Hualing Co., Ltd. only took 38 days from the acceptance of the IPO to the approval, setting the fastest IPO pass record of Beijing Stock Exchange . Why can this company be so fast? The position of
chip testing in the integrated circuit industry chain is crucial, because once a chip has defects, the cost of a single product can reach thousands of dollars, so each chip must be tested before it can be put into use. Hualing Co., Ltd. (430139.NQ) on the New Third Board is an independent third-party integrated circuit (IC) testing company. The company was established in 2001 by legal person Shanghai Fudan Microelectronics and seven natural persons. It is located in Zhangjiang High-Tech Park, Shanghai.
As an integrated circuit testing service company, the company purchases integrated circuit testing equipment and develops and verifys the test programs according to customer needs, providing downstream customers with wafer testing and finished product testing services. In short, 's positioning is the development and application of test software.
Company's testing capabilities cover a wide range of product fields such as CPU, MCU, CIS, MEMS, FPGA, memory chips, communication chips, RF chips, information security chips, artificial intelligence chips, etc., and the service product processes cover advanced processes such as 7nm-28nm.
With the evolution of the competitive landscape of the integrated circuit industry, the huge industrial system is not conducive to the development and growth of the entire industry. Therefore, the integrated circuit industry structure has transformed to a highly specialized manner, forming a situation where the design industry, manufacturing industry, packaging industry and testing industry are independent. Among them, integrated circuit testing runs through the entire process of integrated circuit design, , chip manufacturing and packaging, and is characterized by high technical content and knowledge-intensive. , as a leader in the domestic IC testing industry, has its business covered the entire industrial chain, and the test production line basically covers the inspection of 80% of the mainstream integrated circuit products in the market.
Judging from the revenue composition in the past three years, the proportion of testing service revenue is more than 96%, which is the company's main business. At the same time, customers should also provide test component sales and operating leasing services, and the revenue share is declining year by year.
test program development is based on customer application needs, through research on internal modules and performance of chips, select models that meet the chip test requirements and complete the writing and design of the test program. Design verification is a prototype test, which is an inspection and testing analysis after the design is completed and before mass production. By reliability test and aging analysis are carried out on the test of chip samples to improve the design process.
wafer test is a production test, also known as integrated circuit testing. Before the wafer is packaged after completion, the bare chip on the wafer is tested in the function and electrical parameters through the use of probe station and the tester. The purpose of this link is to ensure that before the chip packages , the invalid chips should be screened out as much as possible to save packaging costs. The built-in mechanism of the wafer will also be used to replace the manufacturing defect circuit with redundant circuits through repair, so that the wafer defects can be repaired.
Finished product testing is also a production test, also known as integrated circuit testing. After the chip is packaged, the chip after the package is tested for functional and electrical parameters through the combination of sorter and the tester. The purpose of this link is to ensure that the functional and performance indicators of each integrated circuit that leaves the factory can meet the design specification requirements.
The company independently developed the "chip test cloud" intelligent testing service system. By establishing an integrated circuit test virtual factory, it provides cloud testing services such as remote debugging, remote control, and automatic upload of test data. While improving the test quality, it greatly improves production efficiency. Currently in the mass production stage, we have realized central control of the complete set of test equipment, test big data analysis, real-time transmission of test results, etc. Through comprehensive integrated optimization of the equipment, application and cloud, we have improved key customer service capabilities.
Gross profit margin, the gross profit margin of testing services has been rising steadily and has been maintaining a high level.Among them, the average wafer test price has shown a downward trend in recent years. In addition to giving certain discounts to long-term customers, the company has increased the proportion of domestic testing equipment. The test price of domestic testing equipment is relatively low, causing the average test price to decline.
However, due to the continuous increase in the company's capacity utilization rate, the decline in unit cost is higher than the average price drop, which has led to an increase in the gross profit margin of wafer testing. The average sales price of finished products is on the rise, which is the company's chip final product testing customers mainly focus on high-reliability fields and relatively high test prices to test and development demand, which has led to an increase in the company's gross profit margin.
