semiconductor is a key component of electronic terminal products. The industrial chain can be roughly divided into three major links: design, OEM, and packaging and testing. Among them, the packaging process refers to cutting and welding wire sealing of wafer after production and processing, so that the circuit is linked to external devices, and providing mechanical protection for semiconductor products, ensuring the heat dissipation performance of the chip, and realizing the transmission of electrical energy and electrical signals. The testing process refers to the use of professional equipment to verify the functions and performance of chips and circuits to ensure the normal use of the delivered products.
Foshan Lanjian Electronics Co., Ltd. (hereinafter referred to as "issuer", "company", "blue arrow electronics") is engaged in semiconductor packaging and testing business, providing discrete devices and integrated circuit products for the semiconductor industry and downstream fields. The company plans to list on the Shenzhen Stock Exchange GEM , the sponsor is Jinyuan Securities , and the auditing agency is Huaxing Accounting Firm.
1. Whether the company meets the positioning of the GEM is questionable.
During the reporting period, the company's main business income was classified by product type as shown in the following table. The source of income was mainly divided device revenue, accounting for 60.45% of the overall revenue, and the remaining integrated circuit revenue accounted for about 40%. So, how advanced is the company's product technology? Does it meet the positioning of the GEM? Valuation Home will take you to analyze and discuss one by one.
01 Discrete devices are not core components with high technical content in the semiconductor industry
①. The process technology of discrete devices is relatively simple
Discrete devices refer to electronic components with separate functions, and their main functions are to realize rectification, voltage stabilization, switching, mixing, amplification, etc. of various electronic devices. Since the invention of power diodes in the 1950s, discrete devices have a history of about 70 years and have formed a relatively mature industry-wide technology. From the perspective of process technology, discrete device chips refer to chips that only form one or a small number of PN junctions on an silicon wafer through doping, diffusion and other processes (P-type semiconductors and N-type semiconductors are made on the same semiconductor substrate, and the space charge region is formed at their interface, called PN junctions ). The chip has a simple structure and the functions that can be realized are relatively simple, mainly to realize the established circuit functions.
②. Discrete devices account for a low proportion of revenue in the semiconductor industry, and fierce market competition
Source: WSTS, Huajing Industry Research Institute
The above picture shows the sales structure of major global semiconductor products in 2021. Due to the relatively simple process technology and role of discrete devices, the scale of revenue of discrete devices is not large, accounting for only 5% of the overall semiconductor industry revenue, and more than 80% of the sales scale is concentrated in the integrated circuit part with high technical content.
At the same time, simple process technology often means low technical barriers and fierce competition in the industry. According to the "China Semiconductor Packaging and Testing Industry Research Report (2020 Edition)" released by the Packaging Branch of the China Semiconductor Industry Association, in 2019, Lanjian Electronics ranked 8th in the production capacity of major domestic discrete device packaging and testing manufacturers, but the company's discrete device market share was only about 0.09% that year. It can be seen that the not-so-spacious track gathers many competitors. In the Issuer's description, the issuer also disclosed the risks related to its discrete devices as follows: The company's current own brand products are mainly transistor , diode and field effect transistor . Some products have a high degree of standardization and versatility, and compared with listed companies in the same industry, the product competitiveness is weaker. If the company cannot apply new materials and new technologies to the above general products through technological upgrades to achieve product upgrades, the related products will face the risk of being replaced.
02 The company's integrated circuit product technology is not very advanced, and its future growth is doubtful
integrated circuit refers to a circuit with specific functions that integrates a certain number of commonly used electronic components, such as resistors, capacitors, , transistors, , etc., as well as the connection between these components, through semiconductor processes. Integrated circuit products include two categories: analog circuits and digital circuits.
