The world's leading EEPROM company, combining multiple product lines. The company was founded in 2009 and has now developed into the world's leading EEPROM chip design company. The company is committed to providing customers with storage, digital, analog and mixed signal integrated circuit products and providing application solutions and technical support services. Currently, it has three main product lines: storage chips (SPD and other products with DDR5 memory modules, conventional EEPROM products, and NOR Flash products), voice coil motor driver chips, and smart card chips. After years of market development, the company has established cooperative relationships with well-known domestic and foreign companies such as Samsung, Xiaomi, vivo, OPPO, Lenovo, TCL, and LG. At the same time, vehicle specification products have also been successfully introduced into domestic and foreign first-line car brands such as BYD, Tesla, Porsche, Hyundai, Toyota, and Volkswagen. The company's core technicians all have rich professional experience and have worked for well-known integrated circuit companies at home and abroad. They have a good industrial background and rich experience in R&D and design. Benefiting from the improvement in inventory levels of downstream memory module manufacturers and the continued increase in the penetration rate of DDR5 memory modules, sales and revenue of the company's SPD products and products used in high-value-added markets such as automotive electronics and industrial control increased dramatically in the first half of 2024, and profitability picked up significantly.

The penetration rate of DDR5 memory modules is increasing at an accelerated pace, and SPD first-mover cards seize opportunities for innovation and development. On the supply side, as the storage market recovers, the price difference between DDR5 and DDR4 narrows, and the main memory manufacturers are leaning their production capacity towards DDR5 products with higher added value; main chip manufacturers such as Intel and AMD have also successively launched processors and motherboards that support DDR5, which has greatly boosted the acceptance of DDR5 memory and the upgrading of supporting components. On the demand side, entering 2024, the increase in the size of the server market under the AI wave and the PC switching cycle driven by Windows 11 and end-side AI will both accelerate the penetration of DDR5 modules. According to TrendForce forecasts, the overall penetration rate of DDR5 memory modules in the global PC and server market is expected to accelerate to more than 50% in 2024, making it the memory generation product with the highest share. The company is one of the few companies in the industry with a complete SPD product portfolio and technical reserves, and cooperates with Lanqi Technology to develop SPD products supporting DDR5 memory modules. Currently, the suppliers of DDR5 SPD products in the global market are mainly the company (in cooperation with Lanqi Technology) and Renesas Electronics. Currently, the company and Lanqi Technology have taken a pioneering advantage in this field and achieved a leading position in related market segments.

The size of the EEPROM market is on a steady upward trend, and domestic production leads the pursuit of excellence. Benefiting from the multi-camera configuration and functional upgrades of smartphone cameras, the continuous development of the automotive industry towards intelligence and electronics, the intelligent replacement of domestic electricity meters, and the development of medical electronics, the EEPROM global market has achieved many breakthroughs in recent years. According to Business Research Insights, the global EEPROM market reached $0.881 billion in 2022 and is expected to reach $1.476 billion in 2031. In terms of competition, in addition to the company, EEPROM suppliers in the global market are mainly ST, Microchip, Ansemi, and Aprinco. In the industrial field, the company has now established a leading edge in segments such as smartphone camera modules and LCD panels, and is actively expanding fields where domestic replacement ratios are relatively low, such as industrial control, communications, and white goods. In the automotive grade field, the company promptly grasped the market development opportunities brought about by the shortage of automotive-grade EEPROM chips, and has initially formed a relatively mature automotive-grade EEPROM product line, and has accumulated good brand recognition and high-quality customer resources.

The new product layout is getting better and better, and multi-dimensional growth can be expected in the future. In terms of NOR Flash, the company has developed a series of NOR Flash products with independent intellectual property rights based on the NORD process platform, and has achieved batch supply to application markets and customer groups such as TWS Bluetooth headsets, PLC components, and AMOLED mobile phone screens. The product has significant advantages in terms of chip size and cost. By the end of 2023, the cumulative shipment volume had exceeded 0.1 billion units, 24Q1 shipments had more than 56 million units, and 24Q2 shipments doubled month-on-month. The market Share and brand influence continue to grow. In terms of voice coil motor driver chips, the company independently developed a two-in-one product with an integrated voice coil motor driver chip and EEPROM, which greatly reduced the area occupied by the two independent chips in the camera module and enhanced the competitiveness of the product. At the same time, substantial progress has been made in the field of optical anti-shake (OIS) voice coil motor driver chips developed at the same time. Some specifications and models have been tested and verified by industry-leading smartphone manufacturers, and are expected to be installed in high-end and flagship models of mainstream smartphone manufacturers. In terms of smart card chips, based on technology accumulation and R&D capabilities in the field of memory chips, the company has developed dual-interface CPU card chips, contactless/contactless CPU card chips, contactless/contact logic card chips, RFID chips, card reader chips and other products, which are widely used in public transportation, public utilities, campus cards, identification, smart terminals, etc.

The company has become one of the city card chip suppliers of the Ministry of Housing and Construction.

Investment advice: The global semiconductor market continues to recover. The company has significantly benefited from the increase in DDR5 memory penetration rate and the increase in demand in the memory market, while fully grasping domestic opportunities. We expect the company's revenue to 2024-2026 to be 1.148/1.536/1.986 billion yuan, net profit to mother 0.332/0.477/0.623 billion yuan, and the corresponding EPS is 2.11/3.03/3.96 yuan. Referring to comparable company valuations, the company was given a 24-year, 30-times PE valuation, corresponding to a target price of 63.3 yuan. For the first time, coverage was given a “strong” rating.

Risk warning: Downstream demand recovery falls short of expectations, increase in DDR5 penetration falls short of expectations, new product development and market development falls short of expectations, increased market competition, exchange rate fluctuations