Special report on the module power supply industry

The heart of electronic equipment, modularization is the general trend

Electric energy porter, widely used downstream

A power supply is a device that converts one standard of electrical energy into another standard of electrical energy. The power supply is different from the battery, it does not generate electrical energy itself, but a device that converts one standard (current, voltage) into another standard (current, voltage). Different components and modules have different currents and voltages under standard working conditions, and different power supplies can provide suitable currents and voltages for corresponding components and modules, so the power supply is called the heart of electronic equipment. As an important part of electronic equipment, power supplies are widely used in downstream fields such as consumer electronics, communications, industry, automobiles, and aerospace.

According to the classification of power conversion methods, AC/DC and DC/DC power supplies are widely used. The power supply system usually needs multiple current and voltage changes before it can convert the external electric energy into the electric energy required by the electronic equipment under standard conditions. According to the form of input and output power, the power supply can be divided into AC/AC power supply (AC to AC), AC/DC power supply (AC to DC), DC/AC power supply (DC to AC) and DC/DC power supply (DC to DC) DC). Among them, the AC/DC power supply is mainly responsible for converting the alternating current output by the generator into high-voltage direct current to realize the "coarse adjustment" of electric energy; the DC/DC power supply is mainly responsible for further converting the battery or the DC power converted by the AC/DC power supply For the low-voltage direct current suitable for the work of downstream components, the "fine adjustment" of electric energy is realized.

Classified by product name and principle, switching power supply is the main variety. According to the "China Power Supply Industry Yearbook 2021" published by the China Power Supply Society, power supplies can be mainly divided into switching power supplies, UPS power supplies, linear power supplies, inverter power supplies, inverter power supplies and other power supplies according to product names and principles. Switching power supply refers to a power supply that maintains a stable output voltage by controlling the time ratio of switch on and off. It has the advantages of low power consumption, high conversion efficiency, and high load stability. Therefore, it has gradually replaced linear power supplies and become the main variety of power supplies. , accounting for more than half of the power supply market.

Modularization is the general trend, and thick film and microcircuit power supplies each have their advantages and disadvantages

Most module power supplies are based on the principle of switching power supplies and are DC/DC power supplies. Modular power supply, also known as power module, refers to a power supply that can be directly mounted on a printed circuit board, and can be an application-specific integrated circuit (ASIC), digital signal processor (DSP), microprocessor, memory, field programmable Gate array (FPGA) and other digital or analog loads. Most module power supplies are based on the principle of switching power supplies, which are DC/DC power supplies (direct current to direct current), and are used as secondary power supplies to achieve "fine adjustment" of electric energy.

The module power supply is located in the middle reaches of the industrial chain, and electronic materials and components are the main raw materials. The power industry chain includes raw material suppliers, power manufacturers, equipment manufacturers and industry application customers. Raw material suppliers are in the upstream of the power industry chain, providing control chips, power devices, transformers, PCB boards and other electronic devices; module power supply companies are in the middle of the industry chain, adopting different design and production schemes to process upstream components into module power supply products; Downstream equipment manufacturers are mainly aerospace institutes, complete machine enterprises, and communication equipment manufacturers, etc., who are responsible for integrating the module power supply into corresponding electronic equipment.

Integration and miniaturization are the general trend, and the module power supply has obvious advantages. Nowadays, the internal functional structure of electronic equipment is becoming more and more complex. Integration can effectively reduce the length of internal leads, reduce parasitic parameters, and reduce the design cost of power supply systems; miniaturization has advantages in aerospace and other fields that have strict requirements on volume, weight, and parameter allocation. The module power supply is highly integrated, and has the advantages of strong versatility, high flexibility, good heat dissipation, and high reliability, so it is widely used in aerospace, communications, new energy vehicles and other fields.