①. Company’s analog circuit product process technology development is slow. Compared with digital circuits, its process technology requirements are not on the same level
Company’s main integrated circuit products are AC-DC, DC-DC, lithium battery protection IC, LED driver IC, etc., all of which are power management products, concentrated in the field of analog circuits. However, analog circuits have the disadvantages of poor confidentiality and weak anti-interference ability: analog communication is easily eavesdropped, and communication content can be obtained as long as the analog signal is received; the electrical signal will be disturbed by various noises from the outside and within the communication system during transmission along the line, and the noise and signal are difficult to separate after mixing, resulting in a decrease in communication quality. Therefore, analog circuits need to pay special attention to voltage, current, distortion, power consumption, speed, reliability and stability, and the impact of various components on the performance of analog circuits needs to be considered. Excessively high process node technology is often not conducive to the requirement of achieving low distortion of analog circuits or outputting high voltage and high current to drive other components. Therefore, the analog circuit has relatively low demand for process node evolution and is not bound by mol law . Therefore, analog circuits generally do not require the most advanced process, and the process process has little impact on the performance of analog chips. The analog chip can be replaced with a relatively low technical threshold.
. Digital circuits pursue computing speed and cost, and often need to use new processes to improve integration and reduce costs, and develop according to Moore's Law. Digital circuit chips are large in scale, production tools run for a long time, and process requirements are complex, so multiple teams often require collaboration. Currently, the most advanced process chips have reached 5-7nm, while the industry still uses a large number of processes above 0.18um/0.13um in the industry. From a process technology perspective, the two are no longer on the same order of magnitude. The digital circuit packaging and testing field is also a hot topic tracked by leading packaging and testing manufacturers. Due to the rapid technological change of digital circuits, the demand for packaging and testing technology innovation in upstream design and wafer manufacturing is constantly increasing, requiring packaging and testing manufacturers to have leading packaging and testing technology capabilities to adapt to their requirements for packaging technology.
②. The growth of the company's integrated circuit business is questionable
In early 2020, with the outbreak of the epidemic around the world, home office and online teaching emerged, which has driven the demand for personal computers and other devices, further boosted the demand for chips, and the supply of products is in short supply. As a result, global chip shortage and chip prices have soared. However, according to Frost; Sullivan data, with the market hot, the market size of China's analog circuit in 2021 was US$273.1 billion, with a scale growth rate of only 9%. At the same time, according to data from the World Semiconductor Trade Statistics Organization, the global digital circuit market sales revenue in 2021 reached US$150.736 billion, with increasing by year-on-year, the largest increase in in the past 1 years. As a country with a large demand for semiconductor products, my country's year-on-year growth rate should be higher than the global digital circuit market revenue growth rate. In 2021, my country's year-on-year growth rate of digital circuit product revenue should be more than three times the growth rate of digital circuits. In comparison, Valuation Home has to put a question mark on the future growth space of analog circuit products, and it is highly doubtful whether the company, as one of its members, has growth potential and whether it has the growth characteristics of the GEM positioning.
Time has arrived in 2022. After the explosive growth of the semiconductor market in the first two years, with the continuous expansion of production capacity, chip manufacturers have begun to face the problems of a significant increase in inventory and a significant decrease in demand. The semiconductor market is facing its worst recession in nearly a decade, or even in nearly 20 years. Oversupply followed by a plummeting chip price, while the consumer electronics field was the most concentrated and significant. Among them, most products fell by more than 20% in the past two months, and some chips dropped by more than 80%. , and one of the main products of the issuer Blue Arrow electronic integrated circuit is consumer electronic product . Such a severe periodic recession in the chip industry has cast a thick shadow on the company's growth.
At the same time, the siphon effect in the packaging and testing market is becoming increasingly obvious, with the market share of the top ten packaging and testing companies in the world in 2020 being 83.98%.The top five companies, , Moonlight , Ankui Technology, , Changdian Technology, , Silicon Products, and Licheng Technology, have a market share of 70.00%. The total market share of China's packaging and testing companies Changdian Technology, Tongfu Microelectronics , and Huatian Technology has reached 21.00%. The increase in industry concentration has intensified market competition. The scale effect and synergistic effect brought about by the improvement of industry market concentration will reduce the cost of leading enterprises. The cost advantages of leading enterprises will affect the expansion of the company's market share and the introduction of new products, resulting in a further widening of the gap between the company and leading enterprises. 2020 in the year, the company's integrated circuit product market share was only about 0.09% . For companies with a size like the issuer Blue Arrow Electronics, the company's competitiveness is very limited. As industry competition will become increasingly fierce in the future, it is really worrying how a small boat like the issuer can maintain stable growth in the storms of the industry.
