Another semiconductor company is here!
On the evening of June 24, Capital State learned that Longteng Semiconductor Co., Ltd. (hereinafter referred to as “Longteng Shares”) sprinted for the IPO of the Science and Technology Innovation Board and was accepted by the Shanghai Stock Exchange. This time, it plans to raise 1.18 billion yuan, all of which will be used for 8-inch power Semiconductor Manufacturing Project (Phase I).
Image source: Official website of the Shanghai Stock Exchange
The company is a design-oriented enterprise in the semiconductor industry. Its main business is the research and development, design and sales of power device products mainly based on power MOSFETs, and provides system solutions for customers.
At present, the company’s products cover the main categories of power MOSFET discrete devices, forming four product platforms: super-junction MOSFET, planar MOSFET, shielded gate trench MOSFET and trench MOSFET. It has been widely used in civil fields such as battery management systems, communication power supplies, and military fields such as military special power supplies.
Combining the company’s technical accumulation in the field of power MOSFET and the understanding of end products such as power supply and control system, the company actively develops the system solution business.
During the reporting period, the company’s system solution business achieved breakthroughs in the field of military products, and the company developed and mass-produced power control cabins to achieve large-scale revenue. In the future, the company’s system solution business will focus on power control cabins and power module products, and achieve coordinated development with the power device business.
Image source: Company prospectus
Financial data shows that the revenue of Longteng shares in 2018, 2019 and 2020 were 89.0863 million yuan, 101 million yuan and 173 million yuan respectively; the corresponding net profits in the same period were -32.2733 million yuan, -13,249,900 yuan, 24,527,400 yuan.
The company shall apply the listing standards of Article 2.1.2 (1) of the Rules for the Listing of Stocks on the Science and Technology Innovation Board of the Shanghai Stock Exchange: “The estimated market value is not less than RMB 1 billion, the net profit for the most recent year is positive and the business is in operation. The income shall not be less than RMB 100 million.”
The controlling shareholder and actual controller of the company is Xu Xichang. At the same time, the company has two state-owned shareholders, Xi’an Economic Development (SS) and Shaanxi New Times (SS), with shareholding ratios of 8.89% and 1.78%, respectively.
Image source: Company prospectus
It is worth mentioning that during the reporting period, the issuer, the issuer’s actual controller Xu Xichang and institutional investors Provincial Integrated Circuit Fund, Provincial New Energy Fund, Xi’an Zhixin, Xi’an Economic Development (SS), Shaanxi New Era (SS) ), CSSC Perception, Shandong Tiefa, Archimedes, Yunze Fenghui, and Heyu Tianyuan have signed an agreement with gambling clauses, and the gambling clauses involved in the relevant agreements include rights adjustment, share repurchase, priority , anti-dilution, listing and performance commitments and other special agreements.
As of the signing date of this prospectus, the agreements between the issuer, Xu Xichang, the issuer’s actual controller, and the aforementioned institutional investors have been terminated, and all parties to the agreement have unanimously agreed and confirmed that there is no other gambling or repurchase. , valuation adjustments, etc., which may lead to changes in equity and thus affect the stability of Longteng’s shareholding structure, or fail to perform rights, and have not entered into any other agreements, arrangements or memorandums with Longteng or Xu Xichang. Valuation adjustments or similar terms.
Longteng shares frankly that the company faces the following risks:
(1) Market volatility risk
Power semiconductors, as the basic power Electronic devices, are widely used in various fields such as consumer electronics, industrial electronics, automotive electronics, and military electronics. The extensiveness of downstream application fields improves the power semiconductor industry’s ability to deal with the risk of fluctuations in a single market, and also makes the power semiconductor industry closely related to the prosperity of the macro economy.
From 2018 to 2020, the power semiconductor industry showed obvious cyclical fluctuations under the influence of supply and demand mismatch: In 2018, the demand for consumer electronics, industrial electronics and automotive electronics grew rapidly, the production capacity of 8-inch wafers was tight, and power semiconductors were out of stock and prices increased ;From 2019 to the first half of 2020, due to the slowdown in macroeconomic growth and the impact of international trade friction and the new crown pneumonia epidemic, the performance of power semiconductors was flat; from the second half of 2020, demand for consumer electronics, 5G commercialization, etc. grew strongly, while 8 The inch wafer production capacity has grown slowly, and power semiconductors have once again experienced shortages and price increases.
The operating performance of companies in the same industry also shows a similar fluctuation trend, and the company faces the risk of overall market volatility.
On the other hand, although the downstream application fields of power semiconductors are extensive, different application fields have different requirements for product types and performance. Under the condition of limited resources, companies in the industry generally focus on product layout in some application fields. Taking the mining machine power supply market as an example, in 2018, the company has a large part of the super-junction MOSFET products used in the mining machine power supply field, which effectively meets the performance requirements of the mining machine power supply with high power, high efficiency and fast heat dissipation; however, in April 2018 At the beginning of the quarter, the downstream mining machine market fluctuated significantly, resulting in a substantial decrease in the sales volume and revenue of the company’s super-junction MOSFET package products in 2019. If the company’s core products cannot enter more and higher-end application fields in the future, the company will also face the risk of single market fluctuations.