Under the trend of integration, "harmonious but different", microcircuit technology and thick film technology are the main paths. According to the process, module power supply can be divided into microcircuit power supply (PCB process) and thick film power supply (thick film process), both of which can further improve the integration of power supply: 1) PCB process: refers to the use of automation equipment, the surface Mounted components are installed and soldered on the printed PCB, and then packaged into the shell to form a module power supply product. 2) Thick film process: use thick film processes such as screen printing and sintering to make a passive network on the same substrate, and then assemble semiconductor device chips, monolithic integrated circuits, micro components, etc. on it, and then add packaging to form a modular power supply product .

Microcircuit power supplies and thick film power supplies each have their advantages and disadvantages. From the perspective of process, the difference between microcircuit power supply and thick film power supply is mainly in the substrate and packaging links: 1) Substrate: microcircuit power supply is directly assembled on the external PCB board, while the thick film power supply first prints the required circuit on the "white board" structure, so the thick film process is also called "microelectronics" process. 2) Packaging: Thick-film power supplies are usually filled with inert gases such as nitrogen for metal hermetic packaging. Due to the difference between the two processes, thick-film power supplies usually have higher cost and technical difficulty, better reliability, longer storage time, wider temperature range, and smaller volume and weight. They are mainly used in the aerospace field; microcircuit power supplies have lower costs. , High-power performance is better, and the versatility is stronger. In addition to aerospace, it is also widely used in communications and other fields.

High power density and high efficiency are the development trend, and digitalization is in the ascendant. 1) High power density: Under the guidance of the miniaturization and lightweight requirements of downstream applications, the main development trend is to output more power with smaller volume and lighter weight; 2) High efficiency: The increase in power density is usually accompanied by The heat generation is increased, and it is often limited by the heat dissipation problem after it is increased to a certain level. Reducing the calorific value of the module power supply by reducing the loss of power devices is the proper meaning of increasing the power density. In addition, realizing the control strategy and protection logic through digital programming can effectively simplify the peripheral circuit of the module power supply, further reduce the size and increase the power density, so digitization has gradually become an important development direction of the module power supply.

Informatization sets up the stage, localization dances

Military and civilian are different, high reliability is the core

Due to the particularity of the application terminal, etc., high reliability is the core of the military module power supply. As a relatively basic component, military module power supplies are widely used in various electronic and information equipment in the sea, land, air and space. The downstream covers military aircraft, missiles, rockets, radars, satellites, ships, armored vehicles and other terminals. The working environment of military products often involves more extreme working conditions. For example, when a missile is in orbit, it needs to face extreme environments such as strong acceleration, strong vibration, and high temperature. It needs to face the interference of large temperature difference and cosmic rays, emphasizing performance indicators such as wide temperature range and radiation resistance. At the same time, downstream equipment such as aerospace has high cost and complex structure, and once it fails, it will cause serious losses. To sum up, quality is the core requirement of military module power supply.

Due to high reliability requirements and military product mechanism, military module power supplies are different from civilian products from R&D to production. The following will explain the differences between military and civilian module power supplies from five aspects: entry qualification, order mode, R&D, production mode, and production process: (1) Entry qualification: multiple qualification certifications are required. Military module power supply enterprises first need to obtain the "three certificates of military industry", namely military product quality management system certification, weapon equipment research and production unit confidentiality qualification certification, and equipment manufacturing unit qualification certification; secondly, they need to obtain the military electronic components quality committee issued by China Various national military standard production line certifications; finally, it is necessary to pass the supply qualification certification of downstream equipment manufacturers before entering the military module power supply industry for supply.

(2) Order mode: small batch, multi-category, high degree of customization. Due to the wide variety of weapons and equipment models, each model has different requirements for power parameters, so compared with civilian products, military orders have the characteristics of small batches and multiple categories, and it is often necessary to develop highly customized products according to downstream needs. (3) Research and development: the cycle is long. Because the product verification period of military products is generally longer than that of civilian products, and some military product module power supplies need to be jointly developed with downstream customers, the development cycle of military product module power supplies is usually longer than that of civilian product module power supplies. Due to the small batch and multi-category order mode, the proportion of customized research and development of military products is relatively high.

