There is no doubt that the past decade of smart phones represent the development of consumer electronics, during the entire industry with the change of technology, resulting in many companies on the cusp of the storm, but also led to many companies into the mud, of which the precision structural parts industry is the most typical case, many precision structural parts enterprises are eventually eliminated by the industry.
Shenzhen Zhishang Technology Co., Ltd. (hereinafter referred to as "Zhishang Technology") followed large customers, from the change of the industry step by step, from the mobile phone industry to the game industry gradually transformed, during the period also continued to carry out new business, but this also led to its business revenue changes very largely, for example, in 2019, the e-cigarette business revenue accounted for as much as 35%, but in the past two years it became zero; at the same time, the optical fiber connector business suddenly grew rapidly.
Backed by Foxconn: from the mobile phone industry to the game industry
According to the data, the company focuses on the research and development and manufacturing of precision electronic components, and is committed to the research and development, design, production and sales of game consoles, VR/AR equipment, professional audio-based consumer electronics, communication electronics and automotive electronics. Its main products include game machine parts, electronic connectors, optical fiber connectors, precision structural parts and metal milling tools, electronic atomization equipment, etc.
In fact, at present, the company's main business is two major aspects: one is the game console related components; the other is the connector business.
From the perspective of development history, the company was established until 2013, focusing on the layout of Foxconn and its supply chain enterprise related businesses, providing precision machining and supporting product sales, the business scale has grown steadily, and the company's overall strength has been continuously improved.
Then from 2014 to 2016, with the explosive growth of the smartphone industry, the company said: "The company has entered the Foxconn smartphone product supply chain with the advantages of R&D and design, mold development, production and manufacturing capabilities accumulated in the early stage, as well as long-term processing services for Foxconn." ”
According to its introduction, in 2014 began to develop and produce precision metal structural parts for Foxconn, successively providing metal processing of iPad mini, IO interface of iPad and IO interface production of iPhone 5C, metal processing of iPhone6 and iPhone6 plus and volume key production of iPhone and iPad, and gradually realized the mass production of precision metal structural parts, and the industry dividend pushed the company's development to a higher level.
Since 2017, the company has actively laid out the game console parts business, developed a variety of precision parts products including slide rails, Tact Switch, card slots, precision positioning controllers, etc., and has now become a professional game machine parts manufacturer in China, and the game console plate business has grown rapidly, becoming the main source of the company's operating income.
In addition, in 2019, with the acceleration of the construction of "new infrastructure" such as 5G networks and data centers, the company seized the market development opportunities, began to provide optical communication related product solutions, and successfully became a qualified supplier of SENKO. In July 2020, the company participated in FukeXima, and the service capabilities in the field of optical communication were further improved, and the optical communication business will become an important performance growth point for the company in the future.
Since its inception, the company has been adhering to the business philosophy of independent innovation and independent research and development, continuously investing in research and development around the needs of core customers, and constantly enriching product types and improving technical content. At present, the company's products have formed a layout with precision components of game consoles and VR/AR equipment as the core, and electronic connectors and optical fiber connectors as important components. In the future, the company will take well-known electronic manufacturing enterprises as the benchmark, further deepen cooperation with brand owners by providing core products and solutions, and strive to become an internationally competitive electronic parts manufacturer and technical service provider.
In terms of customers, its customers are mainly well-known Japanese enterprises N Company, Sony, Facebook and other brand owners, direct customers are mainly Foxconn, Goertek and other manufacturing service enterprises, the company's production of game console parts and electronic connectors and other products through Foxconn and Goertek shares and other integration of other functional parts to form a whole machine products, and finally supporting the supply of terminal customers. At the same time, the company has also established direct cooperative relations with customers such as SENKO, Tefa Information, Shiyuan Shares, Amphinol, Bailingda, Feida Audio and so on.
