In 2019, Huawei violated the three principles of Ren Zhengfei , namely, not touching data, not making applications, and not doing equity investment, and established Huawei Hubble. "Hubble Investment was specially established under the background of Huawei's sanctions against the United States." Huawei's rotating chairman Guo Ping expressed the original intention of Huawei's Hubble's establishment to the outside world.
Hold has been controversial since its establishment.
In September 2019, Huawei invested in Siruipu, breaking the principle of "not investing in suppliers". Then Hubble made large-scale investments in the semiconductor industry chain, shocking the industrial circle and VC circle.
01
Huawei Hubble has become an IPO harvester
As of now, Huawei has invested in a total of 7 listed companies, namely Tianyue Advanced, Siruipu, Dongxin Semiconductor, Canqin Technology, Juguang Technology, Dongwei Semiconductor, and Changguang Huaxin.
Siruipu is the first listed company invested by Huawei Hubble Investment after its establishment, and it can also be said to be the most successful chip listed company for Huawei Investment.
In July 2019, Hubble Investment, which was just established, invested 72 million yuan in Siruipu.
Before boarding Huawei Express, Siruipu was a small analog chip manufacturer and had difficulty surviving. In 2018, Siruipu, which had been established for six years, had revenue of 114 million yuan and had a loss of 8.82 million yuan.
After Hubble acquired shares in 2019, orders from Huawei took Siruipu to a higher level. The prospectus shows that Huawei contributed only 1.7 million yuan to Siruipu in 2018, accounting for 1.5% of its total revenue. In 2019, Huawei contributed 170 million yuan in sales, accounting for 57.13% of total revenue.
Siruipu's revenue increased by 167% to 304 million yuan, and its net profit soared to 70.98 million yuan. It can be said that Huawei pushed Siruipu to Science and Technology Innovation Board with one hand.
Of course, Siruipu did not disappoint Huawei. After its listing on the Science and Technology Innovation Board, the market value rose from 900 million yuan to 45 billion yuan. Hubble Investment's shareholding market value exceeded 2.6 billion yuan, with a return of 35 times in two years.
The second company that Hubble invested successfully listed is Canqin Technology. Hubble invested 110 million yuan in Canqin Technology in 2020, with a shareholding ratio of 4.58%. At that time, Canqin Technology's valuation was 2.4 billion yuan, and now Canqin Technology's market value has reached 4.8 billion yuan, doubled its growth.
In January 2022, Tianyue Advanced was listed on the Science and Technology Innovation Board. This company, known as the "first silicon carbide stock", is the fifth successfully listed company after Hubble's investment.
In August 2019, Tianyue Advanced introduced Huawei Hubble to invest for its first foreign financing. Hubble invested 110 million yuan in Tianyue Advanced, holding 10% of the latter's shares. After several external capital increases, Huawei Hubble's final shareholding ratio was 6.3%. Based on the current market value of Shandong Tianyue’s 45.7 billion yuan, Huawei Hubble made about 2.6 billion yuan.
Changguang Huaxin is an lidar enterprise. At the end of 2020, Huawei Hubble became its shareholder and purchased 5.065 million shares of Changguang Huaxin at a price of 15 yuan per share. Currently, Huawei Hubble holds 3.74% of Changguang Huaxin shares, ranking as the seventh largest shareholder.
Among the companies invested by Hubble, some companies also "suddenly invested" by Hubble.
According to the prospectus of Juguang Technology, in September 2020, Huawei Hubble subscribed to 2 million additional shares issued by Juguang Technology for RMB 50 million, of which RMB 2 million was included in the registered capital, and the rest were included in the capital reserve . At that time, Juguang Technology was already in the stage of IPO, and Huawei Hubble was investing suddenly.
Huawei Hubble's shareholding price is 25 yuan per share, and after the shareholding, it holds 2.96% of the shares. After its public listing, Huawei Hubble held a 2.22% stake in Juguang Technology. As of press time, Juguang Technology's share price was 121 yuan, five times higher than the price of Huawei and Hubble's investment.
Huawei Hubble has not only invested in Juguang Technology, but also Dongwei Semiconductor . Hubble became one of its several new shareholders in the first 12 months after Dongwei Semiconductor submitted its IPO. In July 2020, Huawei Hubble increased its capital of 75.3 million yuan to Dongwei Semiconductor, and obtained 7% of equity , with a shareholding price of 22.61 yuan per share.Among the three equity changes in the year before listing, Huawei Hubble's investment price was the lowest. Today, Dongwei Semiconductor's share price is 228 yuan, which is ten times higher than Huawei's Hubble's 22.61 yuan investment price.
