2011 investment strategy: LED industry growth to return to structural opportunities

Global electronics industry boom peaked. The global semiconductor sales growth slowing, WSTS forecast of 2011 and 2012 global semiconductor sales growth rate was only 4.5% and 5.6%, while the growth rate in 2010 was 32.7%, the downward trend is obvious; further improve the inventory, since the three quarter of this year the stock has been close to the peak in 2008, indicating that the market demand is weak, there is a potential threat to future excess; North America and Japan orders shipment ratio (BB value) have continued to decline. We believe that in 2011 the electronics industry boom down, the industry growth rate decreased significantly.

Three factors in the future will continue to enhance the China market boom. The future of the country will continue to implement the home appliances and home appliance trade policy, continue to be optimistic about them for electronic components demand; consumer electronics constantly upgrading, including e-books, intelligent mobile phone, tablet computer, notebook computer, flat screen TV, a new generation of electronic products with broad market space. Electronic products consumption upgrade drive electronic components demand; the national focus on the development of seven strategic emerging industries in the next few years will be rapid development, which greatly promote the demand for the upstream electronic components, to enhance China's electronic components industry boom.

Heavy industry investment strategy.

(1) touch screen: projected capacitive touch screen is the direction of development, development prospects, the tablet computer will become the second killer application of mobile phone after the projected capacitive touch screen, the tablet computer in 2011 for projected capacitive touch screen demand is expected to be explosive growth;

(2) power semiconductor: the most optimistic about the prospects for the development of MOSFET and IGBT, 2009-2014 MOSFET Chinese market compound annual growth rate will reach 20%, IGBT import substitution space;

(3) LED: by the coming tide, choose red and yellow LED, upstream, downstream selection of package App Co has scale and technical advantages.

Investment strategy and industry rating. In 2010, the electronic components industry usher in a broad market, the industry valuation levels are close to the historical high, stocks have also hit a record high, we believe that the industry valuation level is already at a high level, there are downside risks. At present, the overall estimate of the electronic components industry has been on the high side, next year, it is difficult to have the integrity of the opportunity, but there are still some structural opportunities sub sectors.

Including industry touch screen, power semiconductor and LED etc., can continue to maintain high growth next year, these sub sectors to offset the high valuations by high growth, we are still optimistic about their prospects. We give the electronic components industry neutral rating, given touch screen, power semiconductor and LED sub industry stronger than the city rating.

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