Business fluctuations have changed greatly: the revenue of the e-cigarette business has been "cleared", and the connector business has increased sharply
As mentioned above, the business of Zhishang Technology is actually changing very quickly, from relying on Foxconn to engage in the precision structural parts industry, then entering the game console industry, and then crossing over to the connector industry. In this process, in fact, Zhishang Technology has also engaged in e-cigarettes, and has become one of the company's main sources of income in 2019, but in the prospectus, Zhishang Technology did not elaborate on this.
According to the author's inquiry into the IPO prospectus of Zhishang Technology, from 2019 to 2021, in just three years, the revenue of Zhishang Technology's major businesses fluctuated greatly: 1. The revenue of the precision structural parts business that started fell sharply, from 225 million yuan in 2019 to 0.18 billion yuan in 2021, accounting for a sharp decrease from nearly 50% to 3.01%; 2, the connector business grew rapidly, of which the electronic connector business grew rapidly as a whole. 3, precision machining service business, sales have also dropped sharply from nearly 40 million yuan to almost "cleared" state.
According to Zhishang Technology, the overall revenue of the company's game console parts and components products has continued to grow, becoming the main source of income for the company's main business. The company's connector product revenue remained stable overall, and with the development of the optical fiber connector business, the connector business revenue increased during the reporting period. The significant decline in revenue in the Precision Manufacturing and Other Segment during the reporting period was due to the Company's initiative to adjust its product structure, reduce the sales of precision machining and ancillary products with low profit margins and technical content, and stop the electronic atomization equipment business at the end of 2019.
From the perspective of the e-cigarette industry, at the beginning of 2020, the domestic ban on online sales of e-cigarettes has a very large impact on the industry, and among its top five customers in 2019, the second and third customers, Jin Zhiyuan, you and I networks are all e-cigarette brand manufacturers. These two major customers contributed 160 million yuan in revenue, but by 2020-2021, the two companies' sales to them actually fell out of the top five customer list, while in 2020, the fifth largest customer sales were 12.09 million yuan, and the fifth largest customer in 2021 was 13.38 million yuan.
What needs more attention is that the actual controller of your and my network is the chairman and actual controller of Zhishang Technology, which means that you and my network are actually the enterprises invested by the chairman of Zhishang Technology, even so, its sales have declined rapidly in the past two years and are not in the list of the top five customers.
Although e-cigarettes have suffered a great impact in the domestic market, in fact, sales in overseas markets are still hot, in the face of such a huge market, Zhishang Technology has suddenly "abandoned" this business. At the same time, the revenue from precision machining services is also declining rapidly, close to "clearing".
In addition, through the above, it can be found that in the past three years, Foxconn Group has been the company's largest customer, the main products for game console parts and precision machining services, and in the past two years, its top five customers to sell products are game console parts and connector business, especially optical fiber connector business, driven by the business's largest customer SENKO, sales to this customer increased by nearly 5 times!
In this regard, according to Zhishang Technology, in 2020, the company's top five customers added amphenol and SENKO, of which Amphenol cooperated with the company for a long time, and all belonged to the company's top ten customers during the reporting period, and the company mainly sold electronic connector products to it; SENKO is a world-renowned multinational enterprise focusing on automotive related products, communications and optical communications, electronics and electrical engineering, etc., founded in 1946, and the company successfully became a qualified supplier of SENKO in 2020. It mainly sells fiber optic connector products to it.
It emphasizes that SENKO implements a strict qualified supplier management system and generally does not easily change products that are already in use and of stable quality unless there is a major quality or delivery problem, nor does it easily abandon its cooperation with existing suppliers. This guarantees the continuity and stability of the company's cooperation with SENKO.
Overall, in the past few years, the business revenue of Zhishang Technology has changed greatly, especially the e-cigarette-related business, in just one year, from 160 million yuan of revenue to "zero", and the sales of e-cigarettes overseas are very large; at the same time, the optical fiber connector business is driven by the large customer SENKO, the performance of the rapid rise, in the case of such a large fluctuation in the main business, how to maintain the stable growth of performance in the future? (Proofreading/Xiao wei)