Huaxi Securities released a research report stating that the current market faces multiple uncertainties. Domestic TMT sectors, including communications, are experiencing short-term valuation adjustments due to Q3 earnings reports, warranting a cautious and neutral allocation approach.
Long-term trends such as 6G development, domestic substitution, self-sufficiency, and defense-related advancements are expected to drive opportunities in computing power leasing, satellite communications, defense communications, and 6G. The firm remains optimistic about high-growth potential in these sectors.
Key highlights include: 1. **Satellite IoT Commercial Trials Launch**: China's Ministry of Industry and Information Technology officially initiated a two-year satellite IoT commercial trial during the 2025 China 5G+ Industrial Internet Conference. Satellite networks, as a foundation for 6G, align with current standardization timelines. Following indications of satellite internet licensing since August, this marks a critical step toward large-scale commercialization. Rapid advancements in satellite internet—including increased capacity, reduced latency, and applications like direct smartphone-satellite broadband and LEO-based autonomous driving—are accelerating. The firm recommends satellite communication and IoT-related beneficiaries.
2. **Short-Term AI Market Volatility**: AI large models are still seeking stable use cases, while global market concerns drive sentiment fluctuations. Policy uncertainties in China and the U.S. further impact domestic AI chip adoption. With Tencent's near-term capex cuts and conservative spending by Chinese internet firms, AI strategies prioritize monetization over heavy-asset expansion. However, domestic AI chip development remains a long-term inevitability, presenting growth opportunities for local players like Cambricon and SMIC.
3. **Long-Term Opportunities**: Advanced manufacturing and chip architecture upgrades are expected to boost domestic computing power, benefiting sectors such as LPO, CPO, PCBs, switches, OCS, and multi-mode fiber. Key beneficiaries include: - Switches: ZTE, Unisplendour, Centec, Ruijie Networks - Optical components & OCS: Accelink, HG Tech, Eoptolink, InnoLight, TFC, T&S, Optilab, DK Photonics, Lingyun Guangke, Sicoya, Optowide, LongXing - PCBs: Victory Giant, Wus Printed Circuit - Others: Yangtze Optical, VSTECS, Talkweb
**Risks**: Slower-than-expected tech progress, industry collaboration delays, or policy implementation hurdles.
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