Performance Differentiation Of The First Echelon Of Domestic Chips: Technology And Product Balance

Entering the 5g era, more intelligent products emerge in an endless stream. Under the influence of the new crown pneumonia epidemic, in addition to the hot sales of smart phones, products including PC, tablet computers and even some VR also emerge in great demand in 2020.

In this context, many component companies in the upstream of terminal products will show a large growth in net profit in 2020 financial reports, including core domestic chip design companies.

According to the statistics of the Global Semiconductor Trade Statistics Association (WSTS), the global semiconductor market size will grow by 6.8% in 2020, reaching a record high of US $440.39 billion. Taking into account the gradual recovery of world economic development, the recovery of automobile industry, and the further popularization and expansion of 5g demand, WSTS predicts that the global semiconductor industry market size will reach 488.27 billion US dollars in 2021, a new record.

In recent years, domestic chip design companies have become more active in exploring new technologies with the help of market advantages closer to terminal demand; And through the relatively active inter industry mergers and acquisitions, it is also further expanding the technical capacity.

But a careful review will find that even among the leading chip design companies, there are still performance differences: there are those who have doubled their performance, such as Weiwei Co., Ltd., and those who have declined to a certain extent over the same period of last year, such as huiding technology.

The 21st century economic reporter combed the financial reports and found that behind this difference is the development stage differences between different categories of products under the changing communication generations and the transformation of new and old technologies. It will be a sustainable proposition for chip design companies standing at the forefront of technology landing how to balance the product breadth with the business pressure brought by the technology iteration process.

Strong single category ≠ constant performance

In terms of both revenue and net profit scale, image sensing enterprise Weil Co., Ltd. is a well deserved leader among domestic chip design companies. In 2020, its net profit attributable to the shareholders of the parent company was 2.706 billion yuan, a year-on-year increase of 481.17%, and it was also the most prominent one.

In contrast, huiding technology, the leading company in the field of biometrics, followed closely by net profit in the industry, but suffered a decline of 28.40% in net profit year-on-year.

LanChi technology, a leading memory interface company with the second net profit, achieved a year-on-year increase of 18.31%; However, Zhuo Shengwei, a RF chip head enterprise, realized a sharp increase of 115.78% in net profit over the same period of last year.

Behind the huge differences, on the one hand, it is related to the industry in which the company is located, on the other hand, it is affected by the process of technology iteration.

According to the statistics of canalys, a third-party organization, the global smartphone market's shipment volume in 2020 will drop by 11% year-on-year; But in contrast, the PC market, including tablet computers, saw a 17% year-on-year increase in global shipments in 2020. In addition, the global PC market is expected to grow by 8% in 2021, despite the current global shortage problem.

In summary, most of the demands of the above-mentioned enterprises come from smart phone enterprises, so it should be a matter of course to be in line with the global trend of mobile phones.

However, the difference lies in the impact of 5g and the new crown pneumonia epidemic, and the demand from more terminals has emerged. Even in the fields of intelligent cars, industrial control and smart city, the demand is also rising again and again, which promotes leading enterprises to go on different roads at this stage.

A typical example is huiding technology. According to the statistics of institutions, its market share in the field of fingerprint sensing is in the leading position. However, for PC products with higher demand, it may not have such huge targeted demand at present.

During the performance exchange meeting held recently, Zhang Fan, chairman and CEO of huiding technology, told reporters such as the 21st century economic report that the company is expanding the market scope of PC, wearable, industrial and automobile applications, as well as customers from overseas. From the perspective of income structure, positive changes have taken place.

From the perspective of pertinence, the expansion of new products needs continuous investment from the R & D level. According to the reporter's understanding, in the field of chip design, it usually takes about 3-4 years for a new project to be launched from scratch to a product on a large scale. Moreover, the implementation progress of new products is often affected by the choice of terminal manufacturers.

There is also the impact of competition in the same industry. According to the financial report of Zhaoyi innovation, the main income of its sensor business comes from siliwei, whose main business is off screen sensing technology. The company's sensor business is also the category of Zhaoyi innovation chip products with a larger decline in gross margin, with a year-on-year decrease of 13.26 percentage points.

