The "fruit chain winter" under the epidemic: stoppage, cutting orders, entering the game to build a car to survive

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Recently, some "fruit chain" companies have been affected by the epidemic and have stopped work.

On April 16, it was reported that due to the epidemic situation in the Zhengzhou Airport Experimental Zone, the iPhone assembly of Foxconn's Zhengzhou factory may be affected. On the afternoon of April 16, Foxconn responded that foxconn's Zhengzhou Airport plant is currently operating normally. According to the data, Foxconn Zhengzhou Airport Factory is the largest assembly location for Apple's iPhones, and is the main factory area for Foxconn to assemble Apple products.

Also affected by the epidemic, on April 12, Apple's foundry company and Shuofa announced that their two major factories in Shanghai and Kunshan have stopped work and will actively communicate with the local government to resume work as soon as possible. Tianfeng Securities analyst Guo Mingji predicted in the research report that Pegatron's two factories may take until the end of April or early May to resume production, and it is expected that Apple may transfer some iPhone orders to Foxconn for production.

In addition to the suspension, since the beginning of the year, the domestic mobile phone market has continued to be sluggish, and Apple's cutting rumors have continued. Guo Mingxi recently released news one after another, saying that apple's first new machine this year, the iPhone SE, is sluggish, and its estimated annual shipments have been cut by 10 million units; in the Android camp, Guo Mingxi revealed that China's major Android mobile phone brands have cut about 170 million orders this year, accounting for 20% of the original 2022 shipment plan.

Under the background of multiple factors such as the shutdown of the epidemic, the rumor of cutting orders, and the "lack of core", the survival of "fruit chain" enterprises that rely on Apple's industrial chain orders is becoming more and more difficult. Recently, a number of "fruit chain" listed companies announced the performance of 2021, from the performance point of view, the performance differentiation of "fruit chain" enterprises has intensified, which can be described as "ice and fire double days".

Looking at the performance of various manufacturers, on the one hand, the revenue of leading enterprises such as BOE and Goertek shares has doubled, and the net profit is growing; on the other hand, the performance decline is declining, facing losses: In addition to the leading enterprise Luxun Precision, among the 8 apple suppliers added in 2020, Derun Electronics, Selen New Materials, Changying Precision, and Shengli Precision have all experienced a decline in performance.

This year, there is still uncertainty in the supply chain of the consumer electronics industry, how can "fruit chain" companies find new growth points in the future?

A few joys and a few sorrows: the performance differentiation of "fruit chain" enterprises has intensified

As an emerging "fruit chain" leading enterprise, BOE's performance will increase exponentially in 2021. According to the 2021 annual report disclosed by BOE, the company achieved operating income of 219.310 billion yuan for the whole year, an increase of 61.79% year-on-year; and achieved a net profit attributable to shareholders of listed companies of 25.831 billion yuan, an increase of 412.96% year-on-year, and the performance hit a record high.

According to the financial report of Industrial Fulian, which is also the leader of the "fruit chain", in 2021, The Industrial Fulian achieved a total operating income of 439.557 billion yuan, an increase of 1.8% year-on-year; the net profit attributable to the shareholders of listed companies was 20.01 billion yuan, an increase of 14.8% year-on-year, and the revenue and profit hit a record high. In addition, Goertek shares, Gigabit Innovation, Changdian Technology, Han's Laser, etc. in the "fruit chain" enterprises also achieved positive growth.

Different from the rapid growth of the above-mentioned enterprises, in 2021, the performance of "fruit chain" enterprises has plunged sharply, and even fallen into the dilemma of turning profit into loss.

On January 28, the former "fruit chain" enterprise OFILM disclosed its 2021 annual performance forecast, and it is expected that the net profit attributable to the shareholders of the listed company will be 1.9 to 2.7 billion yuan. The main reasons for the loss include: the termination of the procurement relationship by specific overseas customers, the decrease in the shipment volume of H customer's smartphone business, which led to a sharp year-on-year decline in the company's shipments of multiple products, and the comprehensive inventory and impairment of various assets.

