Recently, Lanqi Technology (688008.SH), the leader in the sub-sector of Yibi ecological enterprise, integrated circuit design sector, announced its 2021 annual performance report. In 2021, the company achieved operating income of 2.562 billion yuan, an increase of 40.49% from 2020, a record high; and achieved net profit of 829 million yuan, a decrease of 24.88% from 2020.
It is worth noting that the company's performance in the fourth quarter of 2021 was particularly impressive, with single-quarter revenue and net profit achieving significant growth year-on-year and and month-on-month . The performance report shows that the company's operating income in the fourth quarter of 2021 was 969 million yuan, and increased by month-on-month, 11.64%, year-on-year; net profit was 317 million yuan, 54.78%, year-on-year, year-on-year; net profit after deducting non-operating items was 257 million yuan, 40.32%, year-on-year.
DDR5 related chips mass production and shipment. The revenue of interconnect chips hit a new high in the fourth quarter
According to the company's announcement, with the official mass production and shipment of the company's DDR5 memory interface chips and module supporting chips, and the continuous development of Jinji® CPU business, the related businesses performed strongly in the fourth quarter of 2021, driving the company's performance to a significant growth. Among them, the operating income of the interconnected chip product line in the fourth quarter was 601 million yuan, a month-on-month increase of 39.97% and a year-on-year increase of 76.55%, setting a record high for the company's single-quarter revenue of the product line; gross profit margin also increased from 65.38% in the first three quarters to 69.21%.
According to market analysts, "Compared with DDR4, due to the faster speed and better performance of DDR5 memory interface chips, with the rapid development of cloud computing and artificial intelligence , the memory interface chip industry itself will enter a new stage of both volume and price increase; on the other hand, as the three module supporting chips SPD, TS and PMIC become the standard configuration of server memory modules, and SPD and PMIC become the standard configuration of UDIMMs for desktop and laptop computers, the market size of DDR5 related chips will achieve rapid growth. A research report predicts that after DDR5 completes its full penetration, the market size of related chips is expected to reach about 4 times that of the DDR4 generation."
0 In addition, the company stated in an investor Q&A in January this year, "The company announced the mass production of DDR5 memory interface chips and memory module supporting chips in October 2021, which shows that the volume of related products is continuous and large-scale."
"Now, Lanqi's performance in the fourth quarter has increased significantly, which once again confirms our judgment on the market prospects of DDR5-related chips. Of course, since the fourth quarter was just mass-produced, according to historical rules, the current penetration rate of DDR5's in the market should still be at a very low level, and it is expected to replace DDR4 and become the mainstream of the market within about 2-3 years. We believe that with the official launch of server platforms that support DDR5 and the gradual increase in DDR5-related products, the company will enter a new performance growth cycle." The market person further added.
two product lines are moving forward in parallel and revenue scale has entered a new stage
From the company's annual performance in 2021, on the one hand, the interconnect chip product line has developed steadily, achieving operating income of 1.717 billion yuan, a decrease of 4.31% from the previous year; on the other hand, the Jinji® server platform product line has made breakthrough progress in the second half of 2021, with operating income of 845 million yuan for the whole year, an increase of 2750.92% from the previous year.
The company's two product lines are moving forward in unison and blooming at multiple points. The annual revenue reached 2.562 billion yuan, an increase of 40.49% over 2020, setting a new record high for the company and the revenue scale has entered a new stage. Analysis points out that Lanqi Technology has gradually upgraded from a single chip product design company , which was originally listed, to a platform chip design company. At the same time, the company is still continuing to increase its R&D investment. The performance report shows that the company's R&D expenses in 2021 were 370 million yuan, an increase of 23.33% over the previous year.
