HaoYing Technology International Holdings Limited (hereinafter referred to as 'HaoYing Technology') successfully listed on December 12, 2022. The company plans to issue 3,600 million H shares, of which 90% will be international offerings and 10% will be public offerings, with an additional 15% being over-allotment rights. The issue price per share is HK$2.73.
During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication between the issuer and the Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Exchange.
Investment highlights
The company is a provider of IoT application data transmission and processing services, as well as communication equipment, that adopts 5G technology in the IoT market. Its customers cover various industries;
The company's software and hardware integration services, along with its short-term delivery capabilities, can provide customers with one-stop data transmission and processing;
The company's strong innovation and research capabilities support its business growth;
The company's diversified product portfolio provides a stable and growing source of revenue;
The company has an experienced management team with outstanding academic and business insights.
According to the Frost & Sullivan report, in terms of revenue for 2021, the company:
Ranked eighth in the China 5G private network market, accounting for a market share of 1.2%;
From 2021 to 2026, the compound annual growth rate of China's 5G private network market will reach 108.2%, indicating broad market prospects.
Overview of the IoT Market in China
The Internet of Things (IoT) refers to the network that connects various information sensing devices to the internet, aiming to connect everything to the network for identification and management. China's IoT market includes upstream software and hardware, midstream IoT solutions, and downstream IoT applications. The upstream mainly consists of sensing devices and communication devices, such as sensors, antennas, routers or gateways, as well as software, which operates on the sensing devices and communication devices.
In the midstream, IoT market participants aim to provide IoT solutions for their customers to address the connection of sensing devices, as well as data collection and conversion. The general architecture of IoT solutions includes four layers: the perception layer, network connection layer, platform layer, and application service layer. The perception layer is equipped with several chips and communication modules, among other sensing and communication devices. The network connection layer is embedded between the perception layer and the application service layer to connect the sensing and communication devices with the IoT applications on the service layer. Sometimes, an additional platform layer is built between the network connection layer and the application service layer to provide big data and artificial intelligence analysis services, which can be selected according to customer requirements. At the application service layer, IoT solution providers are responsible for deploying various IoT applications for transforming and managing collected data.
The downstream refers to various IoT applications, mainly including manufacturing, logistics, transportation, agriculture, mining, healthcare, energy, and others.
The market scale of China's Internet of Things (IoT) industry has rapidly grown from RMB 912 billion in 2016 to RMB 2923.2 billion in 2021, with an annual compound growth rate of 26.2%. It is expected that from 2021 to 2026, the market will grow at a compound annual growth rate of 13.3%, reaching RMB 5466 billion by 2026. This growth is supported by favorable government policies and the continuous introduction of advanced technologies.
Source: Frost & Sullivan report
The competitive landscape of the IoT market in China
The competition in the IoT market in China is fierce and fragmented, with over 30,000 market participants. According to a Frost & Sullivan report, based on revenue in 2021, the top ten IoT market participants in China accounted for 20.0% of the national market, among which HaoDun Technology's market share was 0.006%.
Source: Frost & Sullivan report
Future Trends and Challenges of China's Internet of Things Market
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Government's initiatives for smart city construction
Smart cities are one of the main application scenarios for IoT solutions. Smart cities are modern urban areas with a high level of technology, using various communication methods, voice activation techniques, and sensors to collect specific data. The information obtained from this data is used to manage assets, resources, and service efficiency, while the data itself is used to improve the operation of the entire city. The concept of smart cities integrates information and communication technologies as well as various physical devices connected to the IoT network to optimize urban operations and services and connect with citizens. The Chinese government has implemented a series of policies to regulate and support the development of smart cities, including the "Implementation of Urban Renewal Actions" issued by the Ministry of Housing and Urban-Rural Development in 2021. With government support, the construction of smart cities is expected to accelerate, which will further promote the development of China's IoT market.
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The widespread application of IoT solutions
The demand for digital transformation is on the rise in various fields. Internet of Things (IoT) solutions are appearing in a range of scenarios, involving not only industrial engineering manufacturers but also enterprises within other industries that require broadband and high transmission speeds, such as retail, agriculture, financial services, automotive, and healthcare. In the future, the widespread application of IoT solutions is expected to bring more development opportunities to market participants in China.
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Adopt big data analysis platform
The operation of IoT solutions requires the collection of massive amounts of data. The increase in data volume poses a severe challenge to the collection, storage, and analysis of such data. IoT solutions are expected to adopt new advanced analytical tools to process and analyze the collected large volumes of data, and the application of big data and artificial intelligence analytics platforms is expected to become widespread in this field.
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Network security risks
With the development of wireless communication networks and the deployment of the Internet of Things (IoT), people can easily connect to wireless networks and share large amounts of data within the deployed networks and systems. As a result, a series of new network threats have emerged. With the increasing popularization of IoT and wireless technology applications, as well as the surge in malicious network attacks, many enterprises face cybersecurity risks. Therefore, these companies also tend to establish their own 5G private networks to protect their databases from data leakage.