On the road to betting on IPO, Huawei Hubble has become an "IPO harvester".
02
Behind the entry of the IPO, Huawei gives money and orders
Huawei Hubble's support method is not only "invest money", but also "orders". In addition to the orders for Siruipu mentioned above, including Canqin Technology, Tianyue Xianjin, etc., they also received large orders from Huawei.
In fact, as early as 2018, Canqin Technology has become a supplier of Huawei. At that time, the 5G dielectric waveguide filter produced by Canqin Technology achieved small batch delivery, becoming Huawei's first supplier of 5G ceramic dielectric waveguide filters. That year, Canqin Technology's revenue reached 271 million yuan and its net profit was 77.94 million yuan, an increase of more than 100% year-on-year.
Tianyue Xianjin has also received a large order from Huawei. Tianyue’s advanced development history is full of twists and turns. Its founder, Zong Yanmin, is a post-60s generation, neither 985 nor 211. Since 2011, Tianyue Xianjin has devoted all its efforts to the industrialization of silicon carbide semiconductor materials, but the research and development of silicon carbide materials has not been satisfactory. From 2018 to 2020, Tianyue Xianjin suffered losses for three consecutive years, with a total loss of 885 million yuan.
In August 2019, Tianyue Advanced introduced Hubble Investment, a subsidiary of Huawei Hubble, for its first foreign financing. Hubble Investment invested 110 million yuan in Tianyue Advanced. Hubble's investment in Tianyue's advanced investment is also regarded by the outside world as an important signal for HiSilicon to enter the third-generation semiconductor field.
From the perspective of Tianyue Advanced's development, there is a mysterious customer B's large purchase, which has allowed Tianyue Advanced's revenue to more than triple in two years, so that it can achieve profitability in the first half of 2021 and land on the Science and Technology Innovation Board.
According to Tianyue Advanced prospectus, Customer B belongs to the communications industry and is an affiliated company of Tianyue Advanced. In December 2019, Tianyue Xianjin became a qualified supplier of Customer B and determined the long-term supply relationship. Customer B's purchase of Tianyue Advanced has increased year by year, from 6% of Tianyue Advanced's total revenue in 2019 to 45% of the total revenue in the first half of 2021.
Coincidentally, in August 2019, Huawei Hubble invested RMB 111 million in Tianyue Advanced to become its shareholder. Huawei is also an affiliated company of Tianyue Advanced, which meets the description of Customer B. In the 2021 annual report, the only customer related to Tianyue Advanced also accounted for 40.73% of its annual sales.
Relying on Huawei's orders, Canqin Technology and Tianyue Advanced were "carried into IPO".
03
cannot escape low R&D and "dependence"
From the main business of each company, Siruipu is making base station chips, Canqin Technology is making filters , Tianyue Xianjin is a silicon carbide chip, Dongxin Semiconductor is making small and medium-sized memory chips, Juguang Technology is producing lidar, and Dongwei Semiconductor is mainly making power semiconductors.
They all have a common feature, that is, they are all Huawei suppliers, and some even go public through Huawei's business. But these seven listed companies that rely on Huawei are more or less suffering from Huawei's "dependence".
R&D expenditure is low
As a high-tech industry, semiconductor companies rely heavily on R&D. It is undeniable that the R&D expenditure of semiconductor companies is proportional to the company's strength.
On the one hand, the higher the revenue and the more cash flow companies have the strength to use huge expenditures to the R&D field. On the other hand, the more money a company invests in R&D, the more likely it is to gain a leading position in technology and thus achieve a leading position in the industry.
Among the 7 companies that Huawei Investment successfully listed, 3 R&D expenditures are lower than the market average.
The first company is Dongxin Semiconductor, which is invested by Huawei. Dongxin Semiconductor's main business is the research and development, design and sales of memory chips. The company's product lines include SLC NAND Flash, NOR Flash and niche DRAM (DDR3/LPDDR2).The downstream application fields of the product are mainly communication equipment , mobile terminals and wearable devices.