③. The company's advanced packaging technology revenue accounts for a low proportion
From the perspective of adopting packaging technology, leading packaging and testing manufacturers such as Changdian Technology, Huatian Technology, and Tongfu Microelectronics mainly focus on advanced packaging technology, mainly mastering many advanced packaging technologies such as FlipChip, SIP, Bumping, TSV, MEMS, Fan-Out, and have great advantages in packaging technology and packaging types diversity, and can use a variety of advanced packaging technologies to carry out production and operation. The company currently only masters FlipChip and SIP system-level packaging technology, and there is a big gap in technology compared with leading packaging and testing manufacturers.
During the reporting period, the proportion of revenue of traditional packaging and advanced packaging of various products of the company is as shown in the figure above. It can be seen that the company's revenue of advanced packaging technology is only 7.04%, while sales account for only 5.54%. The industry-leading enterprises account for a high proportion of revenue from advanced packaging. According to the record of Changdian Technology's 2021 semi-annual report performance briefing, its advanced packaging revenue accounts for more than 50%.
④. The company's low overseas sales share highlights the lack of technological advancement. The products are concentrated in the mid-to-low-end products
. A few giant companies dominate the IC design industry, among which the US IC design industry is in a leading position. As a downstream industry of IC design, the semiconductor packaging and testing industry can also reflect whether major companies have technological leadership in the packaging and testing field from the cooperation between overseas design giants and domestic manufacturers. Therefore, the proportion of overseas sales revenue is also a touchstone for packaging and testing of companies' technological advancedness. The leading packaging and testing manufacturers in the domestic industry are among the top ten semiconductor packaging and testing companies in the world. Their main customers include many domestic and internationally renowned companies such as AMD and Intel . In 2020, the average overseas revenue share of the three leading packaging and testing companies was as high as 67.66%, while the company's overseas revenue accounted for less than 0.01% during the same period. It can be seen that the company's packaging and testing products are mainly concentrated in the mid- and low-end product range.
03
R&D expenses are suspected of improper manipulation: R&D expenses are at the bottom, R&D materials and production costs are seriously inverted, R&D expenses are additionally deducted huge differences
①. R&D expenses are at the bottom
As a capital-intensive industry, the semiconductor packaging and testing industry needs a large amount of R&D expenses to support the market competitiveness of the products. During the reporting period, the proportion of R&D expenses of comparable listed companies in the same industry to operating income is shown in the following table, although from the perspective of R&D expense ratio, it is roughly equivalent to the average value of comparable companies. However, in terms of R&D expense scale, there is a clear gap with comparable companies. The total R&D expenses are 91.4997 million yuan, ranking at the bottom after all comparable companies. The total R&D expenses of Changdian Technology, the leader in the industry, are as high as 317,389.810,000 yuan, and the company's R&D expenses are only a fraction of it; compared with the market average 113,709.500,000 yuan, it is also far from the market average. However, the scale of R&D expenses at the end of the rankings are still suspected of serious signs of improper manipulation.
②. R&D materials and production costs are seriously inverted
in the original Science and Technology Innovation Board registration stage inquiry reply that from 2019 to 2020, the SOT23-X package integrated circuit intelligent manufacturing technology upgrade R&D project invested a total of 96.5879 million raw materials such as frames and chips, while the diode SOT23-6 packaging specification product cost includes only 19.961 million raw materials such as frames and chips. The amount of raw materials invested in product cost is only about 20% of the R&D expenses invested, and the raw materials in the R&D expenses and the raw materials in the production costs are seriously inverted. Valuation Home reasonably speculates that the issuer may have improper manipulation of placing relevant production costs on the R&D project due to the low actual R&D expense investment.
