Overview of the Communications Industry 2023 Annual Report: Focusing on AI Computing Power and Operators

The telecommunications industry in 2023 presents the following characteristics:

1. The industry's revenue growth rate is high at first and low later, achieving a 5.3% growth for the whole year. High prosperity sectors such as AI hardware and operators drive revenue growth.

2. Industry profits are under pressure, achieving a growth of 3.2% for the year. Significant impairments in some companies have affected the overall profit performance.

3. AI is accelerating the transformation from economic prosperity to performance. In the first quarter of 2024, the performance of leading AI hardware companies such as optical modules and PCBs is accelerating.

4. The three major telecom operators maintain steady growth, playing the role of industry stabilizers. The construction of 5G and B-end businesses contribute to performance growth.

5. The differentiation within sub-industries is intensifying, with optical modules and operators performing prominently, while other sectors are under pressure.

Looking ahead to 2024, it is recommended to focus on two main directions: "AI hardware" and "operators":

1. AI Hardware: Firmly hold leading optical module stocks and seize opportunities as the industry chain gradually expands. Pay attention to optical devices, PCBs, cooling, and other segments.

2. Operators: With high dividends and growth potential, they are expected to become the computing power base of China's future.

Core Target:

• Optical Modules: Zhongji Xuchuang, NewEase, Tianfu Communication
• Optical Devices: Tai Chen Guang, Teng Jing Technology
• PCB: Hu Dian Co., Ltd., Shenzhen South Circuit Co., Ltd.
• Heat Dissipation: Invec, Vertiv Technologies
• Operators: China Mobile, China Telecom, China Unicom

Risk Warning: AI development is not meeting expectations, Computing Power demand is not meeting expectations.