028, with a penetration rate of 93.5%.

Note:

1. Autonomous passenger vehicles refer to those equipped with Level L1 to Level L5 autonomous driving technology.

2. The penetration rate is calculated by dividing the number of newly sold autonomous passenger vehicles for a specific year by the total number of newly sold passenger vehicles for the same year.

3. Forecasted sales volume and penetration rates are determined by multiple factors, including technological progress, pricing trends, consumer preferences, government regulations, and the business plans of automakers.

Overview of the Automotive Grade SoC Chip Market

Automotive chips are an important component for modern cars to process data and control vehicles, supporting widespread applications in autonomous driving systems, cockpits, chassis, powertrains, and body structures. Automotive chips can be divided into computing chips, memory chips, sensor chips, communication chips, and power chips. Computing chips (those that process signals collected by various sensors and send drive signals to corresponding control modules) are currently the focus of the automotive industry. MCU and SoC are two typical types of computing chips. An MCU refers to a traditional circuit design that contains only a single CPU (central processing unit) as the processor.

SoC refers to System-on-Chip, an integrated circuit design that integrates all the necessary components and subsystems required for a specific application or function onto a single microchip. This includes integrating the CPU, GPU (graphics processor), ASIC (application-specific integrated circuit), and other components onto a single chip, rather than installing separate components on a motherboard as in traditional electronic design. As the automotive industry advances towards electrification and intelligence, traditional MCUs face challenges that they cannot effectively handle, such as complex electronic and electrical architectures and massive data processing. SoC has become the mainstream trend in automotive chip design and application due to multiple advantages such as improved computing power, enhanced data transmission efficiency, reduced chip usage, and more flexible software upgrades.

Source: Frost & Sullivan report

Note:

The forecasted scale of the automotive-grade SoC market is determined by multiple factors, such as the popularity of different SoC models, advancements in SoC technology, changes in SoC pricing, and the business plans of automakers.

Overview of the Autonomous Driving SoC Market

An autonomous driving SoC is a type of SoC specifically designed for autonomous driving functions, typically integrated into a camera module or an autonomous driving domain controller, serving as the central brain of an autonomous vehicle. Autonomous driving functions generally involve three levels: perception, decision-making, and execution. The autonomous driving SoC is used in the decision-making layer, responsible for processing and integrating data from sensors in the perception layer, and then making driving decisions on behalf of the human driver.

The industry value chain of autonomous driving SoCs and solutions mainly includes semiconductor manufacturers, suppliers of autonomous driving SoCs and solutions, and end-users.

Source: Frost & Sullivan report

SoCs are crucial for ADAS automotive performance. Driven by the growing ADAS automotive sales market, the ADAS SoC market has expanded rapidly in recent years. In 2023, the global and Chinese ADAS SoC markets reached RMB 275 billion and RMB 141 billion respectively. Driven by the further popularization of ADAS functions, the global ADAS SoC market is expected to reach RMB 925 billion by 2028, with a compound annual growth rate of 27.5% from 2023 to 2028. The Chinese ADAS automotive sales market is in a stage of rapid growth, with the market scale of ADAS SoCs expected to reach RMB 496 billion by 2028, with a compound annual growth rate of 28.6% from 2023 to 2028.

Note:

The market size prediction for ADAS application autonomous driving SoC is determined through multiple factors, such as the penetration rate of autonomous driving SoC, the sales volume of ADAS vehicles, the pricing trend of autonomous driving SoC, and the strategies of automakers.

Competitive landscape of the autonomous driving SoC market

Autonomous driving SoC suppliers are mainly divided into three categories: specific autonomous driving SoC suppliers, general-purpose chip suppliers, and automotive OEM self-developers. In terms of revenue from autonomous driving chips and solutions in 2023, Black Sesame Intelligence is China's fifth-largest provider of autonomous driving chips and solutions, with a market share of 2.2%.

Source: Frost & Sullivan report

Based on the shipment volume of high-performance autonomous driving SoCs in 2023, the company is the third-largest provider of such SoCs in China, with a market share of 7.2%.

Growth Drivers of the Autonomous Driving SoC Market

• Sales of autonomous vehicles continue to grow

The expansion of the ADAS SoC market is basically consistent with the growth of the ADAS automotive sales market. With the advancement of automotive intelligence, autonomous driving features are expected to become standard configurations in cars. The global ADAS automotive sales market is currently in a rapid growth phase, and continuous sales growth will further drive market growth in the ADAS SoC and related solution markets. In addition, the commercialization of ADAS cars in the future will create new market growth opportunities.

• The value of the bicycle SoC continues to increase

The autonomous driving feature can be expanded through remote software upgrades. The computing power of the autonomous driving SoC determines the maximum extent to which the vehicle's functions can be expanded throughout its lifecycle. Therefore, automotive OEMs typically deploy high-computing SoCs to support future autonomous driving upgrades. High-computing SoCs usually have higher prices on the market, potentially increasing the average SoC value per vehicle over the next few years to a percentage of the total cost of smart vehicles.

• Supportive policies

The autonomous driving SoC is an advanced automotive-grade chip that plays a significant role in achieving autonomous driving. Major countries around the world are closely monitoring the development of SoCs. In particular, the 'New Energy Vehicle Industry Development Plan (2021-2035)' issued by the Chinese government clearly states the need to break through key technologies such as automotive-grade chips and intelligent computing platforms.

Frost & Sullivan has extensive research experience in the automotive and transportation industries and has assisted well-known companies in successfully listing on capital markets. Successful listings include: Xirui Aircraft (2507.HK), Didi Chuxing (2559.HK), Extreme Intelligence (ZK.NYSE), Zhihang Automobile (1274.HK), Lüyuan Group (2451.HK), Noco-noco (NASDAQ: NCNC), VinFast (NASDAQ:VFS), Shengshi Dalian (NASDAQ:SDA), Youpin Auto (NASDAQ:UCAR), HSAI Technology (HSAI.NASDAQ), ECX Technology (ECX.NASDAQ), Boyang International (2457.HK), Newton Group (NWTN.NASDAQ), Zhongxin Hangkong (3931.HK), Leapmotor (9863.HK), DBS World (2418.HK), Kuaidao Taxi (2246.HK), NIO (NIO.SGX), NIO (9866.HK), Cangang Railway (2169.HK), Yanguang Mingzhu (YGMZ.NASDAQ), Asia Express (8620.HK), InfinityL&T (1442.HK), TOMOHOLDINGS (6928.HK), EH Technology (EH.NASDAQ), Aodima (8418.HK), Xiangxing International (8157.HK), CIMC Vehicles (1839.HK), Xunlong (1930.HK), CSSC Leasing (3877.HK), Chengdu Expressway (1785.HK), Tianrui Auto Interior (6162.HK), Baren Holdings (2885.HK), Huazi International (2258.HK), Pulin Chengshan (1809.HK), NIO (NIO.NYSE), Wanlida (8482.HK), Qilu Expressway (1576.HK), Yingheng Technology (1760.HK), Asia Industry (1737.HK), Ruifeng Power (2025.HK), Gaomeng Technology (8065.HK), Hebei Yichen (1596.HK), Zhengli Holdings (8283.HK), Junao Holdings (8035.HK), Yadi Group (1585.HK), Yihai Car Rental (EHIC.NYSE), Xincheng Power (1148.HK), Zhengxing Wheels (ZX.NYSE), Shuanghua Holdings (1241.HK), Changfeng Axle (1039.HK).