How can mobile phone manufacturers enter the TWS headphone track 100 billion market cake distribution?

Apple AirPods Pro, Amazon EcoBuds, and Microsoft Surface Earbuds, the TWS (True Wireless Stereo) headset market have ushered in an explosion in sales. Domestic mobile phone manufacturers such as Huawei, Xiaomi, and Vivo have also followed suit, with prices in Hundreds to thousands of dollars.

The agency predicts that the global market for TWS headsets this year is expected to reach 120 million pairs, and is still growing rapidly.

A person in charge of a domestic mobile phone manufacturer told First Financial that from the second half of the year, the release rhythm of TWS headsets by various manufacturers has significantly accelerated, mainly due to the maturity of the upstream chip industry chain and Apple’s education of user habits. I believe This trend will continue into next year.

Apple leads, Android catches up

Guoxin Securities estimates that according to the average unit price of TWS headsets of 200 yuan, and the global annual shipment of 1.5 billion smartphones if the average penetration rate of TWS reaches 50%, the theoretical annual output value of global TWS headsets is more than 150 billion yuan.

From the perspective of market share, Apple is in an absolute leading position on the TWS headset track. According to market research firm Counterpoint data, in the third quarter of 2019, Apple’s single quarter market share accounted for 45%, which was significantly ahead of other manufacturers.

Since Apple released the first generation of AirPods in 2016, due to the stable connection, low latency and long standby time, it has impressed users. It has now evolved to the second generation and has become the benchmark for TWS headsets. In the Android camp, the development of TWS headsets has always been unsatisfactory, and it is not as good as AirPods in terms of connection stability, standby time, voice delay, and sound quality.

The underlying reason lies in the use of Bluetooth chip solutions.

The biggest difficulty of TWS lies in connection issues, including Bluetooth connection stability and low latency. As a short-range wireless communication technology, Bluetooth can realize data exchange between fixed devices and mobile devices. Generally speaking, Bluetooth before Bluetooth version 3.0 is called traditional Bluetooth, and Bluetooth standards after 4.0 include the traditional Bluetooth module part and the Bluetooth low energy part (BLE).

It is reported that ordinary Bluetooth audio equipment can only achieve a one-to-one connection, and because the left and right earbuds of the TWS headset do not have a wired connection, it is necessary to achieve a one-to-two connection when connecting to a mobile phone.

Apple AirPods uses Snoop listening mode, with its own patented technology, you can listen to left and right ears at the same time. Listening to the signals sent by the mobile phone through certain rules to find out the respective signals of the main and secondary ears, the user experience is better.

The traditional Android phone solution is to implement binaural stereo through the main ear forwarding method, but it also faces a series of problems. For example, the Bluetooth signal forwarded by the main ear is easily interfered with by other Bluetooth and WiFi signals. Forwarding adds delay and causes the main The power consumption of the ear is higher than that of the secondary ear, so TWS headphones face challenges in connection stability, signal synchronization of the primary and secondary headphones, and standby time, which is why Android-based TWS headphones are not as good as AirPods.

However, these problems were solved with the help of chip vendors.

The implementation of Huawei, Qualcomm TWS, Hengxuan LBRT, and Rhoda MCSync solutions have made the binaural direct connection solution more mature, reduced power consumption caused by poor connections, and significantly improved battery life.

For example, Edifier’s (002351.SZ) solution is Qualcomm’s QCC3020, which allows two independent audio streams to be transmitted directly from the phone to different headphones. Equipped with a new 5.0 Bluetooth solution, the transmission rate can reach up to 3.0MB / s. The brand ’s TWS headset sales have grown significantly since mid-2019, with overall shipments exceeding 1 million units in the first three quarters, and it is expected to challenge 4 million units throughout the year.

Zhanrui also previously announced the launch of the TWS Bluetooth headset chip Ziguang Zhanrui Ivy 5882, which supports Bluetooth 5.0 and can provide a dual-ear experience. It is reported that the TWS Bluetooth headset equipped with Ivy 5882 has been officially launched in mass production.

And Huawei’s FreeBuds3 uses Huawei’s self-developed Kirin A1 chip and self-developed dual-channel synchronous transmission technology, which has changed the previous Hengxuan forwarding scheme adopted by FreeBuds, FreeBuds2pro and Honor FlyPods. The Kirin A1 chip solution is similar to Qualcomm’s TWS +, which enables the headset to obtain the left and right channel signals from the mobile phone respectively, achieving more efficient transmission and lower power consumption.

