In 2018, Beijing Silicon, the parent company of Chip Semiconductor (ISSI), which has been delisted from NASDAQ for 3 years, has received acquisition proposals from two A-share companies, Siyuan Electric (002028) and Beijing Junzheng (300223). Siyuan, who shot first, hopes to acquire 41.65% of Silicon Cheng's equity, while Beijing Junzheng, who sold later, has a greater appetite and wants to get 53.59%.
At that time, a financial media reported on the silicification battle
It is not uncommon for two listed companies to compete for the same acquisition target in A shares, and Siyuan and Junzheng also reached a solution after a game: in May 2019, Junzheng announced that it would acquire all the shares of Beijing Silicon Cheng, and Siyuan became the majority shareholder of Junzheng through a share swap. As of the end of the third quarter of last year, Ji cen Partnership, controlled by Siyuan, was still the largest outstanding shareholder of Junzheng.
First, a merger and acquisition to harvest "three highs"
Before the merger, Junzheng's main products were embedded CPUs and smart video chips. Although there is a certain accumulation of technology, and even known as the "first share of domestic CPU", it is actually a short general, the operating performance is very general, and the profit mainly relies on government subsidies.
Therefore, at that time, Junzheng urgently needed to acquire technology and open up the market through mergers and acquisitions. In 2017, the company tried to acquire the main photosensitive element CMOS, which can form a synergy with its own intelligent video chip business, and The Haowei Technology failed, and this time it rushed to buy Silicon Cheng finally got its wish.
Sicheng's main value lies in its wholly-owned subsidiary, ISSI, which specializes in memory chips and analog chips. The company's product line covers DRAM, SRAM, FLASH memory chips and ANALOG analog chips, achieving full coverage of automotive, industrial, consumer electronics and information and communication application scenarios. It is a complete blank for Junzheng. In the M&A report, Jun Zheng described Silicon's products as having three highs: "high integration density, high performance quality, and high economic value." At that time, Junzheng's technical level was still a "nobody" in the world, and Silicon Cheng had already ranked among the first echelon. According to the statistics of the third-party agency IHS iSuppli, the global market share of silicon DRAM and SRAM products ranked 7th and 2nd respectively in 2018, with outstanding performance.
Excerpt from Beijing Junzheng M&A Report
You know, in 2017 and 2018, Junzheng's revenue was 184 million and 260 million, respectively, although the growth was very fast, but the volume was still a certain gap compared to Silicon. And Silicon Cheng gave a performance commitment of achieving a net profit of $49 million, $0.64 billion and $79 million in 2019-2021, respectively. If silicon cheng's actual cumulative net profit does not reach 85% of the promised number at the expiration of the performance commitment period, it is necessary to make performance compensation to Junzheng.
For Junzheng, whose net profit in 2017 and 2018 was net profit after deducting non-recurring gains and losses (deductions), and relied on government subsidies to survive, this merger and acquisition was strong in one bite.
In 2019 and 2020, Silicon Has Not Fulfilled Its Performance Commitments, but it also does not require performance compensation.
Excerpt from the "Special Review of the Realization of Performance Commitments in 2021"
With the 2021 results announced soon, Silicon Is likely to fail to meet its performance commitments, so the 3 billion yuan of goodwill generated by this merger will face impairment risks. Of course, silicon cheng's performance commitment completion rate can basically reach more than 90%, even if the amount of impairment will not be very large.
It is worth mentioning Junzheng's smart video chip products. In 2018, the revenue was less than 100 million, and the gross profit margin was 21.19%. By 2019, revenue has reached 179 million, and gross profit has also increased to 23.62%. Perhaps this is the most important reason why Junzheng can give up Howey but must take Silicon Cheng.
Second, four R & D fundraising of 1.3 billion
Benefiting from the powerful performance of smart video chips, Junzheng's loss of non-net profit in 2019 has narrowed significantly. And by the end of 2019, the merger and acquisition plan for Silicon Cheng was approved, and in 2020, the silicon was merged, and Junzheng's deduction of non-net profit finally turned positive, although compared to 2.17 billion revenue, 0.2 billion deduction of non-net profit is simply pitiful, but after all, it has its own hematopoietic ability.
Excerpt from Beijing Junzheng 2020 Annual Report
At present, Junzheng T21, T31, T40 and other T series intelligent video chips can adapt to 1080P to 4K network camera solutions with different resolutions to support various development needs. It has entered the supply chain of WYZE, Anker, Hualai, Xiaomi, QiaoAn, 360 and other brands and the three major domestic operator systems.
This year, the latest product of the T series T41 is expected to be listed, for the professional security field back-end equipment NVR (network video recorder) chip is also expected to achieve mass production, a few days ago Junzheng also told investors on the interactive platform, is promoting the research and development of 8K encoded video chips. It can be expected that the continuous enrichment of the smart video chip product line will become a stable growth point of Junzheng.
When it comes to growth, the memory chip business brought about by the merger and acquisition of Silicon Is still Junzheng's biggest hope. Not only does the volume crush other businesses, but the growth rate is also a ride. Microprocessor chips are gradually becoming "chicken ribs".
Excerpt from "Beijing Junzheng 2021 Interim Report"
Before merging into Junzheng, Silicon Has been deeply engaged in the memory chip business for more than 30 years, with a large number of vehicle-grade memory chip products, and the main revenue comes from overseas markets such as Europe, the United States and Japan. The global automotive memory chip market will be about $3.4 billion in 2020 and is expected to grow to $5.9 billion in 2023, with a compound annual growth rate of 20%. Benefiting from the solid overseas market position and the trend of domestic substitution, Junzheng's memory chip business will undoubtedly fully enjoy a wave of market dividends.
Last month, Junzheng released the 2021 performance forecast, in addition to the amazing increase, the deduction of non-net profit has been very close to the net profit, indicating that the company has basically got rid of its dependence on government subsidies.
Excerpt from "Beijing Junzheng 2021 Performance Forecast"
At present, Junzheng has more R & D lines, and spent a total of 366 million R& D expenses in the first three quarters of last year. In August last year, Junzheng announced that it planned to raise 1.3 billion yuan for research and development. The investment of funds does not include memory projects, perhaps Junzheng's idea is to make up for the shortcomings and make the revenue structure more balanced.
Excerpt from "Beijing Junzheng Fundraising Plan"
In the semi-annual report, Junzheng said that the terminal demand in the automotive market in 2021 is strong, but the shortage of automotive-grade MCU (micro-control unit) chips has limited global automobile production, which in turn has affected the sales of other automotive chips, and its own automotive memory chips have also been affected. The implication is that if the global chip supply chain returns to normal, Junzheng is confident to come up with more beautiful growth data.
III. Conclusion
In fact, although the global chip supply chain shock has troubled Junzheng, it has also brought junzheng many new market opportunities.
In addition to memory, Junzheng also laid out a wealth of automotive-grade LED driver chips. In recent years, on-board lighting has gradually evolved to the integration mode of sound, light and electricity, and the penetration rate of on-board LED lighting chips has been continuously improved, which is an opportunity that Junzheng can seize. Some of the various network transmission products for automotive applications have already achieved mass production, and are expected to contribute revenue in 2022. The development of automotive-grade graphic signal processing (ISP) chips for in-vehicle cameras is also progressing well.
How to achieve the balanced development of various businesses as soon as possible and realize the platform layout of "processing + storage + simulation" is the top priority of Junzheng.
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.