(4) Production mode: mainly based on sales and production. Military products usually use the sales-based production scheduling model, and after the company reviews the order internally, the materials are prepared according to the order. At the same time, military products will also be supplemented by a certain degree of product reserves to shorten product delivery cycles and quickly respond to market demand. (5) Production process: Reliability requirements lead to more inspection steps. Compared with the civilian module power supply, the military module power supply has more inspection steps in the production process, so as to ensure the traceability of the production process and further improve product reliability.

Due to the differences from qualification certification to production process, military module power supplies have higher added value than civilian products. Due to the qualification barriers of military products and the long R&D and verification cycle, it usually takes 3-5 years for new products to generate scale revenue; at the same time, the small batch, multi-category, and highly customized order mode also brings additional management Requirements, and it is difficult to form an obvious scale effect; in addition, the downstream customers of the military value reliability most, and are relatively less sensitive to price. Based on the above factors, military module power supplies are often priced higher, and have higher added value than civilian products. Taking Xinleon, a core supplier of domestic module power supplies, as an example, the gross profit margin of its special business continues to be higher than that of the communication business. In 2021, the gross profit margin of the special business will reach 60.9%, while the gross profit margin of the communication business will be 26.8%, and the gross profit margin of military products is significantly higher.

Speeding up informatization, the tens of billions of tracks are booming

Our country has a clear goal of strengthening the military, and the construction of informatization has been accelerated. Military informatization means the integration of target detection and tracking, command and control, fire strike, battlefield protection, and damage assessment through information integration, as well as the integration of the joint command center and the combat organizations of various services. The 10 "National Defense White Papers" issued by our country since 1998 have repeatedly expounded on the requirements and progress of my country's military informatization construction. Basically realize the modernization of national defense and the army", compared with the "three-step" during the 18th National Congress of the Communist Party of China, the goal of realizing the modernization of the army has been advanced by 15 years. Driven by policies, the construction of military informatization is advancing rapidly.

We believe that under the background of accelerating military informatization construction, the domestic military module power supply industry will benefit from: 1) Accelerated replacement and installation of weapons and equipment; 2) Increase in the value of electronic systems for new equipment, ushering in rapid growth: (1) Weapons Equipment "compensation" development space is broad. In terms of defense expenditure, my country's 2021 defense budget accounts for about 1.2% of GDP; compared with other military powers (groups) whose military expenditure accounts for GDP, the United States maintains it at about 3.2%, and India maintains it at about 2%. The Secretary-General of NATO has also repeatedly urged members China has raised this ratio to above 2%, and there is still a lot of room for improvement in my country's defense expenditure. In terms of equipment quantity and structure, my country's military aircraft has a large gap with the United States in terms of quantity and generation structure. According to "World Airforces2022" (Flight Global), the total number of my country's military aircraft in 2021 is still less than half of that of the United States. Generation aircraft accounted for only 54% of the total (the United States is almost all third-generation aircraft and above), and there is still a huge space for my country's weapons and equipment construction. As a relatively basic functional module, the demand for modular power supply will grow rapidly with the increase in equipment volume.

(2) The proportion of the value of advanced weaponry electronic systems has increased. Driven by a new round of scientific and technological revolution and industrial transformation, the trend of long-range precision, intelligence, stealth, and unmanned weapons and equipment is more obvious. The functions of electronic systems in sea, land, air, and space weapons and equipment tend to be diversified, the structure tends to be complicated, and the proportion of value continues to increase. On average, the power consumption and value of a single weaponry module will further increase, driving further expansion of industry demand.

It is estimated that the domestic military power supply market will reach US$2.8 billion in 2027, corresponding to a CAGR of 11.9% from 2021 to 2027. According to Reportlinker, the global military power supply market will reach US$7.3 billion in 2020, and is expected to reach US$12.4 billion in 2027, corresponding to a CAGR of 7.8%; the domestic military power supply market is expected to reach US$2.8 billion in 2027, corresponding to a CAGR of 2021-2027 Based on this, we calculate that the domestic military power supply market size in 2020 will be approximately US$1.27 billion (approximately RMB8.8 billion based on the average exchange rate of the year). Driven by the two logics of accelerating the replacement and installation of weapons and equipment and the increase in the value of electronic systems for advanced weapons and equipment, the military module power supply market is booming.

