Loongson Zhongke Chairman Hu Weiwu (Source: Loongson Zhongke)
Titanium Media App launched the industry report special "Silicon-based World", paying long-term attention to the technology and industrial upgrading of the global semiconductor field, and gaining insight into the first-hand information and depth of the industry. trend. After nearly a year of IPO review,
, the “first domestic CPU chip stock” was finally listed on the market.
On June 24, 2022, Loongson Zhongke Technology Co., Ltd. (hereinafter referred to as "Loongson Zhongke", N Loongson code: 688047) successfully landed on the Shanghai Stock Exchange Science and Technology Innovation Board this morning, with an opening price of 96.28 yuan/share, compared with The issue price rose 60% to 60.06 yuan, and subsequently the stock price fluctuated sharply. As of press time, the market value of Loongson Zhongke reached 37 billion yuan.
Loongson Zhongke is not only the "first domestic CPU stock", but also the only company in A-share that designs chips based on its own instruction set architecture. is the fourth listed company after Zhongke Shuguang (603109.SH) and Cambrian (688256.SH).
Previously, Hu Weiwu, chairman and general manager of Loongson Zhongke, put forward the slogan of "persisting in doing Loongson for the people" and also proposed the talent selection and training standards of "being both popular and professional, and being popular is more important than professional", which was full of emotion. Just past June 6, Loongson Zhongke also released a new CPU chip and related software platform based on an independent instruction set architecture. Hu Weiwu also bluntly said that domestic CPUs should get rid of their dependence on foreign instruction set architectures.
Today, this domestic CPU manufacturer has received "appraisal" from the capital market, but its revenue in the first quarter of this year dropped by 37%. So, can Loongson Zhongke be able to sustain a market value of 37 billion yuan?
autonomous instruction set architecture authorization disputes continue
Loongson Zhongke was established in March 2008, formerly known as "Loongson" services, a transfer center supervised by the Beijing Haidian District Science and Technology Commission, and a wholly-owned subsidiary of the Institute of Computer Science, Zhongke Computing Source Jointly funded and established.
"Godson" series is one of the earliest general-purpose processor (CPU) chips developed in China. It started from the "Godson CPU Design and Verification System" scientific research project within the Institute of Computing Technology, Chinese Academy of Sciences, and received Chinese Academy of Sciences , Nuclear Gaoji (Core Electronics devices, high-end general-purpose chips and basic software products) and other projects and institutions.
In November 2000, the design work of Loongson was officially launched; on August 19, 2001, the design and verification system successfully launched the Linux operating system, which was also the birthday of "Loongson"; on August 10, 2002, based on the 0.18 micron CMOS process , the first single-core 32-bit general-purpose CPU Godson-1A (Godson-1A) with 4 million transistors was successfully taped out, ending the "coreless" history of China's computer industry and opening up the road to the development of domestic CPUs.
Since 2010, "Loongson" has begun market operation through Loongson Zhongke, industrializing the research and development results of Loongson CPU. After three generations of unremitting efforts by Academician Li Guojie, Tang Zhimin, researcher, and Chairman Hu Weiwu, a number of core technologies have been accumulated. .
In recent years, the domestic CPU chip market has emerged, with a large number of Chinese companies including Loongson Zhongke, Huawei HiSilicon, Feiteng Information, Haiguang Information, Shanghai Zhaoxin, and Dianke Shentai.
Among them, Loongson Zhongke took the lead in the IPO listing on the Shanghai Science and Technology Innovation Board this time - it officially submitted a prospectus on June 28, 2021, announced a prospectus on June 7 this year, and opened subscription on the 15th; at the same time, Haiguang Information IPO registration has also been approved by the China Securities Regulatory Commission, and the valuation is expected to exceed 90 billion yuan.
Currently, Loongson Zhongke’s main products are CPUs and related solutions for three major scenarios: embedded, industrial control/terminal, and desktop/server. is the only company in the A-share market that designs chips based on independent instruction set architecture.
In fact, the instruction set architecture builds a bridge between software and hardware and is the "root technology" of chip design.
Currently, the world's mainstream electronic products are based on two instruction set architecture systems, namely the American WIntel ( Microsoft - Intel ) system based on the x86 instruction set architecture, and the British AA (Android-Arm) system based on the ARM instruction set architecture. .