Dongxin Semiconductor R&D expense ratio
In its prospectus book, comparable companies listed by Dongxin Semiconductor include Microsity Innovation , Huabang Electronic , Wanghong Electronics, Puran Co., Ltd. and other companies. The annual R&D expense rate of Wanghong Electronics is around 10 to 12%, and the proportion of R&D expenses of Zhaoyi Innovation is around 9 to 12%. However, Dongxin Semiconductor's investment in R&D in 2020 and 2021 was only about 6%.
As a "risen show", although Canqin Technology has developed rapidly in the past two years, its R&D investment is not high. There is a big gap with Wuhan Fangu , which is also engaged in filters, and there are companies such as Dafu Technology , Chunxing Precision , Dongshan Precision and Beidouxingtong . Taking the first half of 2020 as an example, the average proportion of R&D investment of comparable companies in the same industry to operating income was 5.40%, while Canqin Technology's proportion was 3.38%. Its R&D investment not only has the lowest amount, but also has a lower R&D proportion than the industry average.
At the same time, Dongwei Semiconductor also has the problem of low scale and R&D expense investment in its R&D team. From 2018 to 2020, the proportion of R&D expenses in operating income has decreased year by year, reaching 10.49%, 6.13% and 5.18% respectively. In its prospectus, Dongwei Semiconductor regards Xinjie Energy, Huawei Electronics , Huaruan Micro , Yangjie Technology , and Silan Micro as comparable companies in its industry. According to the disclosure, the average R&D expense ratios of the aforementioned comparable companies during the reporting period were 5.90%, 6.24%, and 6.48%, respectively. It is not difficult to see that Dongwei Semiconductor is below the industry average every year, which means that its R&D investment in the industry is also at a low level.
What can you do not have to be poor in R&D? Domestic companies have fewer revenue scale than giants. If the R&D utilization rate is lower, it means it will be more difficult to catch up with international companies.
Huawei "dependence"
In the process of listing, Huawei's orders can undoubtedly help IPO, but Huawei's orders are both an opportunity and a shackle.
First look at Canqin Technology. With the large-scale production of 5G dielectric waveguide filters in the second half of 2018, Huawei's orders for Canqin Technology have come one after another. In 2017, Huawei was only Canqin Technology's second largest customer, with sales accounting for only 16.76% of total revenue. In 2018, Canqin's sales to Huawei accounted for 50.87% of its total revenue. By the first half of 2020, this proportion had reached 92.68%. Canqin completely got on the Huawei chariot.
Also highly dependent is Dongxin Semiconductor. After Huawei Hubble acquired its shareholder Xinsemiconductor, its shareholding ratio was 4%, which does not constitute an affiliate. It is worth noting that in the same year, Huawei (referred to as "customer A" in the prospectus) generated sales revenue of 233 million yuan, and increased by more than 5 times year-on-year, accounting for nearly 30% of Dongxin Semiconductor's main business revenue in the current period. However, in 2021, the revenue contributed by the customer showed a significant decline.
's dependence on a single customer reduces the bargaining power of the company and encountering price cuts is a high probability event. How to seek further development after listing is a question that companies need to think about.
03
Huawei Hubble's investment layout
Must first settle the country when resisting foreign countries. In ancient dynasties, to defend against enemies on the border or even expand territory, they needed to stabilize the rear first.
Wherever Huawei Hubble goes, it is "recruiting troops". Judging from public information, Huawei Hubble's semiconductor investment chain covers software, materials, equipment, design, packaging and testing. Hubble's investment is often closely related to Huawei's business. Investing in the semiconductor industry is to solve Huawei's own "chip shortage" crisis. Investing in sodium batteries and lidar chips is to contribute to Huawei's car manufacturing industry.
In addition to listed companies, a considerable number of Huawei-invested companies are in the process of IPO this year.On the first day of June, Silicon Electric Semiconductor submitted a prospectus on GEM ; on June 2, the IPO of the Simulated IC manufacturer Meixinsheng Science and Technology Innovation Board was accepted by Shanghai Stock Exchange ; on June 16, Zhongke Air Test, which is engaged in semiconductor testing, successfully passed the IPO of the Science and Technology Innovation Board; Yuta Microelectronics , which makes Ethernet chips, submitted a prospectus to the SSE Science and Technology Innovation Board......
Huawei Hubble's investment map continues, and the market will wait and see whether these companies backed by Huawei can eventually make a breakthrough on their own.
