Medium and micro semiconductors focus on 8-bit MCU design and development and continue to expand 32-bit production lines, products are mainly used in home appliance control and consumer electronics fields. With the advantages of high reliability MCU, high performance touch, high precision simulation, motor drive chip and underlying algorithm and low power consumption, the mature MCU development platform is formed, and the number of product models and performance advantages are constantly accumulated. The revenue of motor and battery chip is expected to grow at a high speed in the future, and the product structure upgrading and optimization effect is significant, so it is recommended to pay attention to the company's performance after listing.

Deep ploughing home appliance control and consumer electronics industry, MCU products gradually expand from 8 to 32. Medium and micro semiconductors started in home appliance control chips in 2001 and entered the fields of consumer electronics, sensor signal processing and motor and battery chips in 2013, 2014 and 2019. The company's 8-bit MCU contributes more than 80% of its revenue, mainly small appliance control and consumer electronics chips. 32-bit MCU accounts for a relatively low but rapid increase year by year. With the mature MCU development platform, from 2018 to 2020, the company could sell more than 800 chips, driving revenue from 175 million yuan to 378 million yuan, and CAGR reaching 47.0%. The change in product structure led to a slight decline in gross profit margin. In 2021, under the tide of chip shortage and rising prices, the company's stable production capacity led to a rise in volume and prices, with revenue reaching 1.109 billion yuan and gross profit margin rising sharply to 68.94%. According to the registration draft, the revenue in the first half of 2022 is estimated to be about 4.3-470 million yuan, a year-on-year change of-19.6% and 12.12%, deducting non-return net profit of about 1.31-145 million yuan, and a year-on-year change of-48.59% and 43.10%.

Household appliances are affected by the overall market space, consumer electronics demand is generally under pressure, motors and batteries are expected to become the main increments in the future. From the perspective of downstream areas: 1) the intelligent trend increases the demand for home appliance control MCU, and the overall growth of home appliances will be greatly affected by the industry space in the future. The market of small household appliances is more flexible, and the quantity of popular style products is faster, but the added value of products is relatively low. The trend of intelligent frequency conversion of large household appliances brings higher performance MCU demand, but the replacement cycle of large household appliances is longer, and the overall market scale is relatively stable. The future growth of the company mainly depends on the fixed volume of our major customers; 2) the overall demand for consumer electronic products is weak, and the sufficient supply superimposed competition has led to a sharp decline in MCU prices. The market demand for consumer electronic products fluctuates obviously, and the demand for personal consumer electronic products is easily affected by the overall macro environment. Under the background of weak demand in 2022, the overall ASP goes down more, and manufacturers are generally under pressure in the volume-for-price strategy; 3) the permeability of brushless motors increases, and the diversification of lithium battery management scenes brings broad market space for motors and battery chips. Brushless motor with high efficiency, low consumption and other advantages are widely used in power tools, fans and other fields, permeability continues to increase, brushless DC motor supporting the power battery BMS chip can achieve power detection and circuit protection and other functions, energy conservation and environmental protection trend has broad development prospects; 4) under the trend of Internet of things, sensor market expansion brings sensor signal processing chip demand expansion.

Self-developed high-reliability MCU and other five core technologies, help the four existing areas of products to accumulate technical advantages, and actively layout large household appliances, automotive specification-grade MCU and other high-performance products. Medium and micro semiconductors independently developed high reliability MCU technology, high performance touch technology, high precision simulation technology, motor drive chip and underlying algorithm, low power consumption and other core technologies, contributing more than 97% of revenue in the first half of 2021, widely used in all kinds of products of the company: 1) household appliance control chips with high reliability, high integration and high performance touch display: with high integration, comprehensive IGBT protection and other advantages, multi-technical indicators leading the industry Widely used in small household appliances and a small number of entry in the field of large household appliances, products are adopted in bulk by Midea, Gree and other well-known household appliance enterprises. 2) High integration and low power consumption consumer electronic chips meet diversified needs: develop different consumer electronic chips according to terminal usage scenarios, and provide highly integrated overall solutions, which are widely used in electric toothbrushes, electronic cigarettes, wireless charging and other fields. It has been recognized by XIAOMI, Yijia and other well-known customers. 3) Motor chip integrated control, drive and power devices, battery chip to achieve lithium battery charge and discharge management functions: the company's brushless DC motor series chips integrated control, drive and power devices, more integrated than the traditional scheme, mainly used in electric two-wheelers, fans, garden tools and other fields, the products are adopted by TTI, Nidec and other well-known manufacturers.

The power battery BMS chip meets the IEC60730 safety certification requirements, with long life, high precision and low power consumption. It has been approved by ATL, an international advanced lithium battery supplier, and has been used in motorcycle battery management solutions. Downstream end customers include electric motorcycle manufacturers such as Mavericks and Yadi. 4) the sensor chip has the characteristics of high precision and low power consumption: the company uses mature MCU development platform, combined with high precision simulation and low power consumption technology, to develop a sensor signal processing chip. Among them, the oximeter scheme has the characteristics of high integration and high performance-to-price ratio, and can basically achieve 32-bit performance with 8-bit MCU. 5) actively layout high-performance products such as large household appliances, automotive gauge-grade MCU chips, next-generation motors and battery chips. The company is actively developing 32-bit MCU master chips, MCU series chips, motor series chips and other high-performance products for large household appliances, industrial control, Internet of things and other fields.

It is proposed to raise 729 million yuan to expand the product line of large household appliances, industrial control, Internet of things and high-end chips.

The company plans to raise 729 million yuan for the research and development of large household appliances and industrial control MCU, Internet of things Soc and analog chips, car gauge-level chips, continue to upgrade chips in existing fields, and develop high-end product lines.

Investment advice. Medium and micro semiconductors is a domestic veteran 8-bit MCU manufacturer, gradually introducing 32-bit MCU, the overall growth of the company's home appliance control products is relatively stable, short-term consumer electronics is limited by the overall weak demand performance or relative pressure, considering the gradual increase in the field of motors and batteries, the company's product structure is expected to continue to optimize in the future. We estimate that the annual operating income of medium and micro semiconductors in 22-23-24 will be 114,371,718 million yuan, and the net profit of return to the mother will be 3.34 million yuan, and the corresponding EPS will be 1.88 billion yuan. The offering price is 30.86 yuan per share, and the market value of the corresponding issue is 12.355 billion yuan.

Risk hints: the lower-than-expected risk of product research and development, the risk of concentration in the field of product application and the gap of technology, the risk of intensified market competition, the unsustainable risk of higher gross margin in 2021, business performance risk, intellectual property risk.