Summary of China Smart Driving Chips Conference Call Industry Overview - **Industry**: China Smart Driving Chips - **Key Companies**: Horizon Robotics (Outperform), Black Sesame (Underperform) [1][2] Core Insights and Arguments Market Potential - **Total Addressable Market (TAM)**: Expected to reach USD 15.4 billion by 2030, with a 40% CAGR from 2025 to 2030 [2] - **Penetration Rates**: Anticipated that L2++ (Urban NOA) penetration will reach 65% by 2030, while L2+ (Highway NOA) will plateau in the low 20s [2][18] OEM In-House Development - **Market Share**: Third-party vendors expected to retain over 60% market share by 2030 due to economies of scale [3][26] - **In-House Viability**: In-house solutions become cost-effective only when annual shipments exceed 1.5 million units; few OEMs can achieve this [3][30] Competition Landscape - **Horizon Robotics**: Stands out with a hardware-software integrated model, delivering performance comparable to NVIDIA at lower costs [4][38] - **Momenta**: Potential challenger but 2-3 years behind Horizon in chip development [4][43] - **Qualcomm**: Slow commercialization progress and limited mass production capabilities hinder its competitiveness [42] Financial Projections - **Horizon Robotics Valuation**: Projected annual shipment of J6P to reach 7.1 million units by 2030, corresponding to a 38% market share in outsourced L2+ & Above segment [5][52] - **Gross Margin**: Expected to decline from 77% in 2024 to 57% in 2030 due to changes in revenue mix [57] Additional Important Insights Consumer Preferences - **Smart Driving Features**: Over 70% of Chinese consumers consider smart driving functions important in vehicle purchasing decisions [12][14] - **Importance Increase**: From 2023 to 2024, smart driving features gained the most importance among factors influencing EV purchases [14] Risks and Catalysts - **Geopolitical Risks**: Concerns about the stability of partnerships with foundries like TSMC; however, short-term production is not expected to be affected [60] - **Investment Implications**: Horizon Robotics is positioned for growth due to its integrated solutions and strong R&D capabilities [7][8] OEM Strategies - **BYD's Position**: Struggling with L2+ promotion but expected to invest more in L2++ solutions to enhance user experience [22] - **In-House vs. Outsourcing**: OEMs like NIO, Xpeng, and Li Auto may focus on in-house development for strategic goals, but economic viability remains a concern [30][37] Conclusion The China Smart Driving Chip sector presents significant growth opportunities, particularly for Horizon Robotics, which is well-positioned to capitalize on the increasing demand for advanced driving features. The competitive landscape is evolving, with both in-house and third-party solutions coexisting, but the latter is expected to dominate the market due to scalability and cost advantages.

Summary of the Conference Call on China Smart Driving Chip Sector Industry Overview - The smart driving chip market in China is projected to reach USD 15.4 billion by 2030, growing at a CAGR of 40% from 2025 to 2030, driven by the increasing adoption of Advanced Driver Assistance Systems (ADAS) features [2][34] - The penetration of Navigate on Autopilot (NOA) features is expected to reach 88% by 2030, creating a significant market opportunity for smart driving chips [2][12] Key Companies Discussed Horizon Robotics - Horizon Robotics is positioned as the domestic leader in smart driving System on Chip (SoC), with a projected 23% vehicle share for L1-L2 SoC and 30% for L2+ SoC in 2024 [3] - The company is expected to capture 29% of the outsourced L2+ & above SoC TAM by value by 2030, supported by its unique hardware-software integrated model [3][14] - Horizon's SoC design is co-optimized with smart driving algorithms, allowing for lower costs and faster iterations, potentially increasing OEM net income by 10-20% on a RMB 150K vehicle [3] - Horizon Robotics is rated Outperform with a price target of HKD 15, indicating a 56% upside potential [3][8] Black Sesame - Black Sesame is the second-largest domestic vendor but faces challenges due to a lack of scale and heavy R&D burdens, which could pressure its financials [4][9] - The company focuses on L2+ SoC, capturing a 9% vehicle share in 2024, but lacks software expertise, slowing customer acquisition compared to Horizon [5] - Black Sesame's current balance sheet can only support R&D investments for 1-2 years, suggesting a need for frequent capital raises, which could dilute shareholder value [5] - Black Sesame is rated Underperform with a price target of HKD 16, indicating a 15% downside potential [5][9] Market Dynamics - Concerns exist regarding OEMs' in-house development of smart driving chips potentially disrupting the outsourcing market; however, it is expected that around 60% of the market will remain open to third-party vendors by 2030 [2][13] - The competitive landscape is evolving, with Horizon Robotics and Black Sesame primarily competing against Nvidia in the L2+ & above market [14] - The increasing consumer preference for smart driving features is a critical differentiator among OEMs, with over 70% of consumers considering ADAS functionalities important in vehicle purchasing decisions [18][21] Financial Metrics - Horizon Robotics has a market cap of HKD 133.3 billion and an enterprise value of HKD 116.3 billion, with a reported EPS of RMB 0.51 for 2024 [6] - Black Sesame has a market cap of HKD 12 billion and an enterprise value of HKD 10.4 billion, with a reported EPS of RMB 1.20 for 2024 [6] Investment Implications - Horizon Robotics is expected to maintain its technological leadership through significant R&D investments, which will also allow for future expansion into robotics and global markets through joint ventures [8] - Black Sesame's lack of software capabilities and scale may hinder its long-term success, necessitating a strategic shift or additional funding to remain competitive [9] Conclusion - The smart driving chip sector in China is poised for rapid growth, with Horizon Robotics positioned as a leader due to its integrated hardware-software solutions, while Black Sesame faces significant challenges that could impact its market position and financial health [8][9]