Earlier last month, the world's largest consumer electronics show, the International Consumer Electronics Show (CES), which has long been regarded as the industry's bellwether, was held in Las Vegas on the other side. At this exhibition, chip leader Nvidia announced that it will provide autonomous driving chips for many car companies, including new Chinese car-making forces such as Weilai and Xiaopeng, as well as established car companies such as Mercedes-Benz, Audi and Volvo.
Crowded CES venue
As early as last year, Howey Technology announced its participation in the NVIDIA DRIVE autonomous driving development ecosystem at the NVIDIA GPU Technology Conference (GTC), and released a family of 4 automotive image sensors compatible with the NVIDIA DRIVE AGX autonomous driving computing platform and a new 5-megapixel image sensor. And these products are available for samples and mass production.
One or two mergers and acquisitions have made an image sensing giant
When it comes to Howey Technology, we must first talk about Weier shares (603501).
Founded in 2007, the company originally engaged in two main businesses, one is semiconductor discrete devices, that is, simple resistors, capacitors, transistors and other electronic components and power management ICs and other products research and development design; the other is passive parts (resistors, capacitors, inductors, etc.), structural devices, discrete devices and ICs and other products distribution, to put it bluntly is to earn the difference of traders.
Obviously, neither business is very lucrative. Therefore, after more than a decade of development, by 2018, Weir's performance has been quite difficult to say. Although the scale of sales is getting bigger and bigger, the profit margin is very touching, and the increase in revenue does not increase profits.
Excerpt from "Weir 2018 Annual Report"
In the face of this situation, Weier boss Yu Renrong's idea is to open the situation through mergers and acquisitions, and by August 2019, Weier has completed the acquisition of 85.53% of the equity of Howey Technology, 42.27% of the equity of Sibiko and 79.93% of the equity of Vision, and was reborn overnight. Let's feel the feeling of taking off in situ after the fourth quarter of 2019 results are combined.
Excerpt from "Weier 2019 Annual Report"
In the annual report of that year, Weir bluntly said that the main reason for the take-off was that Howey's performance engine upgraded Weir's original "green car" into an "EMU".
This momentum of soaring has continued to this day. On January 18, Weier shares released the 2021 performance forecast, and the situation is very good.
Excerpt from "Weier 2021 Performance Pre-increase Announcement"
After deducting non-recurring gains and losses, Weir expects net profit in 2021 to be 3.918 billion to 4.268 billion, an increase of 74.51% to 90.10% year-on-year, which is more vigorous than before the deduction.
Howey Technology is a chip design company founded by a group of Chinese scientists in Silicon Valley and is the world's third largest CMOS image sensor manufacturer. In February 2016, a Chinese consortium privatized Howey Technology, which was still listed on the NASDAQ at the time, opening the way for Howey's "naturalization". In June of that year, Beijing Junzheng (300233) first tried to acquire both Howey Technologies and Spicco, but failed in March of the following year.
After junzheng's defeat, Weir made a decisive move, and in 2017 and 2018, he tried two mergers and acquisitions, and finally got his wish and included both companies under his command. Sibiko is also a CMOS image sensor manufacturer, although it is not well-known in the world, it is in the leading camp in China. Through the acquisition of Subico, Weir acquired a large number of domestic customer resources.
After the merger was completed, the semiconductor design business contributed most of Weir's performance, and Weir also became one of the leading international livingss (only design, not production) companies.
Excerpt from "Weir Shares 2021 Interim Report"
The biggest contribution is of course the CMOS business.
Second, automatic driving, pinning the dream of the stars and the sea
CMOS is a low-cost sensor that is the main component of CIS (Image Sensor) and is widely used in consumer electronics, security, automotive, medical, AR/VR and other products. In the first half of last year, 86.1% of the revenue of Weir Semiconductor's design business came from the CMOS business.
The other two business lines of the semiconductor design business, touch and display, and analog chips, although the growth data is also good, but the volume is not the same as CMOS.
Over the past 10 years, the rapid development of smartphones has created a huge demand for CMOS, which is also the reason for the continued high growth after Weier's acquisition of Howey. However, in recent years, the smartphone market has become saturated, and the revenue growth rate of Weier, Sony CIS business and Gerco Micro (688728) has declined in the third quarter of last year, especially weir and Gerco Micro, which have continued to grow high before, and the decline rate can be described as "diving".
Excerpt from Huatai Securities Public Research Report
Obviously, the ceiling of mobile phone CIS is getting closer and closer, so Weir's next strategy is aimed at car CIS, and there is a scene at the beginning of the article where Howey announces that it has joined NVIDIA's autonomous driving development ecology.
Compared with the average annual shipment of mobile phones of more than 1 billion, the average annual shipment of about 900 million cars is less attractive, but in terms of unit usage, each intelligent driving car needs to carry 6-15, or even more CIS sensors, and each mobile phone only needs 2-7; and the high-end CIS pixels of the car are only 8MP, far behind the pixels of high-end mobile phones 64 or even 108MP, but the unit price of the same pixel car CIS is 10 times that of the mobile phone CIS. Therefore, the automotive CIS may become a sea of stars at the level of 100 billion in the future. Nvidia is one of the leading players in the global autonomous driving system, and joining the NVIDIA ecosystem will help Weir quickly seize the automotive CIS market.
In the global automotive CIS market, Vail's market share lags behind that of ON Semiconductor in the United States. However, in terms of technology and product layout, Weir is better than the latter, and China's domestic substitution is a huge market advantage that ON Semiconductor cannot match, so Weir is very promising to complete the anti-overtaking in the future.
In the first three quarters of this year, Weir's R&D expenses were single-handed, which is where the company's future hope lies.
Excerpt from "Weier Shares 2021 Third Quarterly Report"
However, as of the end of the third quarter, Weir held 8.18 billion monetary funds, compared with the balance of interest-bearing liabilities of 9.078 billion, it is inevitable that some deposits and loans are suspected of being double-high.
Moreover, Weir has 2.713 billion accounts receivable. If the sales of downstream mobile phone manufacturers are blocked, the impairment pressure of these accounts receivable is very large, and once this potential thunder is detonated, it will form a chain reaction with up to 3 billion goodwill, and the collapse may be in an instant.
III. Conclusion
Born in the United States, The Return to The Red Flag of Howey can be called the Gu Ailing of the chip industry. With Howey's technical advantages, coupled with its own years of operation, Weir occupies the market in the competition for the domestic automotive CIS market share. However, mobile phone CIS is after all a market of 100 billion, and the revenue of Howey in 2021 may be more than 12 billion, and the global automotive camera market is expected to be no more than 13 billion in 2022. Although the prospects are good, how long it will take for automotive CIS to pick up the girder is a problem that Weir must face. As production increases, the price gradually falls is also the proper meaning of the question.
Mobile phone CIS has loomed in the ceiling, the car CIS baton is still far away, Weir really needs to plan ahead.
Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.