The demand for self-control is urgent, and domestic enterprises welcome golden opportunities for development

Overseas manufacturers have dominated for a long time, and trade frictions have been catalyzed by domestic substitution of foreign sources. The domestic power module industry started relatively late, and U.S. manufacturers such as VICOR, Interpoint, and VTP have dominated the domestic military power module market for a long time. According to the Ganhua Science and Industry announcement, before 2018, the localization rate of domestic military module power supplies was less than 20%. In 2018, the trade friction between China and the United States broke out. The United States restricted the export of electronic components including some module power supplies to China, and the supply side was further tightened. At the same time, the impact of the military reform was gradually implemented. The gap on the demand side is further enlarged. Catalyzed by both ends of supply and demand, there is an urgent need for independent controllability of module power supplies.

The gap between domestic and foreign countries is gradually narrowing, and the technology is replaced by domestically produced kernel drivers. In recent years, domestic module power supply manufacturers have continuously made breakthroughs in the technical fields of high power, high reliability, and high power density, and some module power supply products have been able to benchmark against the international advanced level. In terms of microcircuit power supply, the new Leoneng high-voltage full-brick module power supply products can already be compared with VICOR products in terms of input voltage, output power and other indicators, and even better in conversion efficiency; , Zhenhua Microelectronics and other companies are compatible with similar products of foreign companies such as Interpoint, VPT, IR, and DDC, and can develop LMS, CAST, and SAST grade products required by the First, Fifth, and Eighth Academy of Aerospace Engineering. Domestic power supplies can be used in major In terms of parameters, it is comparable to foreign competing products, and even better in fields such as anti-radiation.

Domestic substitution is in the ascendant, and domestic enterprises are developing rapidly. Trade frictions caused VICOR China's revenue in 2019 to decrease by -46.6% year-on-year to 390 million yuan.

Domestic manufacturers represented by Huawei and other companies have grown rapidly. From 2019 to 2021, the revenue CAGR of Xinleon Military Products, Zhenhua Micro, and VICOR will be 53.5%/45.6%/-3.2%, respectively. Profit CAGR reached 98.7%/162.7% respectively. Under the background of the pull of downstream demand in the industry and the acceleration of domestic substitution, domestic enterprises are ushering in a period of rapid development. The trend of external cooperation under the "small core and large cooperation" is obvious, and private enterprises welcome golden development opportunities. With the reform of the supporting system for military products, state-owned enterprises and scientific research institutes in the middle and lower reaches of the industrial chain gradually focus on the development and production of complete machines and related subsystems. Both the breadth and depth of participation are increasing. With the overall positive development trend of the industry and the continuous promotion of "small core and large cooperation", private enterprises are expected to usher in golden development opportunities.

Technology-based, channel-based

Hundreds of competitors compete for the best, and the industry concentration is relatively low

There are many manufacturers participating in the microcircuit module power supply, and Xinlei can be the leader in the subdivision. For a long time, domestic military microcircuit module power supplies have been dominated by overseas manufacturers such as VICOR and Interpoint. Private enterprises also have some participation. At present, on the one hand, the concentration of the industry is gradually increasing. Nu Skin has gradually grown into a leading domestic microcircuit module power supply company. At the same time, some small companies with low added value are facing survival difficulties; on the other hand, such as HTC Listed companies with technology and channel foundations such as Electronics and Sichuang Electronics are also actively deploying the module power supply business, and domestic manufacturers are blooming.

