According to the Smart Finance app, Tianfeng Securities released a research report stating that Huawei's "No.1 Project" in 2024, the pure-blooded Hongmeng is about to be released; Hongmeng Pangu will join hands for the first time and promote the integration of AI+OS; as China's second largest operating system, Hongmeng's ecosystem partners will usher in multiple growth opportunities. Suggestions: 1) Software development / services: Softcom Power (301236.SZ), Jiulian Technology (688609.SH), ChinaSoft International (00354), Thunder Software Technology (300496.SZ), Jiangsu Hoperun Software (300339.SZ); 2) Hardware: Digital China Group (000034.SZ), Fiberhome Telecommunication Technologies (600498.SH), Chipsea Technologies(Shenzhen)corp.,ltd (688595.SH), Talkweb Information System (002261.SZ).

Huawei's "No. 1 Project" in 2024, the pure-blooded Hongmeng is about to be released.

According to Smart Frontline, Huawei is expected to launch the HarmonyOS NEXT Beta version system at the Developer Conference (HDC2024, June 21-23), and the official version will be released with the Mate70 series in 2024Q4. At that time, it will no longer be compatible with Android. Against this background, the construction of Hongmeng's native application ecology has become Huawei's "No. 1 Project" in 2024. Huawei has invested a lot of resources to accelerate the development of native apps through big factory residence, resource exchange, and training (source: Smart Frontline). As of May 2024, more than 4,000 native Hongmeng development start-up apps have been developed, with an expected achievement of 5,000+ by the end of the year and a final achievement of 500,000+ Hongmeng native apps.

Hongmeng Pangu will join hands for the first time and promote the integration of AI+OS.

Since 2024Q2, Microsoft has accelerated the integration of Copilot into Win11, and Apple has released the personalized intelligent system Apple Intelligence. Mainstream operating system manufacturers are accelerating the layout of AI and launching implementation models of AI+OS integration.

At this HDC conference, Pangu Model 5.0 and HarmonyOSNEXT Hongmeng Galaxy version will appear on the same stage for the first time, constructing a native intelligent foundation by sinking Huawei's AI capabilities to the operating system layer. Tianfeng Securities believes that the integration of AI+OS will promote the construction of Hongmeng's ecology in two aspects: (1) AI can improve the retention and activity of apps, and is expected to form a closed loop of "AI empowerment-native application development-Hongmeng ecosystem prosperity", such as cross-application execution operations and user customization. (2) Realize the interaction between large models, mobile phones, PCs, and end devices, which may drive consumer demand for upgrading their devices and sales of related IoT devices.

Hongmeng: China's second largest operating system, the ecosystem partners will usher in multiple growth opportunities.

According to the latest data from Counterpoint, Hongmeng's global share of the system in 2024Q1 was 4% (up 2pct year-on-year), and its market share in China was 17% (up 9pct year-on-year, up 1pct month-on-month), surpassing iOS and becoming China's second largest operating system.

Regarding Hongmeng OS: With the construction of a native ecosystem, the demand for Hongmeng APP development talents has surged. With the final achievement of 500,000+ Hongmeng native apps and the addition of IoT applications, it is expected to drive the demand for Hongmeng APP development and application migration.

Open-source Hongmeng OS: The commercial release version OS of the open-source Hongmeng ecosystem partner is mainly aimed at the industry field, and commercial release version monetization is achieved through license authorization, software and hardware integrated products, etc.