On June 30, 2023, Huayi Microelectronics' star IPO application was accepted by the Shanghai Stock Exchange. On July 27 of the same year, the Shanghai Stock Exchange updated its inquiry status, but the company did not respond thereafter. After updating its financial data, the company and the sponsoring agency voluntarily withdrew the application materials. The prospectus shows that from 2020 to 2022, Huayi Microelectronics not only had large performance fluctuations, but also had a net loss of net income in 2022.
On June 11th, according to the official website of the Shanghai Stock Exchange, the review of the IPO application of Huayi Microelectronics Co., Ltd. (referred to as Huayi Microelectronics) and its sponsor Tianfeng Securities was terminated due to the withdrawal of the application. based on relevant regulations.
Huayi Microelectronics is a high-tech enterprise under the Huatian Electronics Group specializing in the research and development, packaging/testing and sales of semiconductor power devices. According to statistics from the China Semiconductor Industry Association, in 2021 and 2022, Huayi Microelectronics' sales scale ranked 13th among Chinese semiconductor power device companies, and among non-IDM mode manufacturers, the company ranked in the top five.
Huayi Microelectronics' listing application was accepted by the Shanghai Stock Exchange on June 30, 2023, and the exchange updated its inquiry status on July 27 of the same year. However, Huayi Microelectronics did not respond thereafter. After only updating financial data, the company and its sponsor voluntarily withdrew the application materials.
On April 30th of this year, the China Securities Regulatory Commission revised the "Guidelines for Evaluating Attributes of Science and Technology Innovations" (Trial) (referred to as the "Guidelines"). The revised Guidelines moderately increased the requirements for R&D investment, number of registered patents, and compound annual growth rate of revenue for companies intending to go public on the sci-tech innovation board. It is widely believed in the industry that under the current market regulation environment, the sci-tech innovation board has raised the threshold for admission, prompting some companies with insufficient safety cushions to withdraw their IPO applications.
Some annual research and investment ratios are relatively low.
The reporters of "Science and Technology Innovation Board Daily" noticed from the latest "Guidelines" updated by the China Securities Regulatory Commission that the first item was modified to read: support and encourage enterprises in the related industries where the Science and Technology Innovation Board is positioned to apply for listing on the board at the same time as complying with the following four criteria. Among them, the latest regulation for the research and development proportion is that the proportion of R&D investment to operating income in the past three years is above 5%, or the cumulative amount of R&D investment in the past three years exceeds 80 million yuan.
According to Huayi Microelectronics' prospectus, its R&D expenditures from 2020-2022 were respectively 33.7321 million yuan, 45.6997 million yuan, and 58.1233 million yuan, with corresponding revenue ratios of 3.98%, 3.94%, and 5.03%. Although the company's total expenditure on R&D in the aforementioned period was nearly 138 million yuan, exceeding the latest R&D investment standard figure of 58 million yuan, but from the perspective of the proportion of R&D investment to revenue, the company's R&D investment-to-revenue ratio only barely crossed the 5% mark in 2022.
An industry insider with participation in the fundraising projects of enterprises seeking public listing commented to the "Science and Technology Innovation Board Daily" reporters that "an important indicator for the upgrading of listings on the sci-tech innovation board is R&D investment. Although the latest Guidelines use a 'pick one of two' standard regarding this, industry evaluations of the enterprises in question are comprehensive and consider multiple other criteria. It is also generally believed within the industry that companies rushing to make it to the sci-tech innovation board need to have a certain safety cushion above the statutory line."
Performance fluctuates greatly and losses occur.
According to the prospectus, from 2020 to 2022, Huayi Microelectronics' revenue was 847 million yuan, 1.16 billion yuan, and 1.157 billion yuan, respectively, and the net profit attributable to the parent was 41.6332 million yuan, 88.134 million yuan, and -43.2092 million yuan, respectively; the deduced net profit was 4.5715 million yuan, 60.0433 million yuan, and -75.4803 million yuan, respectively. The company not only experiences greater variation in its performance, it has also incurred net losses in the most recent year.
