(Report Producer/Author: Guolian Securities, Xiong Jun, Wang Ye)
1. Focus on power management ICs, platform advantages drive development
1.1. Deeply cultivate the field of power management IC, has become a leading manufacturer in China
Pioneer of domestic substitution of power management ICs. Xinpeng Micro (full name Wuxi Xinpeng Microelectronics Co., Ltd.) was established in 2005, July 22, 2020 on the Shanghai Stock Exchange Science and Technology Innovation Board listed, is a focus on power management chip research and development and sales of analog IC design enterprises, the company is committed to achieving import substitution, to provide customers with high-efficiency, low power consumption, stable quality of power management integrated circuit products, to promote the energy efficiency of the whole machine and technological upgrades. The company's main products are power management chips, and there are more than 1200 effective power management chip products. Since its inception, the company has adhered to the development strategy of "market demand-oriented, innovation-driven", continued to develop and launch new products, and deployed three major application series product lines, including household appliances, standard power supplies and industrial drives, and the products are widely used in household appliances, mobile phones and tablet chargers, set-top boxes and computer adapters, smart meters and industrial control equipment. The company actively promotes the layout of new business, strengthen the integration of industrial resources, in 2021 the company acquired 100% of the shares of Wuxi Anzhi Electronics Co., Ltd., which is engaged in the research and development, design and sales of power integrated circuits, intending to use the technical advantages accumulated by Anzhi Electronics in the field of power integrated circuits to cooperate with the company's existing industrial control power product line to play a synergistic effect and expand the scale of the company's industrial drive chip business.
Based on household appliance chips, the application field continues to expand. Household appliance chips are the company's traditional advantages of the product, the company in 2008 took the lead in mass production of 700V monolithic integrated power chip and successfully entered the field of home appliances, breaking the monopoly of foreign chip companies in this field. The company launched low-power, highly integrated AC-DC, DC-DC chips in the field of small household appliances, and the intelligent application scenarios extended to promote the steady increase of the company's market share; in the field of large appliances, with high-withstand voltage and wide output AC-DC chips to break into benchmark customers, power supply and drive chips began to increase. The company actively expands the downstream application field, the product gradually penetrates into the field of standard power supply and industrial drive, in the field of standard power supply, the launch of AC-DC, PD protocol and other chips, products have entered the mobile phone and e-commerce customers; in the field of industrial drives, the introduction of high-voltage AC-DC, high-voltage Gate Driver and other chips, in the motor, power, communications three major application plates close to large customers, sales greatly improved.
The cooperation between end customers is stable, and the scale of operation is increasing year by year. With outstanding product performance, continuous technological innovation and rapid service response, the company has formed a stable customer base in various application areas. Home appliance chip terminal customers mainly include Midea, Gree, Philips, Suber, Jiuyang, Lake, Xiaomi and other home appliance industry benchmark customers; standard power chip terminal customers mainly include Skyworth, ZTE, Huawei, Moso Power, Hikvision and other enterprises; industrial drive chip terminal customers mainly include Astronergy, Shengfan shares, Welling Motor, Dayang Motor, Jingma Electric and other enterprises. Under the background of continuous expansion of the customer base, the company's operating scale has grown steadily, and from 2018 to 2021, the operating income was 312 million yuan, 335 million yuan, 429 million yuan and 753 million yuan, respectively, and the 3-year CAGR was 34.14%.
The subdivision field has advantages and has become a leading supplier of power chips in China. The power management chip industry presents a full competitive market pattern, the domestic power management chip enterprises market share is relatively scattered, the company based on the "high and low voltage integration technology platform" to create AC-DC, Gate Driver and other high voltage power management chips have a strong technical strength and market competitiveness. In the field of household appliances, the company has become the mainstream domestic power supply chip supplier of domestic home appliance brand manufacturers; in the field of standard power supply, the company has become the main domestic power supply chip provider of leading manufacturers of Netcom, DVB and mobile phone fast charging; in the field of industrial drives, the company has become a leading domestic power chip provider for terminal application products such as motors, smart meters, and communication base stations.
1.2. Independent research and development of technology platform, product iterative upgrade is guaranteed
The Fabless model is asset-light and the upstream supply is stable. Since its inception, the company has been using the Fabless model of operation, focusing on product market development and design and development, and the production is mainly outsourced. The asset-light, product-focused and marketing business model is conducive to improving the overall operational efficiency of the company. With the help of location advantages, the company actively establishes close cooperative relations with upstream wafer manufacturers Such as China Resources Micro, Huarui Micro, South Korea Eastern Electronics, etc., and upstream packaging and testing manufacturers Huatian Technology and Changdian Technology, and the supply relationship is stable. In order to better play the synergy effect between upstream suppliers and the company's industrial chain, the company has established a team of semiconductor devices and process manufacturing experts with deep technical accumulation, and jointly optimizes the process flow with suppliers to ensure the process advantages of the company's products.