"Currently, China's information industry is mainly built on two foreign technology platforms, and Loongson Zhongke wants to build a third system, from instruction sets to CPUs and operating systems, all independently developed." During the road show, Hu Weiwu said that the Loongson team The original intention is to establish its own ecological system and become the third pole of the IT industry system.
Therefore, for Loongson Zhongke, the biggest controversy is why it should build its own instruction set architecture? Is "Loongson" really an independent instruction set IP?
In July 2021, the Loongson 3A5000, the first processor chip based on 12/14nm fully independent IP design and using the independent command system LoongArch, was officially released. To commemorate the 370th anniversary of the campaign to resist US aggression and aid Korea, the Loongson 3A5000 chip is code-named "KMYC70". The industry believes that there are three main reasons for
to build an independent instruction set architecture: first, there is no authorization problem and the risk of supply interruption is low. For example, Huawei has not been authorized by ARMv9; second, it saves authorization fees. For example, Haiguang started from 2016 AMD obtained the Zen architecture authorization for X86 at a cost of US$293 million; third, it gained a higher industrial status and had more "independent" publicity capital.
However, problems such as compatibility and lack of independent programming frameworks and languages are obvious. Currently, Loongson’s LoongArch independent instruction set architecture is at a disadvantage.
Hu Weiwu believes that the current complete machine products with independent CPUs and operating systems lack independent programming frameworks and languages in the existing domestic operating systems, and are not independent operating systems in the true sense. Loongson Zhongke is currently developing its own programming framework and language, and Hu Weiwu predicts that the development will be successful in 2023 or 2024.
The talent selection and training criteria of “both red and professional, red is more important than professional” was Hu Weiwu’s important statement on the long-term development of Loongson Zhongke during the road show.
Hu Weiwu pointed out that during the "14th Five-Year Plan" period, Loongson Zhongke will complete the transition from general processor and operating system technology "remedial courses" to comprehensive software ecology and industrial chain construction, and move from e-government and key industry markets to open markets The transition from the "kingdom of necessity" that follows sexual development to the "kingdom of freedom" that develops independently.
He emphasized that Loongson Zhongke's goal is to use Loongson Zhongke's independent instruction system as the basis, the performance of general-purpose processors to reach the world's advanced level, the basic software and hardware ecology to be basically perfect, the independent information technology system and industrial ecology to be initially established, and sales revenue to rise again. A big step.
However, Loongson Zhongke is still facing disputes over the MIPS technology authorized by Xinlianxin and Shenzhou Loongson, and the company said it is properly resolving them.
An announcement issued by Xinlianxin in March this year pointed out that Loongson Zhongke has not been audited due to its breach of contract, and its intellectual property rights are suspected of infringement. There are still arbitration and litigation disputes with Xinlianxin, and these disputes will continue.
As recently as June 17, Xinlianxin issued a document on its official website stating that due to Loongson Zhongke's breach of contract and evasion of performance of responsibilities, Xinlianxin had filed separate lawsuits against Loongson Zhongke at the Hong Kong International Arbitration Center and the Beijing Intellectual Property Court. Arbitration and litigation, according to the interim order of the Hong Kong International Arbitration Center, Loongson Zhongke has now submitted tens of millions of royalties to the Hong Kong Arbitration Center, and the case is awaiting the final ruling. The
prospectus shows that from 2018 to 2021, more than 80% of Loongson Zhongke’s revenue came from products authorized by the MIPS architecture. In the Chinese market, the total number of chips shipped using the MIPS architecture authorized by Xinlianxin has exceeded 500 million, and Loongson Zhongke has contributed nearly 0.55% of the number of chips shipped.
(Source: Loongson Zhongke official website WeChat)
As for the trademark dispute of "Shenzhou Loongson", Loongson Zhongke responded in the second round of review inquiries that as of now, it has no litigation, arbitration or other disputes with Shenzhou Loongson.
When Hu Weiwu accepted questions from TMTpost App Roadshow, he said that starting from 2020, Loongson’s newly developed CPUs will all use the self-developed Dragon architecture LoongArch, and will no longer use the MIPS architecture or require foreign ARM architecture technology authorization. Loongson CPU based on MIPS architecture is withdrawing from the market in an orderly manner.