Known as one of the "three musketeers" of Apple's supply chain A-share, Luxshare Precision disclosed the 2021 annual performance express report on the evening of March 14, and the report showed that the increase in revenue did not increase profits, and the operating income during the period was 154.106 billion yuan, an increase of 66.60% year-on-year; and the net profit was 7.072 billion yuan, a year-on-year decrease of 2.12%. This is the first time that Luxun Precision's revenue has exceeded the 100 billion mark, but its net profit attributable to the mother has been negative growth for the first time in recent years.

In addition to increasing revenue and not increasing profits, since 2022, the stock price of Lixun Precision has also "fallen and fallen". As of the close of trading on April 18, Luxshare Precision's stock price has fallen by 52% from the high point at the beginning of the year, and the market value has shrunk by more than 130 billion yuan compared with the beginning of the year.

The stock price "waist cut" makes the company's actual controllers unable to sit still. On April 11, Luxun Precision issued an announcement that Wang Laisheng, one of the company's actual controllers and vice chairman, intends to increase the company's shares through the Shenzhen Stock Exchange system, and the amount of the proposed increase is not less than RMB 200 million, not more than RMB 400 million, and the increase does not set a price range.

As the leader of the "fruit chain", Lens Technology was affected by the epidemic and stopped work, and its subsidiary Dongguan Lens issued an announcement on March 15, 2022 to suspend production activities, and on April 2, it announced that it would fully resume work and production. According to the performance report of Lens Technology, in 2021, the company achieved operating income of 45.286 billion yuan, an increase of 22.60% year-on-year; and achieved a net profit attributable to the mother of 2021 of 2.088 billion yuan, down 57.36% year-on-year.

In addition, the performance of the "fruit chain" enterprises Derun Electronics and Changying Precision in 2021 has also turned from profit to loss.

Exits, epidemics, rising manufacturing costs, and complex reasons for performance changes

In fact, although becoming an Apple supplier is an affirmation of the strength of consumer electronics production enterprises, becoming a "fruit chain" enterprise has also become a "double-edged sword".

Zhang Xiang, a special expert of the Zhongbo Lian Think Tank, analyzed to the reporter of Nanduwan Finance Agency that Apple's same spare parts will look for two suppliers at the same time, and when one has a problem with the supply, the other can guarantee rapid replenishment. Moreover, the two suppliers can compete with each other, Apple has sufficient negotiation space, can purchase products at the lowest price, Apple avoids supply chain risks while reducing production costs. However, in this way, the supplier's right to speak will also be reduced, and it can be replaced.

In addition, some insiders pointed out that Apple strictly controls the production equipment of suppliers, and the production lines of suppliers need to be supplied to Apple separately, which also means that the "fruit chain" enterprises are highly dependent on Apple, and once the enterprise is kicked out of the ranks of suppliers, the production line that provides products for Apple will be invalidated, followed by a sharp dive in performance.

According to CCTV, 34 Chinese companies were "kicked out" of Apple suppliers in 2020, and their performance plummeted. To this end, CCTV called on enterprises to get rid of "Apple dependence".

OFILM is one of them. Due to being removed from the fruit chain list, OFILM's net profit in 2020 will turn from profit to loss of 1.85 billion yuan, and it is expected to lose another 1.9-2.7 billion yuan in 2021. In the performance forecast announced by OFILM, the reason for the loss mentioned "the impact of the termination of the procurement relationship by a specific overseas customer".

In addition to the performance plunge caused by Apple's kicking out of the supplier ranks, the reasons for the decline in the performance of "fruit chain" companies are complex.

Peng Jian, director of the Industrial Development and Urban Planning Center of the Comprehensive Development Research Institute (Shenzhen), analyzed to the reporter of Nanduwan Finance Agency that in addition to the company's own operation, the decline in the performance of electronic manufacturing enterprises is related to the environment of the entire market. Specifically, the cost of electronic manufacturing is generally rising, whether it is factor costs or labor costs, as well as research and development costs are rising rapidly, superimposed on the epidemic, supply chain, import and export shipping and other factors, related enterprises in the general environment is facing greater challenges.