LanChi technology is also facing the same problems. From the perspective of market position, the company is in the top 3 position in the global memory chip interface field. However, in 2020, the memory market experienced a de inventory process, especially in the server memory part. These exactly correspond to the business of LanChi, and also affect the company's financial data presentation to a certain extent.

On the contrary, according to Weill's financial report, its CMOS image sensor chip, which accounts for more than 80% of its revenue, can be used in other fields such as automobiles, security and other fields other than smart phones, which can relieve the pressure on the scale decline of some mobile phone industry.

At the same time, the reporter found that Weil shares has 13 revenue sources, excluding the income from distribution, and the remaining 12 items of income come from chip design business of different categories.

Among them, CMOS image sensor products are still the core revenue contributor of the company, with an annual revenue of 14.697 billion yuan, a year-on-year increase of 50.29%, and a slight increase of 0.55% in gross profit margin; The second revenue contribution comes from tddi and TVs, the former for new acquisitions.

In the process of new and old technology alternation, the benefits brought by this acquisition and merger will also better support the business development of head chip design company.

Labor pains under the alternation of Technology

After a comprehensive review of the financial reports of these head companies, it is found that all of them have more or less talked about the promotion of mergers and acquisitions on performance and technology research and development in recent years, and Weill shares is a typical case.

According to the financial report, among the main holding subsidiaries of Weil, Beijing Howe, which was acquired in 2019, achieved a net profit of 2.448 billion yuan within the year. Compared with the company's overall net profit of about 2.7 billion yuan, it is obvious that it contributed to the core revenue.

According to statistics, since 2019, Weier has completed the industrial and commercial registration procedures for the acquisition and merger of 85.53% equity of Beijing Howe, 42.27% of sipico's equity and 79.93% of shixinyuan's equity.

In April 2020, it also acquired the integrated chip (tddi) business based on single-chip LCD touch and display driver in Asia from Synaptics incorporated. As mentioned above, this business also became the top three business of Weill in 2020.

The greater challenge is that huiding technology and Zhaoyi innovation are faced with such problems through mutual support with the original company's business and even breaking through more industry scenarios after acquisition and merger.

Through the acquisition of Sili micro events, Zhaoyi innovation began to enter the sensor market from the memory market, thus helping enterprises to achieve a more complete industrial chain development closed loop. However, as of 2020, due to the impact of the epidemic situation and the global environment, siliwei has not completed the performance gambling target set previously, which has a certain impact on the asset value.

The core problem of huiding science and technology lies in the process of alternation of old and new technologies. In recent years, the company is strengthening its capabilities in audio, acoustics and image processing by acquiring some business from overseas manufacturers. In the medium and long term, this will bring great benefits to the company's penetration into TWS headphones, smart watches, industrial control and other fields. However, in this process, the company also needs to invest more R & D efforts and introduce more talents to support each other.

During the performance exchange, Zhang Fan said frankly that any product has a life cycle, and it may face competition at different times, and may face income growth obstruction or profit decline“ However, we have a positive attitude towards the off screen optical fingerprint, because the technology is developing continuously, the penetration rate of OLED screen is increasing, and the market application volume continues to increase. At the same time, we have the technical foundation and can find new innovation points to meet the new needs of customers, so as to help the off screen optical fingerprint obtain new growth. "

At the same time, these components manufacturers whose core customers came from smart phones are still accelerating their entry into the vehicle market, which will be the next development goal of the trend.

For chip design companies, it is an inevitable painful process to continuously invest in R & D and develop new scenes.

An insider of a chip design company told 21st century economic news that his company had been in the leading position in the field of single memory, but with the development of the company, it is exploring business in larger markets such as data centers.

"The core is the data connection as the core, the process of digital analog conversion, so the technology is logically interlinked." However, it is a relatively long process to enter the new market. From the launch of the product to the real new business bringing a larger proportion of the company's revenue, it is not enough for the company to put forward efforts in research and development and to launch products for mass production.

At this time, the test of manufacturers, in addition to continuous R & D, may also include management efficiency, market development ability and other aspects. Therefore, more and more talents from overseas large factories began to work in domestic chip companies.

At present, the 5g era, with the increasing demand of terminal market, has provided better background conditions.

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