The company's main supplier is integrated circuit testing equipment manufacturers. In order to ensure that the company's testing level is synchronized with the development of the industry, it is necessary to invest a lot of money every year to purchase international mainstream and high-end integrated circuit testing equipment.
The company's equipment is mainly imported from the United States and Japan international semiconductor equipment giants Advantest Corporation, Tokyo Precision and Epson. Upstream suppliers are competing well, and currently no supplier has more than 50% of the procurement proportion, and there is no supplier dependence.
Equipment materials have the closest relationship with the last three sub-industry manufacturing, packaging and testing. Currently, equipment materials are in a state of monopoly in the high-end field of the United States, Europe and Japan, and the problem of stumbling is serious. The company's testing equipment mainly relies on foreign imports, and has gradually increased the proportion of domestic testing equipment in recent years, but there are still certain trade risks.
downstream customers include more than 300 companies including the top 10 chip design, manufacturing and packaging companies in China. They have established long-term cooperative relationships with many well-known integrated circuit companies in the industry, such as Fudan Microelectronics (688385.SH), Jingchen Co., Ltd. (688099.SH), Ruixin Microelectronics (603893.SH), SMIC (688981.SH), Changdian Technology (600584.SH), and long-term cooperative relationships. Since customers need to go through a strict certification process when choosing a test service provider, once the certification is passed, it will form a high viscosity and the cooperative relationship is stable. The revenue of the top five customers in 2021 was 67.90%, and there was no single customer dependence. Among them, Fudan Microelectronics (SH: 688385) is the company's controlling shareholder, accounting for 14.93% of the sales that year, which is an related transaction.
The company's business is mainly domestic, mainly concentrated in South China and East China, with sales accounting for 54.91% and 37.14% respectively. China's integrated circuit industry cluster is mainly composed of three core areas: Yangtze River Delta, Bohai , and Pearl River Delta. The company is located in Shanghai, which is conducive to getting close to customers, improving response efficiency, and producing synergy, with obvious geographical location advantages.
Mainland China has become the world's largest and fastest-growing integrated circuit market. With technological progress and industrial upgrading, design, manufacturing and packaging companies have increasingly demanded for advanced testing technology. According to data released by China Semiconductor Industry Association , China's integrated circuit industry exceeded one trillion yuan for the first time in 2021, with annual sales of integrated circuit industry of 1.045.8 billion yuan, a year-on-year increase of 18.2%. According to the Forward-looking Industry Research Institute, the market size of my country's integrated circuit industry is expected to exceed 2 trillion yuan by 2026, with an annual compound growth rate of 16.93%.
Behind this is the era of uncertain and unoptimistic environment in the era, China needs to realize the strong logic of domestic substitution and overtaking in the semiconductor industry.
Although the integrated circuit testing industry is developing well, third-party independent testing still accounts for a relatively small proportion of the scale of the entire integrated circuit industry. The testing capacity in mainland China is mainly concentrated in the testing workshops of integrated circuit manufacturing companies and the testing business departments of packaging companies, among which packaging companies have most of the domestic integrated circuit testing capacity.
According to statistics from the China Semiconductor Industry Association, China's integrated circuit design industry sales in 2021 were 451.9 billion yuan, and the integrated circuit testing cost accounted for about 7% of the design revenue. It can be attributed to the revenue scale of the domestic integrated circuit testing industry in 2021 to about 31.633 billion yuan, a year-on-year increase of 19.6%.
Compared with integrated circuit manufacturing companies and packaging companies, third-party independent testers have better testing professionalism and fairness due to their focus on testing processes, and their capacity allocation is more flexible. At the same time, separation from packaging and testing can reduce repeated production capacity investment, reduce product testing costs with scale effect, and provide professional testing services stably. As the domestic third-party testing industry gradually matures and replaces overseas testing manufacturers, the integrated circuit industry continues to develop towards professional division of labor. In addition, the industry is growing rapidly, and the industry has good room for growth in the future.
As a technology and capital-intensive industry, the barriers to the IC testing industry are mainly reflected in technology, talent and capital. Currently, the global integrated circuit packaging and testing market industry CR10 is 78.4%, with a high industry concentration. The United States, EU and Japan have absolute advantages as leading regions in the traditional semiconductor industry, and they are in an international leading position in integrated circuit testing concepts and testing technology.
