New infrastructure: Should we pursue this biggest “trend” in 2020?

If you want to find a keyword that can dominate the hot search list besides "fighting the epidemic" this spring, it must be "new infrastructure". Since the Standing Committee of the Political Bureau of the CPC Central Committee emphasized on March 4 that "the construction progress of 'new infrastructure (new infrastructure)' such as 5G networks and data centers should be accelerated", "new infrastructure" has become the hottest concept in 2020.

The proposal of "new infrastructure" is not a whim, but has gone through a sufficient brewing process. After sorting out, it is found that as early as the Central Economic Work Conference held at the end of 2018, the strategic positioning of "new infrastructure construction" such as 5G, artificial intelligence, industrial Internet, and Internet of Things was clarified; then the 2019 Government Work Report also mentioned the content of "strengthening the construction of a new generation of information infrastructure"; the 2020 Central Economic Work Conference once again proposed the policy of "strengthening the construction of strategic and network-based infrastructure."

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The reason why this concept is solemnly put forward now is that the early exploration and practice have allowed China to accumulate considerable technological potential, and now it is the so-called "the arrow is on the string and must be shot"; and another direct catalyst is that under the current shadow of the new coronavirus epidemic, the downward pressure on the economy is quite large. At this time, both economic development and people’s confidence urgently need a new and powerful fulcrum, and the emergence of "new infrastructure" is timely.

Avoid the "real" and go for the "false"

As we all know, infrastructure investment and construction play a very important role in the driving force of China's rapid economic growth. The "new" in new infrastructure is relative to traditional infrastructure: the "infrastructure" in the traditional sense is concentrated on construction projects such as railways, roads, airports, ports, and water conservancy facilities, and is also vividly called "iron and public infrastructure"; in comparison, the new infrastructure is full of technology. According to the official interpretation, "new infrastructure" mainly refers to new infrastructure represented by 5G, artificial intelligence, industrial Internet, and Internet of Things. In essence, it is an infrastructure for information digitization and an information infrastructure that can support the development of traditional industries in the direction of networking, digitization, and intelligence. Therefore, it can be said that new infrastructure is a basic technology and resource that can provide new momentum for future development.

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According to the tone set by the national decision-makers for "new infrastructure" in March 2020, we can summarize the seven key areas it covers, including:

• 5G Infrastructure
• Big Data Center
• AI
• Industrial Internet
• UHV
• Intercity high-speed rail and rail transit
• New energy vehicle charging pile

Some analysts have further summarized the new infrastructure into three "network" frameworks on this basis:

• First: An information network with 5G as the core, mainly relying on big data cloud computing, artificial intelligence and industrial Internet
• Second: An energy grid with electricity as its core, mainly new energy technologies led by ultra-high voltage
• Third: A transportation network centered on high-speed rail and urban rail

At the same time, these three "nets" are not independent of each other, but complement and support each other, thus building a solid skeleton for China's future society and becoming the indispensable warp and weft for weaving the blueprint in people's minds.

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No matter which perspective you use to interpret "new infrastructure", the most critical point is that compared with traditional infrastructure, the "raw materials" for building new infrastructure have undergone fundamental changes - from "real entities" such as steel and cement that constitute traditional infrastructure to "virtual entities" with information data as the core. This shift from avoiding "real" to "virtual" is really refreshing. Such "novelty" is also in line with the general trend of social and technological development.

Is the wind coming?

It is precisely because of this that the investment circle with the most sensitive sense of smell was the first to get excited when the concept of "new infrastructure" came out. A professional organization has compiled the data released by various ministries and commissions of the state. The total investment scale in the seven major areas of new infrastructure in 2020 is about 1.2 trillion yuan. Considering the follow-up of various local governments under the general situation and the influx of commercial investment institutions, it is no surprise that new infrastructure has become one of the biggest investment hotspots this year.

Table 1: Statistics on new infrastructure investment in 2020 (Source: Fullgoal Fund)

However, after a careful analysis of the above investment data, it is found that the 1.2 trillion new infrastructure investment scale only accounts for 6.6% of the completed infrastructure investment in 2019. In other words, in the current national infrastructure scale, new infrastructure has not yet shaken the position of traditional infrastructure. This does not seem to be commensurate with its explosive "popularity". This also makes people wonder: Is the "trend" of new infrastructure really coming?

According to the above understanding of the concept of new infrastructure, its leverage and multiplier effect on the entire economy is very significant. However, this process is long-term and needs to go through several different levels to gradually penetrate its influence into all aspects of the social economy.

First of all, the first intuitive feeling that the new infrastructure brings to us is the results of "digital infrastructure" such as 5G, data centers, and the Internet of Things, which is also the "digital cornerstone" of the entire new infrastructure. Next, the establishment of new supporting facilities triggered by digital infrastructure will constitute the second level of new infrastructure. Going deeper, the influence of new infrastructure will penetrate into different sub-sectors through the digital and intelligent transformation of traditional infrastructure projects and the development of emerging industries, becoming the fundamental "gene" of future economic development. Only then can people see the big picture brought by a new infrastructure.

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The irrationality of the "small investment ratio" in new infrastructure that we see now reflects, on the one hand, that gold and silver investors have yet to deepen their understanding of new infrastructure and have not yet formed a clear and systematic strategic thinking on "how to invest"; on the other hand, the industrial ecology surrounding new infrastructure is far from being formed, and there are very limited targets for people to choose from for "where to invest", so we cannot demand that we can see a blowout growth in the new infrastructure field in the short term. From the perspective of 2020, investors will still focus more on digesting and understanding the concept of "new infrastructure". On this basis, they will speed up the previous investment rhythm, move investment measures forward, and actively explore the "trends" that can be bet on.

So should people in the electronics industry chase after such a "trend"? If we can seize the opportunities in the early stages of "digital infrastructure" and convert them into real orders, in the current market environment full of uncertainties, this will certainly be a "reassurance" and will also allow our own development to maintain sufficient acceleration. However, from the "tone" of the new infrastructure, instead of paying attention to its recent "trend", it is better to think about how to make a long-term layout, find our own position, and enjoy its long-term "dividends". Facts have proved that the pigs on the vent will fall sooner or later, and only solid wings can ride the wind and travel a thousand miles a day.