"Loongson does not need foreign technology authorization and can maintain openness in the market. For example, Loongson can be authorized for IP, but CPUs introduced from ARM cannot be authorized for IP.For another example, if ARM's V9 does not have authorization for domestic enterprise architecture, domestic enterprises are not qualified to develop V9 processor cores. "Hu Weiwu said that the LoongArch architecture is becoming a command system architecture in parallel with X86 and ARM. Tencent 's WeChat, Alibaba 's Dragon Lizard community, and Huawei's Euler community all support LoongArch. Under the Linux system ecosystem, Loongson We can do better through independent research and development.
Titanium Media App learned that ’s next-generation Loongson 3A6000 uses a 12nm process, has a main frequency of more than 2.5GHz, and contains 4 processor cores. Each processor core uses 64-bit superscalar LA464. The independent microstructure is mainly used for desktops and laptops. It is expected to be released around 2023 at the earliest. Hu Weiwu said that the company plans to use more advanced processes to develop products for desktops and laptops during the "14th Five-Year Plan" period from 2021 to 2025. As a general-purpose processor for servers, we strive to achieve the performance of mainstream products in the market as soon as possible. At the same time, we must carry out the research and development of GPGPU (general graphics processing unit) chips and storage chips that are matched with Loongson processors. In addition, during the first online road show on June 15th. , Hu Weiwu also revealed that Loongson Zhongke will enter the automotive chip market, "mainly making MCU (micro control unit) chips for control. The first one has been taped out, and the company is currently in contact with complete machine companies. "
Q1 revenue in 2022 fell by 37.08%, and "Loongson" business stalled.
At present, Loongson Zhongke's main business includes the development, sales and service of processors and supporting chip products, basic software and hardware solutions, based on information systems, industrial control With two main lines of the system, Loongson products are widely used in e-government, energy, transportation, finance, telecommunications , education and other industries. The
prospectus shows that from 2018 to 2020, the company's operating income was 193 million yuan and 485 million yuan respectively. Yuan and 1.082 billion yuan, totaling 1.761 billion yuan, with a compound growth rate of 57.28%; net profits attributable to shareholders of the parent company were 7.9033 million yuan, 193 million yuan, and 71.7985 million yuan respectively, totaling 273 million yuan, of which government subsidies amounted to 127 million yuan, with a gross profit margin of more than 48%. Revenue in 2021 will only increase by 10.99% to 1.201 billion yuan. According to the company’s March 2022 prospectus, Loongson is expected to be in 2022, 2023 and 2024. Zhongke expects revenue to be no less than 1.5 billion yuan.
However, it turns out that Loongson Zhongke’s forecast is a bit too optimistic.
Due to the new crown epidemic, reduced procurement and other reasons, the company’s operating income and net profit will decline from January to March. A double year-on-year decrease, of which revenue was only 181 million yuan, a year-on-year decrease of 37.08%; net profit attributable to the parent company was 36 million yuan, a decrease of 41.74%.
Loongson Zhongke’s stalling shows that under the new crown epidemic, interest rate hikes, inflation and economic changes. Under this situation, China's CPU chips are under pressure.
Loongson Zhongke said that the decline in revenue is mainly due to the fact that the company's information customers are in the stage of centralized delivery and acceptance to end users, and the procurement of new batches has lagged behind, and product delivery work has been delayed. Affected by the epidemic, its major customers are generally in the budget preparation and approval stage in the first half of the year, and there are fewer new procurement needs, and they usually complete product acceptance in the second half of the year, especially in the fourth quarter. "Affected by this, Loongson Zhong. Sales revenue is usually lower in the first half of the year and higher in the second half of the year, especially in the fourth quarter, which is mainly related to the market demand for downstream terminal products. "Cao Yancai, Chief Financial Officer of Loongson Zhongke said.
At the same time, the direct sales model has led to the high sales expense rate of Loongson Zhongke , which was 8.17%, 4.99% and 7.58% respectively in 2019, 2020 and 2021, while in the same period the industry The median values are 4.09%, 4.4% and 4.17% respectively.
In the prospectus, the company admitted that the market ecology of competitors’ x86 and Arm instruction sets is “mature”, and “the software ecology of Loongson processors is complete and mature. Therefore, there is still a certain gap between Loongson Zhongke and other international CPU leading companies such as Intel and AMD.