Everbright Securities believes that through the self-developed Kirin A1 chip to adapt to its own mobile phone Kirin SoC platform, Huawei will also establish its own FreeBuds3 headset to connect with Huawei mobile phone ecology, reaching or exceeding the good ecological experience of AirPods and iPhone.

Favorable domestic ODM and upstream manufacturers

TWS currently replaces traditional wired headsets for use with smartphones. Because TWS headsets and mobile phones have strong binding characteristics, TWS headsets from mobile phone brand manufacturers will usher in a larger market. According to the global smartphone shipments of Android and Apple 6: 1 in 2018, the shipment of Android TWS headsets may also be six times that of AirPods in the next few years.

According to Counterpoint Research data, global TWS headset shipments reached 33 million pairs in the third quarter of 2019, while shipments in the second quarter were 27 million pairs, an increase of 22.22%. In the third quarter of 2019, global TWS headset shipments reached US $ 4.1 billion. From a regional perspective, US shipments accounted for 31% of the global market share, and the third quarter of this year was the first time in history that single-season shipments exceeded 10 million units. The growth rate of TWS headsets in the Chinese market is obvious, with a quarter-on-quarter increase of 44%.

Referring to the development history of copycat machines, China Everbright Securities believes that the TWS industry pattern will go through the following processes: First, Apple AirPods create new products and use them by high-end customers; then, white-brand TWS headphones will help open the market due to low prices; in addition, brand manufacturers rely on Product quality and brand advantages make TWS headsets concentrated to brand manufacturers. Finally, through the ecology formed by TWS headsets and smartphones, the TWS industry will concentrate on headphone manufacturers. TWS headsets from Apple, Huawei, Samsung, OPPO, Vivo, Xiaomi, and other mobile phone brand manufacturers will occupy the market.

Shengang Securities believes that with the hot sales of TWS headsets, companies in the domestic-related industry chain are expected to benefit, such as Apple AirPods foundry Lixun Precision (002475.SZ) and GoerTek (002241.SZ), and domestic NorFlash leader Zhaoyi Innovation (603986.SH), analog chip leader Shengbang shares (300661.SZ) and discrete device leader Weir shares (603501.SH), etc.

From the perspective of business scope, Lixun Precision and Goertek are the core ODM (original manufacturing) manufacturers of Apple’s AirPods supply chain. Judging from the report of Luxun Precision for the third quarter of 2019, the company’s inventory increased by 111.76% over the end of the previous year, mainly due to the increase in performance and the increase in materials. The chain increased by 4.181 billion yuan, of which about 3.5 billion yuan was prepared for customers’ new products, and is expected to be sold in October and November. The company’s inventory has increased significantly, mainly due to the stocking of AirPods Pro.

In the research report, Shengang Securities stated that from the Apple official website, the AirPods Pro’s delivery cycle takes 2 to 3 weeks. Order.

Zhaoyi Innovation is a leading domestic NorFlash company. Traditional wireless Bluetooth headsets have few functions, and the main control Bluetooth chip memory can already meet the needs, while TWS headsets have more functions. In order to store more firmware and code programs, and external SPINORFlash needs to be expanded, and it requires small size and low power consumption. Therefore, with the large-capacity NorFlash has become a trend, domestic NorFlash leaders will directly benefit.

Shebang Co., Ltd. is a leading company in domestic analog chips, mainly engaged in power management products and signal chain products. The company’s charge management chip SGM40561 is widely used in domestic TWS headsets, such as Huawei Freebuds, Xiaomi Bluetooth headset AirDots Youth Edition, Netease Cloud Music Bluetooth Audio Receiver, and Meizu POP True Wireless Bluetooth Sports Headset. Weir is a leading domestic discrete and passive device company. The company’s overcurrent protection chip WS3210C has been successfully applied to Huawei’s FreeBuds2Pro and Xiaomi Bluetooth headset Air.

“This year, whether it is true wireless headphones, sports headphones or noise-canceling headphones, the demand for the entire market has been growing rapidly; especially the two categories of true wireless headphones and noise-canceling headphones have become the keywords of the entire headset market.” The relevant person in charge of JD.com said that within 5 minutes from November 11, the sales of high-end headphones exceeded 220,000; the sales of noise-canceling headphones increased 231% year-on-year; the sales of true wireless headphones increased 13 times year-on-year;

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