③. Company R&D expenses additional deductions are huge
According to the company's original prospectus for the Science and Technology Innovation Board and the relevant inquiries reply, there is a huge difference between the issuer's original report and the R&D expenses used when applying for additional deductions for R&D expenses, among which: the direct material expenses in R&D expenses are the largest. The company's R&D expenses during the original reporting period were RMB 58.3575 million, while the investment in materials that did not fall within the additional deduction scope of R&D was as high as RMB 31.9974 million, accounting for 54.83%. 's exclusion amount when calculating the additional deduction of R&D makes Valuation Home reason to reasonably doubt the authenticity of its R&D expenses. The company has a very high possibility of improper manipulation of the R&D costs by placing the production costs on the R&D projects to embellish R&D expenses.
04
In history, the company suspected that there have been many cases of failure in the operation of products and even subsidiaries due to insufficient R&D
①.The company stopped operating LED product
In 2008, the company began to participate in the research and development, production and sales of LED products, mainly engaged in LED lamp beads and supporting products. In 2017, the company suffered losses in LED products, and the issuer gradually reduced LED R&D investment and production capacity investment. In the second half of 2018, the company no longer produces LED-related products.
Regarding the reasons for stopping the operation of LED products, the company explained that since 2016, the downstream market demand for LED products has slowed down, overcapacity has become prominent, competition in the LED market has been fierce, industry concentration has continued to increase, the overall price of LED products market has dropped significantly, and a large number of small and medium-sized LED manufacturers have been forced to transform or close, and the company has adjusted the strategic layout and resource allocation of LED products.
. In the view of Valuation Home, the essential reason is that the company's insufficient R&D investment makes the company's LED products do not have cost and technical advantages in the fierce market competition. Most of the products with serious homogeneity cannot escape the fate of being eliminated by the market in the low-value-added industry track. At that time, the situation in the LED industry was very similar to the situation the company is currently facing in the fields of discrete devices and integrated circuits. If the company does not increase its R&D investment, it may usher in the same fate as LED products.
②. The original holding company went bankrupt due to insufficient R&D investment of issuers and liquidation of liquidation
company holding during Shenghai Electronics, due to insufficient R&D investment, backward technology, slow product updates, and significant economic benefits declined. In December 2015, after the company's board of directors, it transferred its controlling rights to Jiangsu Zhongpeng, a professional plastic sealing material manufacturer. After the transfer of control, Shenghai Electronics is still a shareholder of the issuer. However, this transfer did not improve Shenghai Electronics' performance. According to Tianyan Check, Shenghai Electronics and its controlling equity transferee Jiangsu Zhongpeng are currently in the bankruptcy liquidation stage, and Shenghai Electronics is also involved in a number of contract dispute cases.
2. In addition to R&D expenses, the company also has many suspicious signs of financial packaging
01 The gross profit margin of the company's integrated circuit products is much higher than that of the comparable leading company
During the reporting period, the gross profit margin of the company and domestic leading packaging and testing manufacturers is shown in the above table. The issuer Blue Arrow Electronics' gross profit margin is much higher than the average value of the leading companies in each period. Among them: the gross profit margin in 2019 was about 7 percentage points higher than the average value of comparable companies, and 36.26% higher than the average value (due to the difference between the overseas business and the domestic business model of the leading comparable companies, the gross profit margin of overseas business is lower, so the overseas sales business is excluded and the domestic sales gross profit margin with similar sales models is compared).
As mentioned in the previous article, from the perspective of product structure, the company's integrated circuit packaging and testing services are mainly analog circuit products; on the other hand, leading packaging and testing manufacturers have product types that cover multiple fields such as digital circuits and analog circuits. In addition to the traditional packaging series, they are also involved in multiple advanced packaging series such as BGA, SIP, WLCSP, etc. Valuation Home has reason to reasonably doubt the authenticity of the issuer Blue Arrow Electronics' gross profit margin. The products of comparable leading companies cannot achieve logical self-consistent , whether in terms of the difficulty of digital circuit technology or the proportion of advanced packaging revenue, the gross profit margin of the company's mid- and low-end analog circuit products is much higher than that of comparable leading companies.
02
sales unit price of discrete device products has grown steadily, but the unit price of packaging and testing services has dropped significantly
During the reporting period, the average unit price of discrete device products of private brands and packaging and testing services has been shown in the following table. It can be seen that the average unit price of the company's own brands has risen steadily, with an annual compound growth rate of 1.76%; but at the same time, the average unit price of packaging and testing services has been greatly reduced, with an annual compound growth rate of -15.82%, of which: it was significantly reduced by 20.80% in 2021.