Regarding the significant decline in net profit in 2022, Huayi Microelectronics indicated that the decline was mainly due to multiple reasons such as declining gross margin rate, a greater proportion of inventory write-down, and reduction of goodwill. Looking at the gross margin rate, from 2020-2022, Huayi Microelectronics had gross margin rates of 12.75%, 17.66%, and 8.89%, with some fluctuations.
Particularly in 2022, Huayi Microelectronics' gross margin rate in main business fell significantly year-on-year, with a decrease of nearly 50%. According to the company, this was primarily due to a downward cycle in the semiconductor industry, changing supply and demand relationships in downstream application markets, rising costs of raw materials like upstream wafers, and product structural adjustments. Affected by these factors, Huayi Microelectronics' inventory write-down reserve balance jumped from 4.2619 million yuan in 2020 to 49.952 million yuan in 2022.
In an interview with "Science and Technology Innovation Board Daily", investors in the domain of hard sciences expressed, "the downturn in the market for consumer electronics in 2022 has resulted in explosive inventory increases for many companies, but whether using which sales mode, the same reduction in the gross margin rate year-on-year suggests that product competition has become increasingly fierce."
Another major reason that affected Huayi Microelectronics' net profit in 2022 is the impairment provision of goodwill from Xi'an Huayi Semiconductor worth 16.1886 million yuan at the end of 2022. With respect to the aforementioned goodwill impairment, Huayi Microelectronics stated that it was non-core. But Huayi Microelectronics originated from Xi'an Huayi Semiconductor founded in 2008. In October 2017, Huayi Microelectronics acquired all of Xi'an Huayi Semiconductor's equity for 159 million yuan.
The "Science and Technology Innovation Board Daily" reporters noticed that in past review practices, regulatory bodies' attention to non-profit making enterprises going public mainly focused on the industry context, innovation ability display, and management measures regarding market and financial expectations for the next several years. Regulatory bodies require enterprises to fully disclose the fundamental reasons resulting in non-profitability and the potential influence on sustainable operation capability.
According to industry insiders interviewed by Science and Technology Innovation Board Daily, this year regulatory institutions have clearly stated their requirement for 'strict supervision' of listing of unprofitable enterprises, which has led some companies to voluntarily withdraw their listing applications.
Relatively weak advantage compared with similar enterprises.
According to the prospectus, Jilin Sino-Microelectronics' main business is the research and design of self-branded products, mainly high-performance power devices represented by SGT MOSFET and Trench MOSFET, as well as packaging and testing products such as MOSFEs, modules, IGBTs, and diodes.
Jilin Sino-Microelectronics plans to raise 1.1 billion yuan in this IPO. Among them, 640 million yuan will be used for the R&D and industrialization of on-board power semiconductors, 100 million yuan will be used for research and development center construction and third-generation power semiconductor device R&D projects, and 360 million yuan will be used for supplementary working capital.
According to investors in the Chinas' YRD hard-tech sector, the MOSFET industry where Jilin Sino-Microelectronics is located is a power semiconductor device with higher technical barriers, demanding higher requirements in R&D technology, product quality, and services. It is a high-performance and independent power semiconductor device industry that is highly correlated with performance. It will fluctuate due to macroeconomic fluctuations. 'The company's opportunity comes from the increase in market share brought about by localization, but in recent years, there have been many leading enterprises in the power semiconductor industry, and competition and fluctuations during the industry downturn cycle will become more intense.'
Jilin Sino-Microelectronics' revenue mainly comes from self-branded products such as SGT MOSFET and Trench MOSFET, as well as power devices and power module packaging and testing products covering different packaging types ranging from low voltage to high voltage. Its main competitors in the product market include AMS, STMicroelectronics, Vishay, Toshiba, ON Semiconductor, Wuxi NCE Power, Suzhou Good-ark Electronics, Jilin Sino-Microelectronics, HM Semiconductor, and Blue Arrow Electronics.
It should be noted that although Jilin Sino-Microelectronics has achieved international advanced level in many product technical indicators and manufacturing processes, there is still a certain gap with comparable companies in terms of technical capabilities, high-end talent reserves, process accumulation, product line richness, enterprise scale, and brand awareness.