In addition to rising costs, Apple suppliers such as Derun Electronics, Changying Precision, and Lens Technology have issued performance express reports claiming to be affected by "missing cores and few materials", and net profits are under pressure, and Lixun Precision also bluntly said in the performance express that performance is affected by this factor. In addition, the reasons for the decline in the performance of various companies generally include difficulties and challenges such as repeated epidemics and limited electricity consumption.

Get rid of "Apple dependence": layout smart cars, smart wear, "fruit chain" enterprises to create a "second growth curve"

Under the pressure of exit, epidemic, cost increases and so on, many "fruit chain" companies have opened the road of transformation, and have declared that they want to create a "second growth curve". Emerging tracks such as smart cars and smart wearables have gradually become a breakthrough for enterprises to create a "second growth curve".

OFILM said in the announcement that one of the reasons for the change in the company's performance is that the company actively expands new businesses while developing its core business, including the optical optoelectronic business of laying out new areas such as smart cars, VR/AR, and action cameras. In June 2021, OFILM disclosed its semi-annual report results, of which OFILM's intelligent vehicle business achieved operating income of 413 million yuan, an increase of 78.22% year-on-year.

In this regard, Peng Jian said that there is a certain threshold for smart car manufacturing. The technology accumulation, talent accumulation, various production and manufacturing cooperation systems and huge industrial chains of veteran car companies in the industry cannot be established overnight. Even the new forces of car manufacturing have many advantages over electronic manufacturing companies.

Therefore, Peng Jian suggested that electronic manufacturing companies want to turn into the emerging subdivision track, rely on their own advantages to find a point of convergence with smart car manufacturing, and rely on their own core technology to combine with some of them. "If you can play a good role as a supplier of smart car manufacturing, you can eat dividends in emerging fields."

Perhaps aware of the gap with mature smart car manufacturers, although the layout of smart cars, Luxshare Precision has repeatedly reiterated that it does not build complete vehicles. In February this year, Luxun Precision announced that it had signed a "Strategic Cooperation Framework Agreement" with Chery's subsidiary to form a joint venture company to develop and manufacture new energy vehicles, and would acquire the relevant equity of Chery held by Qingdao Wudaokou for 10.054 billion yuan. In the same month, Wang Chunlai, chairman of Luxun Precision, said in a conference call that the strategic cooperation between Luxun Precision and Chery, the company did not build a complete vehicle, but coordinated with Chery New Energy's ODM business.

In addition, there are many "fruit chain" companies pouring into the field of smart wear.

On April 7 this year, Lens Technology issued the Announcement on Changing the Use of Part of the Raised Funds. The announcement said that the company intends to increase the total investment of the "Changsha (II) Park Smart Wearable and Touch Function Panel Construction Project" from the original 1.515 billion yuan to 5.406 billion yuan, and the project is expected to be completed and put into production by the end of 2024.

Coincidentally, Luxun Precision announced as early as February this year that it planned to raise no more than 13.5 billion yuan, of which 3.5 billion yuan was invested in smart wearable device production projects.

Last year, the "meta-universe" concept of popularity, the market's attention to smart wearable devices has also risen, the electronic manufacturing industry into the field of smart wear, is there any irrational factor? Zhang Xiang analyzed to the Nanduwan Finance News reporter that last year, The three companies of Luxun Precision, Goertek and Lens Technology collectively said that AR/VR wearable devices will be an important product direction for the company in the future, which to a certain extent illustrates the strategic position of wearable devices. In addition, manufacturers may establish new cooperation with Apple with the help of wearable devices. So, from these two aspects, the supplier's strategy of developing wearables is correct.

At present, there is a two-stage differentiation in the performance of various enterprises in emerging tracks such as smart cars. "However, no matter what, comprehensive diversification and development, reducing the proportion of Apple's business, in order to get rid of the dependence on Apple, reduce the risk of business operations," Zhang Xiang said.

Written by: Nandu Wan Finance Agency reporter Yan Zhaoxin intern Bai Hongguo