The company explained the reason for the price reduction: the sales share of field effect tube products with higher unit prices in the packaging and testing services has decreased, which has lowered the average unit price of discrete device products.
, and Valuation Home checked the Shenzhen Stock Exchange's review inquiry letter response and its revenue and composition of the company's discrete product: In 2021, the company's own brand FET revenue accounted for 22.28% of the total revenue of its own brand products, a decrease of about 4% year-on-year; the total revenue of the closed-end test service FET revenue accounted for only 8.99%, a decrease of about 5% year-on-year.
So the question is, why can the average unit price of the company's own brand discrete product not decrease but increase instead when the year-on-year changes in the amount share and the proportion of the revenue of the field effect management private brand is significantly higher than the proportion of the packaging and testing services? The issuer said that the reason for the price reduction given by the issuer obviously cannot explain the abnormal growth of the average unit price of its own brand discrete product, and it cannot be self-consistent.
03 The changes in the company's chip purchase unit price are seriously inconsistent with the changes in the industry price
At the beginning of 2020, with the outbreak of the epidemic, it drove the demand for electronic products to rise. At the same time, due to the insufficient production capacity due to the epidemic, the domino effect caused by the tight wafer supply is becoming more and more intense in the semiconductor industry chain, and the chip prices in the upstream industrial chain are showing a trend of soaring.
According to CCTV reports, the price of some chips produced in Germany is 3.5 yuan in 2020, and has risen to 16.5 yuan in 2021, a year-on-year increase of nearly 4 times; the core chip of the body electronic stability system produced by STMicroelectronics has soared from the original 20 yuan to 2,800 yuan, a year-on-year increase of more than 100 times.
In contrast, the price changes of the company's chip purchases: from 2019 to 2021, the annual compound growth rate of chip purchase unit price was only 4.68%, of which: the purchase unit price in 2021 increased by 0.47% year-on-year, and there was almost no price fluctuation in . 's extremely stable procurement price seems out of place compared to the overall market supply and demand imbalance. Valuation Home has reason to reasonably doubt the authenticity of the company's chip procurement price.
3. The company's aggressive investment highlights insufficient internal control and brings risks to future sustainable operations
In 2019, the company had a debt investment transaction amount of up to RMB 21 million. The company disclosed in the reply to the Shenzhen Stock Exchange's review inquiry letter that: In order to improve the efficiency of idle funds, after the issuer's board of directors' resolution, Foshan Zhengcheng Investment Company Co., Ltd. transferred its target share of 21 million yuan in Zhuhai Baohui Tiancheng Asset Investment Management Center (Limited Partnership) to the issuer, and repurchased the issuer's income rights within the agreed repurchase date. The company's asset acquisition target is "Shanghai Personal Loan Debt Package Project 16". The company acquires shares of funds with priority, with a maximum holding period of 1 year, and an annualized rate of return of 18%. The source of funds for the principal and interest of the debt is the realization income of the mortgaged property auction and sale.
has an annualized yield of up to 18% and the source of funds for the principal and interest of the debt. In the view of Valuation Home, the personal loan claim of the investment target should be a personal non-performing asset with extremely high bad debt rates. The liquidity of the debt investment is extremely low and the risk is extremely high. On the other hand, its risk control measures for debt investment are only the repurchase commitments of relevant companies and personnel and the preferred share of repurchase due to the inferior party, and its risk exposure to the company is obviously not well covered.
In order to improve the efficiency of idle funds, listed companies often invest in bank wealth management products with abundant liquidity and low risk levels. In order to pursue high returns, the company has invested in non-performing asset projects with annualized yields as high as 18% . Judging from the reply to the Shenzhen Stock Exchange's review inquiry letter, the issuer does not seem to pay attention to and pay attention to the relevant risks, which also highlights the company's internal control of to insufficient control of related risks. Once listed, the issuer Blue Arrow Electronics will have sufficient equity cash flow, and such aggressive investment strategies and obviously insufficient internal controls will bring risks to the company's future sustainable operations.
This article is from Valuation Home
