Where will the core microelectronics that have been "kidnapped" by the VAM agreement go?
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The author | Yao Yongzhe
Editor| Bao Yonggang
Recently, a power semiconductor chip manufacturing company from Anhui Province, Huangshanxin Microelectronics, was accepted by the Shenzhen Stock Exchange for IPO application on the ChiNext board, which immediately caused a fierce discussion.
The prospectus shows that the company has only 16 employees with bachelor's degree or above, accounting for only 2% of the company's total employees, which is far from our traditional perception of chip companies as "sophisticated" and "tall".
Some people think that this shows the company's attitude of "not talking about heroes based on academic qualifications", and feels that "college students are not qualified to work in the chip industry" is a manifestation of academic discrimination. Another part of the people believe that the chip industry has always been a technology-intensive and talent-intensive industry, and the situation of Huangshan core microelectronics shows a serious lack of innovation ability.
1
The name change is full of doubts, just for "rubbing heat"?
The Huangshan core microelectronics that came out of the listing news this time was born from Huangshan Electric Appliances. Huangshan Electric Appliances was originally a state-owned Huangshan Electric Appliance Factory, and after its restructuring in 1997, Wang Rixin served as the chairman. As early as the state-run era, Huangshan Electric Appliance Factory has built a rectified and controllable power module production line.
At the beginning of the 21st century, Huangshan Electric has become a company with thyristors and rectifier diodes as its main business.
From Huangshan Electric Appliances to Huangshan Core Microelectronics, in addition to the name, the company seems to have no substantive change. According to the disclosure in the prospectus of Huangshanxin Microelectronics, the main products of Huangshanxin Microelectronics are still thyristors and power semiconductor chips, which is basically the same as the company's business in the Huangshan Electric Period. And before and after the name change, the business scope of the enterprise has not been adjusted, so all this makes this name change full of doubts.
A series of capital increases and equity transfers in recent years by Huangshan Electric appliances have made the company's situation even more confusing.
In June 2019, Wang Rixin made his son Wang Min'an a shareholder through equity transfer. In September of the same year, Huangshan Electric Appliances carried out equity incentives, so that the employee shareholding platform Huangshan Xinpeng and Huangshan Hongxin also became shareholders of the company. At the end of 2019, the company carried out financing again, introducing shareholders such as Gaoxin Yida, Huangshan Xinbao, and Shenzhen Huaqiang.
In 2020, Huangshan Electric changed its name and carried out another round of expansion. After this round of financing, Wang Rixin holds 44.4% of the shares of Core Microelectronics and is the controlling shareholder of the company. Wang Rixin and Wang Min'an father and son hold a total of 59.5% of the company's shares, which is considered to have a joint action relationship and is the actual controller of the company.
In the process of continuous expansion of the company, Wang Rixin's father and son are the most direct beneficiaries. From Huangshan electrical appliances to core microelectronics, it does not look much different. This has forced people to suspect that Huangshan Electric changed its name to "rub" the current hot semiconductor industry.
The VAM agreement signed in the process of financing expansion has become a hidden danger to the core microelectronics.
2
The VAM agreement is added, and the road to listing is difficult to turn back
In fact, for the core microelectronics, now is indeed not a good time to go public.
According to the prospectus, the revenue of Core Microelectronics from January to September 2021 was 275 million yuan, and the net profit was 0.79 billion yuan. The revenue of Jiejie Microelectronics, Yangjie Technology and Leon Micro, which are also under the IDM model and produce thyristors, is 1.346 billion yuan, 3.241 billion yuan and 1.753 billion yuan, and the net profit is 388 million yuan, 607 million yuan and 418 million yuan, respectively. Revenue and profit are far more than the core microelectronics.
While the revenue and profit are not as good as those of peers, the technical reserves of core microelectronics are also far behind. As of December 30, 2021, the number of patents for Core Microelectronics was only 20, and the number of R&D personnel was only 88, which was far behind the market average.
But listing is a road that must be taken for core microelectronics.