Overview of China's 5G Private Network Market
5G refers to the fifth-generation mobile network. The definition of 5G technology first appeared in the white paper released by the Next Generation Mobile Networks Alliance (NGMN) in 2015. From 2015 to 2016, 5G technology underwent testing and preliminary research. In 2017, the 3GPP (Third Generation Partnership Project) established 5G standards and began technical trials to support the development of supplementary technologies such as DAS and LTE-U. In 2018, large-scale MIMO and digital beams were developed, which can enhance 5G signals and meet the needs of end-users. 5G frequencies have reached 6GHz. The Sub-6GHz band and millimeter-wave spectrum are two frequency specifications defined and used for 5G technology. Sub-6GHz refers to the medium and low frequency bands below 6GHz, while millimeter-wave refers to the high-frequency radio frequency band above 24GHz with wavelengths less than 10 millimeters. Currently, the most commonly used 5G technology in China is Sub-6GHz.
5G technology aims to provide higher peak data speeds of multiple Gbps, ultra-low latency, greater reliability, massive network capacity, and improved availability, as well as offer a more unified user experience for more users. 5G can be up to 100 times faster than 4G, accelerating the expansion of IoT application scenarios such as consumer applications and industrial applications. In 2020, 5G technology officially entered commercial use.
Compared to previous generations of standards, the 5G standard is a more unified one worldwide. 5G was initially introduced in 2018 by freezing version 16 (Phase 2 of 5G) of 3GPP, which has been widely adopted by member states of 3GPP. The IoT market is expected to benefit from the high transmission speed and low latency of 5G technology. By breaking through the capabilities of 4G technology, 5G creates a faster, higher-bandwidth, and lower-latency friendly ecosystem for the Internet of Things compared to 4G technology.
China's 5G private network market size
The China 5G private network market began to generate revenue in 2020. In 2020, the total revenue of the China 5G private network market was RMB 23 billion. In 2021, the 5G private network market accounted for about 0.2% of China's Internet of Things market, with a total revenue of RMB 60 billion. With the acceleration of digital transformation in various industries, the total revenue of China's 5G private network market is expected to reach RMB 2361 billion by 2026, with a compound annual growth rate of 108.2% from 2021 to 2026.
Source: Frost & Sullivan report
The competitive landscape of China's 5G private networks
The China 5G private network market is relatively concentrated and dominated by a few market leaders. In 2021, there were only over 20 participants in the Chinese 5G private network market. According to a Frost & Sullivan report, in 2021, the total revenue of the top 10 participants accounted for approximately 96.3% of the total revenue of the Chinese 5G private network market, among which HaoDing Technology had a market share of 1.2%, ranking eighth.
Source: Frost & Sullivan report
Future Trends and Challenges of China's 5G Private Networks
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Development of emerging technologies
The development of 5G applications has provided tremendous opportunities for the 5G private network market. At the same time, diverse and complex 5G application scenarios pose higher demands on 5G private networks. 5G private networks are committed to developing new technologies to optimize product performance. For example, 5G micro base station large-scale MIMO technology is a core technology of 5G private networks, aimed at improving spectrum efficiency and system capacity. In the future, the development of emerging technologies is expected to broaden downstream applications of 5G private networks, further driving the rapid development of the 5G private network market.
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The demand for 5G private networks is constantly increasing.
In the future, 5G networks can support various scenarios of intelligent manufacturing, including millisecond-level extremely low latency required for robotic arm collaborative control and high bandwidth, millisecond-level low latency required for augmented reality applications in advanced production assistance systems. As people become more aware of data security and demand lower latency in data processing, more enterprises will build low-cost and convenient self-owned 5G private networks, which will also become an important part of enterprise network coverage planning.
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Integrate micro base stations and edge computing in 5G private networks
The continuous exploration of 5G application scenarios will generate huge demand for edge computing. Edge computing refers to a distributed computing framework that brings applications closer to data sources such as IoT devices or local edge servers. Edge data centers are located closer to information sources and can perform simple data processing locally, greatly reducing network latency, speeding up feedback, improving user experience, and reducing network congestion. 5G private networks have high micro base station density, simple deployment, self-optimization, and low cost, and are highly compatible with edge computing platforms. The future increase in edge computing demand will promote the sales of 5G micro base stations and accelerate the development of 5G private networks.
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Insufficient talent
With the gradual popularization of emerging 5G technologies, the demand for professionals in R&D, engineering applications, operation management, and related vertical industries within 5G networks and the Internet of Things (IoT) is increasing day by day. 5G networks and IoT are emerging industries, and there is a significant gap between market demand and talent supply. In addition, related education and skills training may not keep up with the rapid development of the 5G and IoT industries.
Frost & Sullivan has extensive research experience in the communications technology industry and has assisted well-known enterprises in successfully listing on capital markets. Successful listings include Xuanwu Cloud Technology (2392.HK), Huitongda (9878.HK), Innovent AI (2121.HK), SenseTime (0020.HK), Qinhuai Data (NASDAQ: CD), Mingyuan Cloud (0909.HK), CenturyLink Group (1849.HK), WeCom Group (2013.HK), Wanke Yilian (1762.HK), AsiaInfo Technologies (1675.HK), Hong Kong Asia Holdings (1723.HK), Aurora Mobile (NASDAQ: JG), Kingsoft Holdings (8606.HK), Qiyi Technology (1739.HK), WeBank (2003.HK), Tenpay (1806.HK), Atlinks (8043.HK), Zioncom (8287.HK), ISP Global (8487.HK), Vobile (3738.HK), iBuyTech (2708.HK), iClick (NASDAQ: ICLK), Shengye Capital (6069.HK), Anlink International (8410.HK), Ank Systems (8353.HK), Junmeng International (8062.HK), Feisida (8342.HK), Future Data (8229.HK), and Asia Backup (8290.HK).
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*The above order is not sequential and is arranged in reverse chronological order based on listing time.
