Photo source: Visual China

Blue Whale financial reporter Wang Xiaonan

On April 14, Crystal Integration (688249.SH) disclosed its 2023 annual report. Affected by the recovery of the semiconductor industry's boom falling short of expectations, Crystal Integrated listed on A-shares in May 2023. The results in the first year of listing changed its face, and the company's gross margin was even more “cut off”. At the same time, the pressure for integrated debt repayment is not low. Under long-term loans exceeding 10 billion dollars, the company's monetary capital is only 6.5 billion yuan. Before and after the listing, many star capital funds entered the market one after another, but the stock price of Jinghe Integrated continued to fluctuate and decline. Currently, the market value has evaporated to over 10 billion dollars.

Results changed in the first year of listing, and gross margin was “cut off”

On April 14, Crystal Integration disclosed its 2023 annual report. The company achieved total operating revenue of 7.244 billion yuan, a year-on-year decrease of 27.93%; net profit to mother was 212 million yuan, a year-on-year decrease of 93.05%. While revenue declined by nearly 30% year over year, the net profit of Crystal Integrated plummeted by 90%.

Regarding the sudden change in performance, Jinghe said it was mainly due to the decline in semiconductor industry prosperity in 2023, slow market recovery, increased market competition, and continuous investment in R&D.

According to a report released by the American Semiconductor Industry Association (SIA), the total sales of the global semiconductor industry in 2023 was US$526.8 billion, down 8.2% from total sales of US$574.1 billion in 2022. Total sales in 2022 are the highest annual total in the history of the semiconductor industry.

Looking at the overall situation in the terminal industry, application fields such as new energy, automotive electronics, industrial electronics, big data, and cloud computing have grown, but due to weak markets such as computers and smartphones, shipments of integrated crystal products have decreased compared to 2022. Coupled with falling prices, the company's sales revenue and profits have declined.

In 2023, the production volume of CRIC wafer manufacturing was 957,400 pieces, a decrease of 11.72% from the previous year; the sales volume was 935,926 pieces, down -11.75% from the previous year; while the inventory volume was 41,111 pieces, which surged 94.36% compared with 2022, further increasing the risk of inventory impairment.

In fact, during the 2018-2020 period, Crystal Integration's performance was not impressive. Although the company's revenue rose from 218 million yuan in 2018 to 1,512 billion yuan in 2022, its net profit to mother was a continuous loss, with a cumulative loss of 3,692 billion yuan over three years.

Until the first two years of applying for an IPO, Crystal Integration's performance showed a qualitative leap. While revenue rose sharply, its profitability also increased significantly. In 2020 and 2021, benefiting from the rapid growth in the size of the downstream market, Crystal Integration's revenue was 5.429 billion yuan and 10.51 billion yuan respectively, and net profit to mother was 1,729 billion yuan and 3,045 billion yuan respectively. In five years, Crystal Integration went from a cumulative loss of 3,692 billion yuan over three years to a cumulative profit of 4.774 billion yuan for two consecutive years.

As global integrated circuits enter a downward cycle, the performance of Crystal Synthesis was once again under pressure, and the first year of listing was unfavorable. In the first quarter of last year, Crystal Integration's performance changed. Net profit was -376 million yuan, and the company fell back into losses. After listing in May 2023, apart from a 145.55% year-on-year increase in net profit for the fourth quarter, the net profit of Crystal Integrated in the second and third quarters all declined by 81.96% and 93.14%.

By product, in the company's main business in 2023, integrated circuit wafer manufacturing revenue was 7.183 billion yuan, accounting for 99.16% of revenue. The product's gross margin was 21.46%, a decrease of 24.65 percentage points. The sharp decline in gross margin of core products also led to a “drop in” the gross profit margin of Crystal Integration in 2023, which was only 21.61%, compared to 46.16% in 2022.

It should be pointed out that at the end of 2023, the undistributed profit in the consolidated statement of Crystal Synthesis was 523 million yuan, and the undistributed profit at the end of the middle of the parent company's statement was 846 million yuan. However, Crystal Integration does not plan to distribute profits in 2023. In addition to the pressure on last year's performance, Jinghe said that in 2024, the company will increase investment in important R&D projects based on capacity expansion, business layout and R&D plans, while expanding domestic and foreign customers and deepening the stickiness of cooperation. Taking into account the current situation, the company plans not to distribute profits in 2023.