Institutes within the system are the mainstay of thick-film power supplies, and Zhenhua Microelectronics is growing rapidly. The development of thick film power supplies in China started in the 1960s. For a long time, domestic aerospace thick film power supplies were mainly imported from manufacturers such as Interpoint, VPT, and IR, 43 CETCs, 24 CETCs, 771 Aerospace Science and Technology Institutes, etc. There is also some participation, and the institutions within the system are the mainstay of domestic thick film power supplies. In recent years, companies such as Zhenhua Microelectronics have developed rapidly in the field of thick-film power supplies. At the same time, companies such as New Leoneng and Hongda Electronics are also actively deploying.

The concentration of the industry is low, and leading companies are expected to seize structural opportunities. We calculated in the previous article that the market size of the domestic military power supply industry in 2020 will be about 1.27 billion US dollars (approximately 8.8 billion yuan at the average exchange rate of the year). Based on this, we estimate that the market share of VICOR in the domestic military power supply industry in 2020 will be about 1.27 billion U.S. dollars. 7%, the industry CR3 is about 21%, and the CR5 is about 30%. At the same time, according to the "China Power Supply Industry Yearbook 2020", the scale of my country's module power supply market accounted for about 3% of the entire power supply market in 2019, but the number of enterprises accounted for 8%. To sum up, the market concentration of the military module power supply industry is still relatively low. In the rapid growth stage of the industry, leading enterprises are expected to further increase their market share by virtue of their technological advantages and channel advantages, and fully grasp the structural opportunities brought about by industry integration.

Driven by technology, facilitated by channels, the scale effect is obvious

When the industry concentration is low, customer channels and supply chain management capabilities are the core competitive elements. Major customers of military module power supply companies generally account for a relatively high proportion of revenue. Industry leaders Xinlei Energy and Juntao Technology will account for 56.0% and 60.1% of the revenue of the top five customers in 2021, of which Juntao Technology will be the largest in 2021. Customer revenue accounted for 26.5%. We believe that under the condition of insufficient industry competition, customer channels are the core competitiveness of enterprises. At the same time, considering the rapid increase in demand in aerospace and other fields, as well as the strong demand for "guaranteed supply" in special fields, supply chain management capabilities and timeliness of product delivery are also important competitive factors.

Technology is the key to the steady and long-term development of enterprises. With the increasing requirements for high reliability, miniaturization, high power density, and high efficiency in downstream applications such as missiles, satellites, and military aircraft, the barriers to R&D, design, and processing and production of module power supplies will be further consolidated. Overseas leader VICOR has maintained a leading position in technology in the industry since it released the first generation of high-power DC/DC converters in the 1980s, becoming an "evergreen tree" in the industry. With the gradual intensification of competition in the domestic market and the further increase in concentration, we believe that the importance of technology level in enterprise competition will be further highlighted, and it will be the key to whether enterprises can maintain steady growth in the medium and long term.

The scale effect is obvious, helping the leader to stabilize its advantages. Because the electronic components and supporting materials selected by the module power supply are highly versatile, and the upstream suppliers are fully competitive, it is easier to form a scale effect. With the increase in revenue, the net profit margins of New Leoneng and Zhenhua Micro will reach 19.8% and 39.1% respectively in 2021, an increase of 12.0pcts and 32.5pcts from the 2018 level, respectively, and the scale effect is obvious. On the one hand, leading companies in the industry can further reduce the average cost through large-scale production, gain product volume and price advantages, further consolidate market competitiveness, and increase market share; on the other hand, the long verification cycle of military products also makes it difficult for new entrants In the short term, the cost will be diluted by increasing the volume, so the scale effect is also an important factor for stabilizing the leading advantage.

Expansion of civilian products and solutions, breaking the ceiling of the industry

Through reviewing the development history of VICOR, the global leader in module power supplies, we believe that technology is the core driving force for the expansion of downstream fields, and the extension of the industrial chain is also an important development direction. Expansion of application fields and extension of solutions will help special module power supply companies further open up long-term growth space. The global leader in module power supplies, focusing on high-performance power modules. Founded in 1981, VICOR is a global leader in module power supplies and a major supplier of global military module power supplies. The company's products cover AC/DC power supplies, DC/DC power supplies, MIL-COTS (military-grade) power supplies, power supply systems and electromechanical accessories, which are widely used in aerospace, defense electronics and other military fields, and are actively expanding to AI computing, new energy Automobiles, LED lighting and other civilian fields.

