The company is the target of domestic scarce exchange chips, the current low-end product line has a solid foundation, high-end products are expected to cut into the overseas leading monopoly market, is expected to bring 25.6T products into the AIGC computing network; rooted in China has local advantages and actively promote supply chain innovation, coverage for the first time, giving "overweight" rating.
Shengke Communication is a leading Ethernet switching chip design enterprise in China, which is deeply engaged in the research, development, design and sales of Ethernet switching chips and supporting products. After years of deep cultivation and accumulation in the industry, the company's products include access layer to core layer, covering 100Gbps-2.4Tbps switching capacity and 100M-400G port speed, and plan to launch 25.6T switching capacity Arctic series in 2024. 2023H1 achieved revenue of 643 million yuan, an increase of 88.28% over the same period last year, and a net profit of 35 million yuan, an increase of 202.02% over the same period last year. It is expected that with the launch and mass production of products such as TsingMa.MX and Arctic, the profitability of the company will be further enhanced.
From 2020 to 2025, the market CAGR of commercial Ethernet switching chips in China's data centers is expected to be as high as 18.0%. The proportion of high-speed chips continues to increase, and independent and controllable demand opens up broad space for domestic manufacturers.
According to Zhenshi Consulting, China's commercial Ethernet switching chip market is expected to grow from 9 billion yuan in 2020 to 17.14 billion yuan in 2025, with CAGR reaching 13.8% in 2020-2025. Data center switching chips will be the main driver of market growth (18.0% CAGR in 2020-2025), and the proportion of high-speed switching chips will continue to increase. At present, the large model of AI brings huge demand for computing power, and the shipments of high-speed switches are increasing rapidly, which drives the demand for switching chips to increase. In China's commercial Ethernet switching chip market in 2020, Broadcom Ltd, Mei Man and Ruiyu have a market share of 61.7%, 20.0% and 16.1% respectively, ranking in the top three, and domestic manufacturers still have plenty of room for alternative improvement.
The company's products are bound to domestic mainstream network equipment vendors to build R & D ecology with many parties. In terms of products, the company has established long-term cooperative relations with end customers such as Maipu Communications, Xinhua three, Ruijie Network and so on through direct sales and distribution mode. the products produced by the company's exchange chips have been applied on a large scale in operators, finance and other customers in many industries. In terms of R & D, the company carries out R & D cooperation on multimodal network and Gigabit Ethernet PHY chips with a number of domestic and foreign suppliers, direct customers, end customers and standards organizations, which is expected to strengthen cooperation with multi-agents and establish close ecological cooperation.
The company's mid-and low-end products have certain performance advantages, and high-end 25.6T products are under research and are expected to enter the new market space. In terms of middle and low-end products, the company's TsingMa series products (440Gbps) and TsingMa.MX series products (2.4Tbps) have certain advantages in port coverage, characteristics and autonomous requirements.
In terms of high-end products, the company plans to launch Arctic series products in 2024, with switching capacity up to 25.6Tbps and supporting a maximum port rate of 800G, with advanced features such as enhanced security interconnection, enhanced visualization and programmability, and is expected to cut into the current super-large data center market monopolized by Broadcom Ltd and Meimen, and its share is expected to continue to increase.
The company actively distributes the relevant supporting chips in the field of Ethernet, which is rooted in China and continues to promote supply chain innovation. At present, the company pays close attention to the improvement of the demand for data exchange and the development of routing core chips, and develops routing switching chips with large cache and large table item routing capabilities, so as to improve the company's product line, precipitate advanced chip technology, and increase the value of products. At the same time, the company is rooted in China and has multiple local service advantages compared with overseas competitors such as Broadcom, Mei Man and Ruiyu, and the company is gradually promoting the replacement of wafer procurement and chip closed testing services in the new product trial production project. to ensure the long-term stability of the company's supply chain.