According to disclosures, as of December 31, 2021, Loongson Zhongke has orders in hand for products based on the LoongArch instruction system. Approximately 138 million yuan, and shipments will gradually increase. As of March 20, 2021, there are no chargebacks on the aforementioned orders.
In the first half of 2022, Loongson Zhongke expects revenue to be about 400-500 million yuan, a year-on-year decrease of about 28%-11%; it is expected to achieve net profit attributable to the parent company of about 115-167 million yuan, a year-on-year increase of 28% to 85%, excluding non-profit Afterwards, it decreased by 38 million yuan year-on-year.
IPO fundraising has shrunk by nearly 1/3, and there will still be competition risks in the domestic CPU market in the future.
When submitting the prospectus in June 2021, Loongson Zhongke stated that the IPO company planned to raise 3.512 billion yuan, of which 35% of the total funds raised. It is used for the research and development and industrialization of advanced process chips; 30% (30%) is used for construction investment in two major projects of high-performance general-purpose graphics processor chips and system research and development; the rest is used to supplement working capital.
However, based on the issue price of 60.06 yuan per share, the expected funds raised are 2.462 billion yuan, which is nearly 1 billion yuan less than the fund-raising plan in the prospectus. At the same time, calculated based on the issue price, the total market value reached 24 billion yuan. Whether it is the issue price, fundraising, or market value, it is lower than market expectations.
Regarding the company’s pricing considerations for this issuance and the gap between fundraising expectations, Hu Weiwu said during the online debut roadshow that there are currently no listed companies in the A-share market that are completely comparable to the company. The company’s pricing takes into account the current market conditions and the company. funding needs in the coming period.
Among the objects participating in the strategic placement in the listing of Loongson Zhongke, in addition to the two employee management plans and the sponsor companies participating in the investment, there are also three companies: Tongfu Microelectronics , Guodian Nari , and Code CNC. Loongson Zhongke’s business includes industrial enterprises with strategic partnerships or long-term cooperation intentions (each investing 30 million yuan), the second phase of the National Fund (investing 200 million yuan), China Internet Investment Fund (investing 120.6 million yuan), and national industrial investment Fund (investing 100.5 million yuan) and other "national team" funds participated in the initial strategic placement.
According to the results, the second phase of the large fund was allocated 1.435 million shares, accounting for 3.50% of the issuance; China Internet Investment and Industrial Investment Fund were allocated 546,700 shares and 273,300 shares respectively; three industrial strategic investors Each was allocated 205,000 shares. According to the
announcement, the initial strategic allotment quantity of Loongson Zhongke's issuance was 3 million shares, accounting for 15% of the total issuance size; the final strategic allotment quantity was 835,100 shares, accounting for 27.84% of the initial strategic allotment quantity. The difference of 2.1649 million shares will be transferred back to offline issuance. Regarding the future positioning of Loongson Zhongke, some media believe that at present, a large number of Chinese software companies are using Loongson Zhongke's programming framework and language to write code. This probability is still very small, and with the cost advantage of independent instruction set architecture , in the Xinchuang market, it will gradually encroach on the market share of domestic chips using X86 and ARM instruction set architecture, and there will be great opportunities.
But the problem is that with the rapid development of RISC-V, ARM and other instruction set architectures in the future, Loongson Zhongke may fall into the struggle of other domestic CPUs and the Xinchuang market, which is probably the company's biggest risk. When
IPO Roadshow accepted a question from Titanium Media App, Hu Weiwu replied that in the global computer field, the CPU commercial market is basically occupied by Intel (market share maintains 80% all year round) and AMD. After long-term accumulation, Loongson Zhongke has basically completed technical "make-up lessons". The performance of general-purpose processors has approached the level of mainstream products in the commercial market, and the operating system has become mature and stable. After further iterative optimization, it will move toward the open market in the commercial field.
He emphasized that as the earliest company to develop general-purpose processors, Loongson Zhongke already has a series of independent patents and intellectual property rights, with outstanding technical advantages and strong product competitiveness. Compared with domestic CPU companies, Loongson Zhongke is at the forefront of the market in both the industrial control system autonomy market and the information system autonomy market.
(This article was first published on Titanium Media App, author | Lin Zhijia)