As an advantageous region of Foundry model, Taiwan in my country has many testing companies, and its independent testing companies have certain advantages in terms of quantity and scale. According to data in 2020, Taiwan, China accounts for 56.1% of the global market share. The domestic integrated circuit industry has started a late professional division of labor, and third-party independent testing manufacturers are scattered and small in scale. There are about ten professional integrated circuit testing companies that can produce on a large scale, and the industry concentration is not high.
Since the packaging and testing integrated company focuses more on R&D in the packaging field, its testing is mostly for self-testing, while independent third-party IC testing companies focus more on R&D in the testing field, and the two have different business focus. The company's competitors in the IC testing industry are mainly selected as comparable listed companies, including Taiwan's Jingyuan Electronics (2449.TW), Guangdong Liyang Chip (688135.SH), Beijing Quian Technology (430094.NQ) and Weice Technology in the IPO stage of the Science and Technology Innovation Board .
Jingyuan Electronics is the world's largest independent IC testing company and occupies an important position in the global wafer testing and finished product testing. Liyang Chip is currently one of the largest private IC testing enterprises in China. It specializes in the post-stage processing process of semiconductor , including wafer testing, wafer thinning, wafer cutting, finished product testing and IC tape braiding and other one-stop services. Quian Technology is the largest independent IC testing company in the north, providing professional overall testing solutions for all links in the integrated circuit industry. Weice Technology is a well-known third-party testing company in Shanghai, mainly engaged in wafer testing, chip finished product testing and value-added services related to integrated circuits. The core competitiveness of
IC independent testing companies is mainly reflected in the R&D capabilities of testing technology. In terms of testing technical parameters, the company is weaker than Weike Co., Ltd. in wafer size, and lags behind peers' average level in finished product test packaging size. There are no significant differences in other indicators.
The company's current major competitors in China are Liyang Chip and Weice Technology. Here is a comprehensive comparison of the strength of the three companies.
In the background of the core team, most of the core teams of Hualing Co., Ltd. graduated from Xidian and Chengdian. The microelectronics majors in these two universities are the only two domestic electronic science and technology disciplines that have received A+ ratings, and are even above Tsinghua and Peking University.
Weice Technology's core team is also no less than the company.
And Liyang Chip's core team is much inferior to the two companies, and there are fewer relevant professionals at the core management level.
In terms of technical level and R&D investment, by comparing the relevant data of the three in 2021, it can be found that Hualing is better than the other two companies in terms of R&D investment and R&D results.
In major national scientific research projects, Hualing has carried out in-depth cooperation with Peking University , Fudan University and Shanghai Fudan University in terms of testing method research and talent training since 2007, and has undertaken 8 major national scientific research projects. However, Li Yang and Wei Ce have no experience in taking on major national projects.
It can be seen from the above that the company's disadvantages compared with its peers are mainly in terms of packaging size, but it has obvious advantages in R&D investment and scientific research strength.
The company's operating income from 2019 to 2021 was 146 million, 192 million and 284 million, respectively, with an annual compound growth rate of 41.42%; the non-net profit was -5.12 million, 26.54 million and 66.25 million, respectively. It can be seen that the company's performance in the past two years has ushered in a turning point in growth, mainly because is in the context of a significant improvement in the overall prosperity of the IC industry. The company's new production capacity has been put into production one after another in the past two years, and the rapid growth of the test business has led to a significant increase in the company's main business revenue and net profit.
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In the first half of 2022, the company achieved revenue of 124 million yuan, a year-on-year decrease of 2.81%; and achieved net profit of 20.53 million yuan, a year-on-year decrease of 25.76%, mainly due to the fact that the performance was not as good as expected due to the impact of the Shanghai epidemic in the first half of the year, and the amount of subsidy for postponing scientific research project acceptance was significantly reduced. In addition, the expansion of production capacity led to an increase in management costs such as personnel recruitment and training. Considering that the company's downstream major customers have maintained high growth in the first half of 2022, the domestic epidemic situation has also improved significantly, and it is expected that the company's performance will rebound in the second half of the year. In terms of profitability, the company's gross profit margin has always remained above 52% from 2019 to 2021, higher than the industry's average level of 43.62%. Jingyuan Electronics focuses on testing business and also conducts packaging business. In addition, Taiwan's semiconductor industry is developing maturely and competition is fierce, so its gross profit margin is relatively lower than that of the company. The company's gross profit margin is higher than that of Quian Technology, but it is comparable to Liyang Chip and Weice Technology, and the difference is not obvious from its peers.