Less than a year after listing, the pressure for integrated debt repayment by Crystal Synthesis remains unabated. At the end of 2023, Crystal Integrated Monetary Fund was 6.526 billion yuan, down 17.33% year on year, while long-term loans reached 11.51 billion yuan, up 39.91% year on year, and the company's balance ratio was 54.03%.

Star Capital funds have entered the market one after another, and the market value evaporated over 10 billion dollars ten months after listing

According to data, Crystal Integration is mainly engaged in the 12-inch wafer foundry business. In terms of foundry process nodes, the company has achieved mass production of 150nm to 55nm process platforms, and is currently developing 40nm and 28nm process platforms. Currently, it has the technical capabilities of foundry for process platforms such as DDIC, CIS, PMIC, MCU, Logic, etc., and its products are mainly used in smart phones, computers, tablet displays, automotive electronics, smart household appliances, industrial control, and the Internet of Things.

Currently, Crystal Integration has a leading market share in the LCD display driver chip foundry field in the world. According to the global market revenue ranking of the foundry industry for the fourth quarter of 2023 announced by TrendForce Jibang Consulting, Crystal Integration ranked ninth in the world and third among mainland Chinese companies.

The crystallization integrated mass production process node covers 150nm-55nm, and research and development of 40nm and 28nm advanced process technology is ongoing. However, in 2023, the 90nm process accounted for 48.31% of revenue; the 110nm process accounted for 30.47% of revenue; and the 55nm process only accounted for 7.85%. It is easy to see that over 90% of the revenue from crystal integration comes from 90nm and below processes.

Meanwhile, the share of SMIC's revenue from the 90nm foundry business is 60%, of which 40/45nm technology revenue accounts for 15%. At the same time, leading global industry companies such as TSMC and Lianhua Electronics have reached 5nm and 14nm process nodes, Huahong has also reached 28nm, and even TSMC is expanding significantly towards 2nm technology.

In recent years, with the trend of electrification, intelligence, and connectivity of automobiles, the semiconductor content of each vehicle has been steadily increasing. According to Standard & Poor's forecasts, the average semiconductor content of each car will increase 80% over the next seven years, from $854 in 2022 to $1,542 in 2029.

In this context, Crystal Integration has also begun to actively meet the needs of the automotive industry chain and lay out the automotive chip market. In terms of automotive chip manufacturing capacity building, Crystal Integration has obtained international automotive industry quality management system certification and has passed vehicle specification verification on multiple process platforms. In the future, the company will continue to promote vehicle specification process platform certification and fully enter the automotive electronic chip market.

On May 5, 2023, Crystal Synthesis appeared on the Science and Technology Innovation Board. As of March 11, 2024, Hefei Construction Investment is the company's largest shareholder, with a shareholding ratio of 23.35%. The actual controller is the Hefei Municipal State-owned Assets Administration Commission. Among the shareholders of Jinghe Integrated, there is no shortage of capital entering the market. The second largest shareholder is the **** company Lijing, which holds 20.58% of the company's shares. In addition, Midea Innovation, an investment company owned by Midea, holds 4.39% of the shares, the company terminates its IPO on the Science and Technology Innovation Board and holds 1.69% of the shares, and Hefei Cunxin of Shangfeng Cement (000672.SZ) holds 1.32% of the shares.

In addition to this, the layout of many fund managers in the fourth quarter of last year was integrated. On December 27, 2023, Jinghe revealed the shareholding status of the top ten shareholders with unlimited sales conditions as of December 22. It was shown that Sino-European Innovation Future, managed by Shao Jie and Liu Jinhui, was the third largest tradable shareholder of the stock, holding 5.866,800 shares. BOSHI THEME LOF managed by Jin Zhe and Guangfa Small and Medium Cap Selection managed by Chen Yunzhong also jumped to become the sixth and ninth largest tradable shareholders of Jingsheng Integrated, holding 2,806,200 shares and 2,6097 million shares respectively.

Jinghe Integrated, which is favored by capital, did not perform well in the secondary market. On May 5, 2023, Jinghe registered on the Science and Technology Innovation Board. The issue price was 19.86 yuan/share. The stock price reached 23.86 yuan/share on the opening day, with a total market value of about 38 billion yuan. However, after that, the company's stock price fluctuated and declined. On February 6, Jinghe Integrated's stock price hit a record low of 11.73 yuan/share. Compared with the highest stock price, it had “dropped”. The market value was only 23.5 billion yuan. Ten months after listing, the market value evaporated over 10 billion yuan.