demand recovery + generation upgrade, memory interface chip growth can be abundant
information technology development promotes data cloud transfer, and the world's four major cloud computing manufacturers Amazon , Google , Microsoft , and Meta Capital expenditure in the first three quarters of 2021 reached US$30.972 billion, maintaining a high growth of +36.62%.As the impact of the epidemic and chip shortage gradually eases and CPU updates and iterations, the server market will usher in a new round of growth cycle in 2022. IDC is expected to ship 14.23 million units in 2022, up 9.78% year-on-year. At the same time, with the upgrading of technology, the number of memory modules for a single server increases, driving the increase in the demand for memory interface chips. (Report source: Future Think Tank) After
is upgraded to DDR5 generation, the value of the company's RCD single piece is expected to increase significantly; LRDIMM has been upgraded from 1*RCD+9*DB to 1*RCD+10*DB, and the usage is increased; 1*SPD+1*PMIC+2*TS is added to the DDR5 generation memory module, among which SPD and PMIC can also be applied to the PC side, opening up broad market space. It is estimated that the memory interface + supporting chip market space is expected to exceed US$2 billion. The industry's competitive barriers are high, and the layout of Lanqi and IDT oligopoly is stable. The company's forward-looking layout is expected to continue to maintain its leading position in DDR5 and enjoy the revenue growth opportunities brought by industry growth.
server prosperity has increased, driving the demand for memory interface chips to increase
information technology development promotes data cloud transfer, and cloud manufacturers' capital expenditures maintain rapid growth. With the development and maturity of the new generation of information technology such as cloud computing, 5G, AI, and other , the advantages of cloud service accessibility, expansion and flexibility have been further highlighted. The digital transformation of enterprises accelerates the penetration rate of cloud services. According to IDC's forecast, the cloud system infrastructure service (IaaS) markets in 2021 and 2022 will increase by 32.59% and +29.45% year-on-year respectively.
Capital expenditure of cloud computing manufacturers is a leading indicator of IDC demand. The total capital expenditure of the world's four major cloud computing manufacturers Amazon, Google, Microsoft and Meta in the first three quarters of 2021 reached US$30.972 billion, up 36.62% year-on-year, maintaining high growth. Meta expects capital expenditure to be $19 billion in 2021 and to increase significantly to $29-34 billion in 2022 to support AI and machine learning spending under the meta-universe transformation. Investment in cloud infrastructure will continue to stimulate the acceleration of data center settings and increase server demand.
server market has fully recovered, and the stocking cycle has arrived. Server shipments in 2020-21 were affected by many aspects. 1) The impact of macroeconomic instability factors such as Sino-US trade frictions and the impact of the epidemic has reduced the IT budget of enterprises, and the shift to leasing of server purchases has led to the suspension of server purchase orders. 2) Due to the delay in the release of the new generation of Intel CPUs, cloud data centers and brand manufacturers are becoming more conservative in pulling goods. 3) Affected by chip shortage, the overall shipment volume is affected by the problem of long and short materials.
Outlook In 2022, as the epidemic and chip shortage gradually ease, supporting the new DDR5 platform Intel Sapphire Lake and AMD Genoa are expected to be launched, stimulating major manufacturers to purchase models equipped with the new generation of CPU. Judging from the necessary remote management chips (BMCs) demand among servers and hosts, Xinhua Technology, the world's largest supplier, achieved revenue of RMB 82 million and RMB 70 million in October and November 2021, respectively, an increase of 84.57% and +33.22% year-on-year. The continued growth in performance shows that the stocking cycle has arrived. IDC expects global server shipments to be 14.23 million units in 2022, up 9.78% year-on-year. The global server shipments to be CAGR will reach +7.18% from 2021 to 25, and the server market will usher in a new round of growth cycle.
Lanqi Technology was founded in 2004 and is an international leading data processing and interconnect chip design company. It is committed to providing high-performance and low-power chip solutions for the fields of cloud computing and artificial intelligence. The company currently has two product lines: interconnect chips and Jinda® server platform. As the first batch of listed companies on Science and Technology Innovation Board , Lanqi Technology logged on Shanghai Stock Exchange in July 2019 with the stock code 688008.
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