(2) Wafer supply and outsourcing processing risks
At present, the company mainly adopts the Fabless mode of operation, focusing on the research and development and design of chips, and entrusts suppliers to carry out the production links such as wafer manufacturing, packaging and testing. If the foundry price, packaging and testing and other outsourced processing prices rise sharply, or the production of the company’s products is affected due to the shortage of capacity of the foundry, packaging and testing factories or process fluctuations, it will be detrimental to the company’s supply stability and profitability. influence. Therefore, the company faces the risk of raw material supply and outsourcing processing.
(3) Supplier concentration risk
At present, the company mainly adopts the Fabless mode of operation, focusing on the research and development and design of chips, and entrusts suppliers to carry out the production links such as wafer manufacturing, packaging and testing. Due to barriers in terms of capital and technology, the number of foundries and packaging and testing factories in the semiconductor industry that meet the company’s technology and process requirements is relatively small.
During the reporting period, the company’s purchases from the top five suppliers were RMB 90.7042 million, RMB 125.570 million and RMB 76.9834 million, accounting for 94.06% and 94.01% of the total purchase amount respectively. And 84.47%, the company’s purchasing ratio from major suppliers is higher. The company’s main suppliers all have large operating scale and strong market influence, and the foundry production capacity of some of the company’s core products is concentrated in the world’s leading companies such as Huahong Grace, China Resources Shanghua, and Dongfang Hi-Tech. supplier.
On the one hand, the company’s operating scale is small and its bargaining power with suppliers is weak. If suppliers raise prices or tighten their credit policies for the company, it will have an adverse impact on the company’s cash flow; on the other hand, if major suppliers produce Unfavorable changes in operations, limited production capacity, or tense cooperation with the company, the company has great difficulties in replacing suppliers in a short period of time, which may cause the company to not be able to deliver sufficient quantities and timely shipments, thereby adversely affecting the company’s production and operation.
(IV) Risk of seasonal fluctuation of income
The company’s main products are power MOSFETs and system solutions. Power MOSFETs contributed most of the operating income during the reporting period. At present, the company’s power MOSFET products are mainly used in LED lighting drivers, power adapters, TV boards, battery management systems, communication power supplies and other civil fields as well as military electronics.
Due to the characteristics of the industry and the nature of end customers, there are many holidays in the first and fourth quarters of each year, which belong to the traditional peak sales season of consumer electronics products; while the military usually adopts a budget management system and a centralized procurement system, and the procurement approval decision-making and management processes are relatively strong. The procurement plan is usually formulated in the first half of each year and approved step by step, and the procurement, delivery and acceptance are carried out successively in the second half of the year.
Affected by the chip processing cycle and the production cycle of terminal products, the company and downstream customers need to stock up in advance, resulting in a relatively high proportion of the company’s operating income in the second half of the year, especially in the fourth quarter, showing certain seasonal characteristics.
If the procurement plan of the company’s end customers is still seasonal in the future, it may have a corresponding impact on the company’s research and development, production and sales activities, and lead to certain seasonal fluctuations in the company’s operating income. At the same time, the company’s various expenses are relatively evenly incurred during the year, so the company may experience a loss or low profit in the first quarter or half a year, and the company’s operating performance has the risk of seasonal fluctuations.
(V) Risk of lower gross profit rate and decrease in gross profit rate
The power semiconductor industry has obvious characteristics of scale effect. After the enterprises in the industry reach a certain business scale, they will form a certain competitive advantage. In terms of upstream wafer procurement, the larger the sales scale of power semiconductor design companies, the stronger the bargaining power for wafer foundries, the lower the cost of wafer procurement, and the more obvious the scale effect; in terms of downstream product applications, power The larger the sales scale of semiconductor design companies, the more extensive and long-term market verification the products have, which is conducive to the expansion of industrial electronics, automotive electronics, military fields and other application fields that require higher reliability and supply qualifications of power devices, thereby improving the downstream bargaining power.
During the reporting period, the company’s business scale was relatively small, and the scale effect was not obvious, resulting in a low gross profit margin. The gross profit margins of the business were 20.22%, 10.93% and 19.35% respectively, and the gross profit margins of the civilian power devices were 20.22%, 10.90% and 8.22% respectively.
In the future, if the company cannot continue to expand its business scale and accelerate the realization of scale effect, or if the company’s R&D strength is weakened, it fails to develop and launch new products according to changes in market demand, the demand in downstream applications declines, and the upstream wafer foundry capacity is tight, etc. This will further lead to a decline in the company’s gross profit margin, thereby affecting the company’s profitability.
(VI) Risk of low proportion of voting rights controlled by the actual controller
The controlling shareholder and actual controller of the company are Xu Xichang, and Du Zhongpeng, Chen Qiaoqiao, and Xi’an Panding Enterprise Management Consulting Partnership (Limited Partnership) (hereinafter referred to as “Xi’an Panding”) are the persons acting in concert with the actual controller. As of the signing date of this prospectus, Xu Xichang and its persons acting in concert controlled a total of 35.24% of the voting rights of the company.
Based on the company’s proposed public offering of 37.5 million shares, the total voting rights controlled by Xu Xichang and its concerted actors will be further diluted to 26.43% after the issuance, and the voting rights ratio is relatively low. If other shareholders reach a concerted action agreement, or seek control of the company by increasing their shareholdings, it may affect the stability of the company’s control, thereby adversely affecting the stability of the company’s management team and production and operation.