Tianfeng: Optimistic about technology domestic demand. Suggest focusing on military information technology + independent and controllable direction such as satellite.

Tianfeng released a research report stating that under the backdrop of the US-China trade war, the defense industry has a natural closed-loop property, a high degree of industrial chain autonomy, and certain "risk-averse" attributes. It is recommended to pay attention to the military information industry chain related targets: (1) Military semiconductor: Compared to passive components & FPGA which have been fully domesticated, it is recommended to focus on the analog chip section, such as Great Microwave Technology, Chengdu. (2) Military communication: Including radios, BeiSan, data links, military broadband, etc. Related targets include Guangzhou Haige Communications Group Incorporated, Jushri Technologies, Inc, Tianjin 712 Communication & Broadcasting. (3) Unmanned equipment + AI: Guangzhou Haige Communications Group Incorporated, Shanghai Huace Navigation Technology (computer joint coverage), Tianjin 712 Communication & Broadcasting. (4) Satellite: Zhejiang Chengchang Technology, Great Microwave Technology, Jushri Technologies, Inc, Tongyu Communication Inc., Xinsci Mobile, Wuhan Yangtze Communication Industry Group etc. The main viewpoints of Tianfeng are as follows: The defense industry chain is relatively closed-loop, driven by the trend of autonomy and controllability In terms of midstream communication equipment, domestic production has been basically achieved comprehensively, and domestic communication equipment has a high cost-effectiveness and will not be significantly impacted by the international market; in terms of upstream semiconductors: the production processes of digital chips above 28nm have been basically domesticated, while the domestication rate of analog chips still needs to be improved. Medium sampling rate, high-speed, high-precision ADC/DAC has been applied to military wireless communication terminals, and high sampling rate products are expected to accelerate penetration in fields such as digital phased array radar in China. There are signs of recovery in the industry after adjustment In the years 2022 to 2024, the main units of the industry will mainly focus on digesting downstream existing orders. Coupled with the midterm adjustment impact of the 14th Five-Year Plan equipment procurement plan, the industry demand will be under pressure in 2024. 2025 will mark the closing stage of the implementation of the "14th Five-Year Plan" for the Chinese military, with various strategic tasks and major projects entering the final stage. In terms of guided missiles, some inertial guidance device contracts and missile ammunition product orders are gradually starting, and the recovery is expected to be directed downstream from upstream chips & components; in the direction of informationization, the information support unit for troops was established on April 19, 2024, and it is a key support for coordinating the construction and application of the network information system. The bank believes that attention can be given to military data links, satellite internet, unmanned communication, etc. Construction of unmanned combat systems, AI empowers intelligent equipment development The militarization of AI technology is a general trend, and "control intelligence" has become the key to victory in modern warfare. Intelligent unmanned systems, as a new type of equipment formed by the close combination of artificial intelligence and unmanned equipment, are becoming an important part of the national defense equipment system. By improving combat efficiency through precise data analysis and real-time decision-making, it expands battlefield advantages. The trend of future wars is expected to be AI-assisted decision-making, with AI controlling various unmanned equipment for cluster operations. Currently, the application of artificial intelligence in the military field is still in its infancy, and the rapid development and popularization of AI technology are driving the integration of AI with various types of unmanned equipment such as drones, unmanned vehicles (military Siasun Robot & Automation), unmanned ships/boats, unmanned underwater vehicles, etc., accelerating the landing of intelligent unmanned equipment. 2025 is a turning point for satellites, and commercial aerospace is accelerating The constellation of satellite internet has entered the stage of accelerated network construction progress. On April 1st, our country's Long March 2D carrier rocket successfully launched the new satellite internet technology test satellites 0001 to 0004 into the designated orbit in a one-launch-four-star manner. The new satellite internet technology test satellites use Ka-band payloads for mobile broadband direct satellite links, earth-space network integration, and other technology test verifications, providing strong technical support for the development of mobile direct satellite services. The bank predicts that commercial aerospace will enter an accelerated network construction phase, and the era of mobile satellite linkage is expected to begin. Risk warning: Military expenditure falls short of expectations; risk of military orders pace; new equipment development and delivery fall short of expectations; risk of changes in the international situation.