On June 25th, the performance conference held by Yunzhong Technology stated that the company's consumer electronics components business will show a good trend with the rebound of smart phone market demand. Chairman and General Manager Wang Bin quoted IDC's quarterly mobile phone tracking report to indicate that global smartphone shipments are expected to increase by 4.0% YoY in 2024, and consumer demand will gradually recover from the downturn of the past few years.

Yunzhong Technology continued to operate at a loss in Q1 2023 and Q1 2024.

In 2023, the company's revenue was RMB 525 million, a YoY increase of 13.35%; the net income was a loss of RMB 126 million, an increase of 2.00% over the same period last year. In the first quarter of this year, it achieved revenue of RMB 141 million, a YoY increase of 56.72%, and a net loss of RMB 30 million, which increased by 2.00% YoY. Regarding the losses, Yunzhong Technology stated that the company's MLCC (multilayer ceramic capacitor) business was in the research and development and trial production stages, resulting in a significant increase in period costs such as materials, labor, and depreciation.

At the performance conference, when talking about the latest progress in the company's MLCC business research and production, Wang Bin said that the MLCC business is a long-term strategic development area for the company. With the investment and construction of MLCC projects in the future, it will comprehensively improve the process and technology of MLCC-related products and achieve mass and scale production of MLCC-related products.

It is understood that Yunzhong Technology is mainly engaged in the research and development, design, and sales of precision optical parts, automotive electronics, and electronic ceramics, among which the electronic component business represented by CMI (packaged metal terminals and electronic components) is the company's revenue pillar and is mainly used in the voice coil motors VCM and camera modules CCM in the smart phone camera, which are applied to mainstream brands such as Huawei, Xiaomi, OPPO, Vivo, Glory, and Transsion.

Yunzhong Technology is currently focusing on three major areas:consumer electronics, automotive electronics, and electronic ceramics.

In these areas, the electronic component business, represented by CMI, is the company's revenue pillar. It is mainly used in the voice coil motors VCM and camera modules CCM in the smart phone camera, which are applied to mainstream brands such as Huawei, Xiaomi, OPPO, Vivo, Glory, and Transsion.

In 2023, affected by the global economic downturn and weak demand in the mobile consumer electronics sector, the downstream customers of Yunzhong Technology had weak direct demand. The company's main CMI product operating income was RMB 171 million, a YoY increase of 45.55%, accounting for 32.49% of operating income; the gross margin was 35.93%, a decrease of 24.13% compared to the previous year.

At the performance conference, Chen Yan, Yunzhong Technology's board secretary and CFO, explained the reasons for the decline in gross margin of CMI products and the current situation of product price recovery. She stated that in 2023, the company increased the application and expansion of mid-to-low-end mobile phones in the CMI market and adopted a price reduction strategy for first-generation products, causing sales revenue to increase while the gross margin fell. At the same time, the new product CCMI after the update iteration of CMI is still in the stage of market development and climbing. The yield rate of new products is lower than that of traditional products, and equipment investment and depreciation have increased, resulting in a decrease in gross margin compared with 2022.

"In 2024, Yunzhong Technology will continue to maintain the gross margin of CMI products through process optimization and technology improvement." Chen Yan told the reporter of the Science and Technology Innovation Board Daily and some investors.

It is worth mentioning that Huawei's nova foldable screen phone will also be launched in August this year. In this regard, one investor asked the company, "Will the company's precision electronic components be applied to this new phone?" "Does Yunzhong Technology have related parts for folding hinges in the production of folding phones?" Yunzhong Technology denied this and stated that the company has not been involved in the production of related parts.

In addition, regarding the company’s layout in the AI smartphone business, independent director Liu Haiyan only stated that Yunzhong Technology is paying close attention to the market demand and technical application of AI smartphones, maintaining the company’s research and development innovation ability and improving product performance.

In addition to precision electronic components, in recent years, the company has also actively deployed in the fields of automotive electronics, electronic ceramics, etc.

In the automotive electronics market, replacing steel with plastic is a trend in the development of the automotive industry, and it is also one of the ways for automobiles to achieve lightweight development. At present, Yunzhong Technology has theoretical and research and development foundations for mass development of electronic components for the entire vehicle in the automotive field, and the company's products in the automotive field have achieved mass supply.

During the earnings conference, reporters from the STAR Daily and some investors further questioned whether the company has batch-produced products such as chassis line control brake systems, other steering system products, and electronic door and window systems, as well as line-controlled chassis brake systems. But the company did not give a positive response on this issue or whether it brought in earnings revenue.

Liu Haiyan said that in the field of automotive electronics, the company's main products are the controller part of the chassis line control brake system, including ABS, ESC, ONE-BOX controllers and EPB components for autos.