Tongfang Shareholding, as the largest listed company under Tsinghua University's umbrella, will soon present its annual report to investors in about half a month. As one of the earliest domestic companies to venture into the Internet of Things (IoT), and as a representative of university-run enterprises aiming to learn from GE (General Electric), Tongfang has many aspects worthy of investor attention.
On the afternoon of March 26th, at the Tongfang Technology Plaza beside Tsinghua East Road, Sun Min, Vice President and Secretary of the Board of Directors of Tongfang Shareholding, gave an exclusive interview to the Securities Daily. From IoT to Tongfang's industrial structure, and then from performance to market value management, Sun Min explained a completely new Tongfang to the reporter.
It is normal for there to be bubbles in the early stages of IoT.
Securities Daily: As one of the earliest domestic listed companies to venture into IoT, how does Tongfang view the current IoT fever in the A-share market?
Sun Min: Without the financial crisis and the transformation of China's economic structure, IoT might not have been given due importance.
From an industry perspective, the core of IoT is software, followed by terminal sensors, with communication currently receiving heavy investment from the state. According to industry rules, it can be divided into three layers. The most basic layer is sensors, including technologies like RFID, which need to collect data from all aspects. The second layer is communication, where the state has made large investments, with 2G, 3G being relatively mature. The state has also invested heavily in fiber optic networks. The third layer involves data aggregation for decision-making and application.
The hardest part is the system-level software. Tongfang started working on this from 2001-2002. Software is about engineering, which requires repeated development. Tongfang productized the software, avoiding repetitive labor, strengthening reliability, and has been doing software platforms for more than 7 or 8 years. After developing the software, we found that our advantage in IoT became apparent with such a software platform.
IoT builds a software platform on mobile internet. For instance, Tongfang recently collaborated with China Mobile on logistics networks, selling GPS+GPRS+Beidou modules to logistics companies. Currently, IoT represents a fairly mature business model, not something entirely re-understood but rather utilizing new technology within traditional concepts. IoT is becoming increasingly clear.
Securities Daily: There is a process from R&D to commercial use for any technology, facing either market selection or elimination. What advantages does Tongfang have in IoT applications?
Sun Min: Unlike what the market rumors suggest, IoT doesn't necessarily require many standards. Each IoT network can have its own encoding. In the future, if standards are needed, first each device needs to be uniformly defined. What people may not know is that IoT can self-define and be closed. Standards can be self-defined within projects. In the past, Tongfang has been doing building control, so we are quite familiar with enterprise standards and know how to convert them into our own standards. When doing projects, Tongfang can resolve these issues. From a base number perspective, Tongfang has its own reserves in IoT, giving us a distinct advantage. We don't just look up from individual sensors but start looking down from system software.
Tongfang has two inherent advantages in doing IoT. First, it has technical reserves based on urban informatization to conduct business. Second, Tongfang has an ezONE business foundation software platform with independent intellectual property rights. After 7 or 8 years of exploration, Tongfang's IoT technology has become relatively mature. For Tongfang, IoT is a good tool to enhance competitiveness.
Securities Daily: How do you view the current IoT bubble in the A-share market?
Sun Min: In the past, the domestic IT industry did not advocate IoT, nor did various levels of government pay much attention. Tongfang's advantages in IoT were not evident. Now, Premier Wen Jiabao has proposed promoting the convergence of three networks and accelerating IoT research and application, which is a very good opportunity for Tongfang. Our accumulated technical advantages in IoT have become apparent.
Currently, there are many companies in the A-share market related to IoT, but from a technical and application perspective, they are still far from IoT.
A market always needs a certain amount of bubble support, especially in emerging industries. Without a vision, there wouldn't be so many companies venturing into this field, making it hard for this area to develop. In the information age, many times eyeballs generate benefits.
For example, back in 2000, both overseas and domestic media extensively discussed the internet bubble, believing that the internet's youthful lifespan was over. But ten years later, the internet not only survived but thrived even more. Aren't Baidu's Robin Li, NetEase's William Ding, and domestic companies like Sina and Sohu all very successful now?
Domestic companies should be cautious about patent traps when doing LED.
Securities Daily: Currently, the LED concept is prevalent in the A-share market, and Sanan Optoelectronics, which is somewhat related to LED, created a 'miracle' of rising from 37 yuan to 78 yuan in a month. Is LED really that hot?
Sun Min: LED is a blue sky industry without any clouds. Why replace lighting? Current light bulbs mostly contain heavy metals, which are polluting, and will eventually be replaced. LED's energy-saving and non-polluting characteristics are indisputable. Economic development at the cost of resource consumption cannot fundamentally solve problems. After the financial crisis, energy conservation and emission reduction have been advocated by the state, becoming an inevitable trend. Regarding Sanan Optoelectronics' LED stock price effect, as peers, we are not in a position to comment.
Securities Daily: Before the interview, I looked up some information and found that domestic electronic enterprises lagged behind foreign counterparts by at least ten years in the CRD and LCD eras. Can we keep pace with foreign giants in the LED era?
Sun Min: Tongfang started laying out the LED industry in 2005.
The horizontal LED industry chain mainly includes silicon carbide substrates produced by companies like Tianfu Thermal Power, made into LED epitaxial wafers, cut into chips, packaged, and made into lamps, etc. Tongfang is currently involved in the epitaxial wafer and chip product application stages, acquiring patents for high-power chips from a Singapore company.
One characteristic of the LED industry is strong patent protection. In many cases, it is impossible to bypass patents, and large enterprises can easily trigger patent litigation. Although the LED industry is promising, patents can be a trap.
In the past two years, Tongfang has made large-scale investments in LEDs, taking the lead in establishing backlight sources. Liquid crystal has almost completely replaced CRT, gradually expanding market penetration. Tongfang's LED industry chain covers upstream to downstream, consuming part of it itself, thereby driving the entire industry chain, preparing for large-scale entry into the lamp industry in the next step.