Technology empowerment, actively expand the civilian field

Continuous innovation of module power supply technology, leading the world in military module power supply. VICOR revolutionized standardized DC/DC converters in 1984 with the introduction of the fully encapsulated "Brick" power brick VI-200 series modules, becoming the leading supplier of brick DC/DC converters in the 1980s and 1990s. Due to the weakening demand in the traditional telecommunications field, VICOR turned to high-reliability fields such as aerospace, defense electronics, industrial automation, and transportation in the early 21st century, and successively launched FPA (Factorized Power Architecture), VI chip modules, ChiP platforms, etc. to achieve efficiency and further increase in power density. By continuously focusing on and innovating high-end technologies, VICOR has become a world-class leader in the field of military module power supplies.

Actively deploy AI new energy and other civilian markets, and expand the application field to open up room for growth. VICOR actively expands civilian fields such as AI, new energy, and LED. In 2018, it launched a PoP (power package solution) dedicated to artificial intelligence AI computing to solve the contradiction between high current and high loss in AI microprocessors. It is expected to be released in 2022. Its upgrade solution VPD (Vertical Power Supply) will be delivered in 2020; at the same time, its modular power supply network products can meet the weight, volume, power and compatibility requirements of vehicle electrification, and are expected to be put into production by the end of 2022. Products in the AI field have become an important revenue growth point for the company in the past two years, and products in the new energy field are also expected to contribute considerable growth in the future, further opening up the company's growth space.

Leading by demand, extending comprehensive solutions

Extend to the downstream of the industrial chain to build a one-stop power supply solution. Under the impact of the traditional telecom market recession and IBA (Intermediate Bus Architecture) at the beginning of the 21st century, VICOR implemented the strategy of "mass customization" and extended to power supply integrated solutions. Now it has formed a relatively complete power supply comprehensive solution system. Its products include a variety of converters and complementary components, which can realize various input and output voltages and powers, and provide customers with modular power products, design tools and engineering support through the "power component design method", so that customers can achieve Get custom AC/DC and DC/DC solutions. At present, its comprehensive power supply solutions are widely used in civilian fields (such as autonomous driving, AI, new energy vehicles, and high-power LED lighting, etc.) and military fields (such as drones, etc.), contributing a considerable increase in the company's revenue.

Expansion of field and extension of industrial chain, breaking the growth boundary of the industry

Advanced products broaden the field, and brick products extend downstream. VICOR divides its products and services into two strategic directions: "advanced products" and "brick products". Among them, advanced products are innovative products based on its proprietary power architecture FPA, mainly targeting high-growth market segments with a low-mix, high-volume operation model, such as AI computing, automobiles, and solid-state lighting; brick products It mainly includes brick-type power modules used in traditional power system architectures, and is mainly deployed in mature market segments in a high-mix and small-batch mode, such as special fields, industrial automation, and industrial equipment. VICOR adheres to the innovation of high-performance power supply technology, and actively expands the application of module power supply to high-growth fields such as AI computing and automobiles; at the same time, it actively extends brick-type products to comprehensive power supply solutions to further increase the value.

The expansion of application fields and the extension of the industrial chain break the ceiling of the military field. As a leader in the module power supply industry, VICOR has always adhered to technology-driven, while actively expanding horizontally such as AI new energy and other high-growth fields, and extending vertically to system solutions to achieve sustainable development. By reviewing the development history of VICOR, we believe that the expansion of the civilian field and the downward value extension can effectively break the ceiling of the military field. In the short and medium term, domestic military module power supply manufacturers are expected to benefit from the acceleration of military informatization and domestic substitution, ushering in golden development opportunities; in the long run, the expansion of civilian fields and the extension of power systems are expected to further open up room for growth.