In a series of investment promotion activities before and after the name change of Huangshan Electric Appliances in 2020, Huangshan Electric Appliances signed a VAM agreement with new shareholders while expanding its scale. According to the Yangtze River Business Daily, in December 2019, when Core Microelectronics first introduced five external shareholders such as Gaoxin Yida and Huangshan Xinbao, it signed a VAM agreement. The parties agreed that by June 2022, Core Microelectronics needs to declare a qualified IPO or the IPO declaration will be accepted. On June 30, 2023, Core Microelectronics will achieve IPO listing.
The agreement states that if Chip Microelectronics fails to complete the listing plan as agreed, the investor has the right to require the actual controller of the company to repurchase shares at an annualized rate of return of 10% per year.
In addition to promoting the IPO process of Core Microelectronics through the bet agreement, the new shareholders also signed a VAM agreement with Chip Microelectronics in terms of performance. The agreement stipulates that from 2019 to 2022, the target net profit of Core Microelectronics in each year should reach 32 million yuan, 35 million yuan, 40 million yuan and 50 million yuan. If the actual profit of the company in any one of these years does not reach the expected target of 80% or the net profit of any year from 2020 to mid-2023 decreases by more than 30% compared with the previous year, the shareholders also have the right to require the actual controller to repurchase shares at an annualized return of 10% per year.
At the same time, Wang Rixin, the actual controller of Huangshanxin Microelectronics, also promised in his personal name to the employee shareholding platform Huangshan Xinpeng and Huangshan Hongxin that the company would complete the IPO and list on A shares by 2024, otherwise it would repurchase the partnership shares.
Under heavy pressure, if the core microelectronics cannot carry out the listing plan as expected, it will suffer huge losses. In order to avoid the serious consequences of the failure of the bet on the company, regardless of whether the time is ripe and whether the market environment allows, the core microelectronics has to move forward on this IPO road.
3
Equity concentration, talent fatigue, where is the IDM dream road?
According to the narrative of the official website of Core Microelectronics, Core Microelectronics defines itself as a semiconductor company that takes the IDM model. This model requires manufacturers to have the ability to cover the entire industry chain such as chip design, wafer fabrication, packaging and testing, etc. at the same time. Compared with the Fabless model, which only carries out chip design, the IDM model has a higher demand for capital from manufacturers.
However, at present, there are still huge deficiencies in the research and development capabilities of core microelectronics. As a semiconductor company, the proportion of R&D personnel of Huangshanxin Microelectronics is only 11.1%, while the proportion of production personnel is as high as 82.6%.
At the same time, the quality of Huangshanxin Microelectronics' talent reserve has also made the outside world quite suspicious.
According to the prospectus of Huangshanxin Microelectronics, of the company's 793 employees, only 16 employees with bachelor degrees, accounting for 2% of the total number of employees, while employees with high school and below high school education reached 82.46% of the total number of employees. It is worth noting that employees who do not have a master's degree or above in the core microelectronics are the highest education of the company's employees.
This is a rather exaggerated number for a semiconductor company, especially a company with an IDM model.
For comparison, Silan Micro is a semiconductor company listed in the early 21st century, and like Core Microelectronics, it is also an IDM model company whose main business is power chips.
The employee information disclosed in the prospectus of Silan Microelectronics shows that 37 of its 429 employees have postgraduate degrees or above, and 112 have bachelor's degrees. The proportions were 8.62% and 26.11%, respectively. After nearly 20 years of development, the number of highly educated talents in the mainland has increased by leaps and bounds, and the composition of the employees of Core Microelectronics is not as good as that of similar enterprises at the beginning of the century, which cannot help but make people worry about their future.
In addition, there are many problems that are criticized by people for core microelectronics.
Wang Rixin's father and son hold more than half of the shares, making the core microelectronics more like the family business of the Wang family father and son.
In 2019, Huangshan Electric Appliance, which had not changed its name to Core Microelectronics at that time, suddenly paid a dividend of 75 million yuan after accepting the investment, which was 2.56 times the net profit attributable to the mother of Core Microelectronics in the current period. The Father and Son of the Wang Family, who held the largest shareholding ratio, became the biggest beneficiaries of this dividend.
The arbitrage behavior of Wang Rixin's father and son has made people doubt the company's strategy, what is the purpose of the expansion and financing behavior of the core microelectronics?
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