“Science and Technology Innovation Board Daily”, November 13 (Reporter Huang Xiumei) “Due to the special nature of the industry in the downstream market itself, there is a high concentration of leading companies. In the future, the company will vigorously expand excellent new customers and products, continuously optimize and reduce the concentration of the top five customers, and reduce the risk of dependency that may be brought about by concentrated sales.”

In response to the issue that the company's performance still depends on Huawei as the largest customer, Liu Taiguo, director and general manager of Huafeng Technology Corp., responded to the “Science and Technology Innovation Board Daily” reporter at the third quarter results meeting held today.

Huafeng Technology specializes in R&D, production and sales of optical and electrical connectors and cable components, and provides customers with system solutions. Its product line can be divided into defense connection products, communication connection products, and industrial connection products.

According to the data, Huafeng Technology's revenue for the first three quarters of this year was 619 million yuan, a year-on-year decrease of 12.41%; net profit was 39.7011 million yuan, a year-on-year decrease of 47.98%; and deducted non-net profit of 17.213,200 yuan, a year-on-year decrease of 67.69%. The decline in revenue in the first three quarters was mainly due to a year-on-year decline in sales of communications products and defense products.

In the third quarter, Huafeng Technology's net profit was only 2,053 million yuan, far less than 11.66 million yuan and 25.99 million yuan in the first and second quarters.

“Net profit declined significantly in the third quarter, mainly because the company increased R&D investment by 25.3678 million yuan in the third quarter, an increase of 33% over the same period last year.”

Liu Taiguo said, “In the field of defense, the company focuses on key R&D investment on missiles and unmanned platforms, in the field of communications, on high-speed backplane connectors and high-speed line modules, and in the industrial field, on automotive high-speed connectors for key R&D investment.”

In response to a question from the “Science and Technology Innovation Board Daily” reporter, Liu Taiguo said that the company's sales revenue in the defense sector declined year-on-year in the first three quarters, mainly due to factors such as mid-term adjustments, which led to insufficient batch orders, and the defense sector faced certain price pressure.However, the defense sector has undertaken many new R&D projects. Missile-borne, airborne, and unmanned platforms are new R&D projects undertaken in the defense field this year.

It is worth noting that as another important source of revenue for Huafeng Technology, in the first half of this year, the company's communications connectivity product revenue was about 160 million yuan, a slight decrease from the previous year. Among them, the company's self-developed 5G data center used high-speed backplane connectors to break foreign monopolies, and 56Gbps products entered the Huawei supply chain and became one of the two major domestic suppliers.

As of the first half of this year, Huawei was the company's largest customer. In 2020-2022, the company's direct sales to Huawei accounted for 34.4%, 20.4%, and 26.6% of the company's revenue, respectively, and Huawei accounted for more than 60% of the company's communications business, so the company's dependence on Huawei is high.

“In addition to Huawei, the company's communication high-speed backplane connectors are currently developing third class customers such as Fenghuo and Xinhua.”Liu Taiguo told the “Science and Technology Innovation Board Daily” reporter that in the future, the company will vigorously expand excellent new customers and products, continuously optimize and reduce the concentration level of the top five customers, and reduce the risk of dependency that may be brought about by concentrated sales.“At present, the 112Gbps high-speed backplane connector has completed product testing for major customers, but has not yet entered mass production.”

It is worth noting that in the third quarter, the company made some progress in the automotive field. Liu Taiguo said that in the first half of the year, the company already had samples of in-vehicle high-speed connectors developed for autonomous driving and smart cockpits, and is currently in the customer certification stage.

“The field of industrial new energy vehicles is the focus of the company. Currently, the company has become a qualified supplier for customers such as BYD and SAIC-GM-Wuling. This year, the NEV sector targets both high-voltage connectors and in-vehicle high-speed connectors, and is gradually developing customers.”