In addition, the company's 's ROE's 's ROE's ROE's trunk rate is constantly increasing, and its debt-to-asset ratio is declining year by year. The growth of ROE's main source of the company's net sales rate and total asset turnover rate, which shows that the company's profitability and operating conditions are constantly improving. The company has concentrated downstream customers, but accounts receivable revenue accounts for a low proportion, sufficient cash, cash flow performed well, and its financial situation was quite stable.
The company's controlling shareholder Shanghai Fudan Microelectronics holds 50.29% of the company's total share capital, with a state-owned asset background. The shareholding ratio of the top five shareholders is 67.6%, and the equity is relatively concentrated. The company has paid dividends and dividends frequently in history, and the company has implemented employee shareholding for most core technical personnel, with a shareholding ratio of 3.34%, which has a good equity incentive effect.
The funds raised by the company are mainly used for the Lingang integrated circuit test industrialization project and the R&D center construction project. The project will match the development needs of the domestic high-end integrated circuit industry. By building a 5nm-28nm 12-inch test line and a special packaging R&D platform, it will create a one-stop, high-quality testing service platform and a special packaging R&D center. It can be seen that in addition to expanding production capacity and improving the level of integrated circuit testing based on the original business, the company is also planning to expand its business in the field of IC packaging.
Integrated Circuit Test Industrialization Project is planned to build a period of 2 years, mass production will begin at the end of the first year, with 83 new sets of equipment added. After reaching production, it is expected to add 666,900 new capacity every year, with an average annual capacity growth rate of 31.14%, slightly lower than the capacity growth rate in 2021. Considering that the company's capacity utilization rate has increased year by year in the past two years, the average annual compound growth rate of revenue is more than 40%, and the downstream customer cooperation relationship is stable, and the industry is in a period of rapid growth, the project is reasonable.
Summary: As a leading domestic third-party IC testing enterprise, the company has made steady progress in the field of IC testing. With the equipment upgrade and capacity expansion in the past two years, its performance has ushered in explosive growth. With the trend of rapid growth of the integrated circuit market and domestic substitution, the industry's development prospects are good. In addition, as a strategic industry for economic development, the semiconductor industry has introduced a number of policies to promote the sustainable development of the industry in recent years. The global semiconductor industry has gradually shifted from South Korea, Taiwan, to mainland China, providing major opportunities for the company's future development.
However, the industry's "bottleneck" problems are prominent, and the testing technology level is still far from that of companies such as the United States and Japan. Test equipment mainly relies on foreign imports.In recent years, the company has tried to break through the "bottleneck" link of independent and controllable testing of high-reliability chips, such as increasing the proportion of domestic testing equipment and promoting the application technology research and development and industrialization of high-reliability chips in domestic testing systems, but there are still certain trade friction risks in the short term.
This issuance issuance by inquiry. It has previously lowered the issuance floor price from 16.88 yuan/share to 13.48 yuan/share. It is expected that the price after this inquiry may be between 13.48 yuan/share-16.88 yuan/share, corresponding to the company's price-to-earnings ratio after deducting non-net profit in 2021 (TTM) is about 54.33-68.04 times, corresponding to the circulating market value of after listing, is 1.787 billion to 2.238 billion yuan.
The price-to-earnings ratio of Liyang Chip (TTM) is 55.41 times and the price-to-book ratio is 4.28 times; Quian Technology's price-to-earnings ratio (TTM) is 45.53 times and the price-to-book ratio is 2.43 times. The company's public offering price is relatively high compared to its peers. If a new product is issued, the potential room for growth on the first day of listing will be limited.
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