Invest in FAB manufacturers to secure production capacity. In June 2021, the company signed a "capital increase agreement" with Chuzhou Huarui Microelectronics Technology Co., Ltd., subscribed the registered capital of 4,060,714 yuan, and completed the subscription in July 2021; in December of the same year, it invested in SMIC Yuezhou Integrated Circuit Manufacturing (Shaoxing) Co., Ltd. In the context of the current global wafer production capacity shortage, the forward-looking investment in two FAB companies with integrated circuit manufacturing capabilities has a profound strategic significance for the company, ensuring the company's production capacity supply in the subsequent expansion of products and markets, and escorting the company's performance growth.
Independent research and development iteration of "high and low voltage integrated technology platform" to establish a technical moat. At the beginning of its establishment, the company focused on the research and development of the technology platform, starting from the special high-voltage semiconductor process and device platform to the circuit, layout and system design, which took two years to complete the research and development of the 700V "high-low voltage integrated technology platform", and developed a 700V monolithic MOS integrated AC-DC power chip series products based on the platform, breaking the monopoly of imported products. Since then, the company has continuously upgraded its technology platform, in 2010 based on the second generation of "high and low voltage integrated technology platform" layout standard power chip market; in 2013 based on the third generation of "high and low voltage technology platform" into the industrial drive chip market, and in 2014 in China took the lead in mass production of 1000-1200V intelligent MOS ultra-high voltage AC-DC power supply chip, successfully entered the State Grid, South Grid smart meter and intelligent circuit breaker market. At present, the company's "high and low voltage integrated technology platform" has been upgraded to the fourth generation of "intelligent MOS digital multi-chip high and low voltage integration platform", and continues to develop a series of highly integrated power supply chip products. Through continuous iterative upgrading of the technology platform, the company's products have always remained at the forefront of the industry.
1.3. The equity structure is stable, and the equity incentive shows confidence
The shareholding structure of large funds is relatively concentrated, and the management has a deep industrial background. As of March 31, 2022, Mr. Zhang Lixin held a total of 30.33% of the company's shares, and Mr. Yi Yangbo and Mr. Xue Weiming, the core members of the management team, held 4.06% and 1.32% of the shares respectively. The second largest shareholder of the company is the National Integrated Circuit Industry Investment Fund Co., Ltd., which holds a total of 6.63% of the company's shares, and the participation of the large fund is conducive to the company's enjoyment of relevant policy support for the national and local integrated circuit industry and helps the company's development. The core team members represented by Mr. Zhang Lixin, chairman of the company, and Mr. Yi Yangbo, general manager, have rich experience in the semiconductor industry, and their personal interests are highly consistent with the company's interests, which helps to ensure the professionalism and forward-looking nature of the corresponding strategic decisions of the company's management.
Continuous equity incentives bind interests, and the core technical team is stable. After the company was listed in July 2020, it issued shares in December 2020 and December 2021 for two consecutive years to implement equity incentive policies, deeply binding the interests of the company and employees, and condensing the company's development source. In April 2022, the Company announced its intention to repurchase the Company's listed shares for an amount of not less than RMB55 million and not more than RMB110 million, and the repurchased shares will be used for employee stock ownership plans or equity incentives at an appropriate time in the future. After the listing of two consecutive years of equity incentive plan is conducive to maintaining the stability of the core technical team, the company has formed a high-level R & D team led by 3 doctors, a total of 215 people, the number of team members accounted for 75.44% of the total number of employees, the company's R & D advantages are obvious.
2. The power SUPPLY IC market is vast, and the momentum of domestic substitution is rapid
2.1. Market space: Emerging application areas continue to grow in scale
Power supply chips are an important branch of analog chips. Analog chips are mainly divided into three categories: power supply chips, signal chain chips and other chips. The signal chain chip mainly receives, transfers, amplifies, filters and finally converts the analog signals such as temperature, sound, light, and electricity into digital signals through the digital-to-analog conversion chip, so that the digital chip can be stored and calculated. Common signal chain chips include amplifiers, digital-to-analog converters, comparators, and interface chips. Power supply chip is the power supply heart of all electronic equipment, responsible for the transformation, distribution and detection of electrical energy required by electronic equipment, etc. Control work, is indispensable for electronic equipment, its performance and reliability have a direct impact on the performance and reliability of the whole machine, once the power chip fails will lead to electronic equipment to stop working or even damage, is the key device of electronic equipment. Power supply chips exist in almost all electronic devices and have become the largest market segment of analog chips. According to IC Insights data, the global analog chip market size in 2020 is $57 billion, accounting for 13% of the global semiconductor market size; according to Frost & Sullivan data, the global power supply chip market size in 2020 is $32.9 billion, accounting for 58% of the global analog chip market size; according to IC Insights data, the global signal chain chip market size in 2020 is $9.9 billion, accounting for 17% of the global analog chip market size. According to IC Insights, the global analog chip market size grew from $55.2 billion in 2019 to $741 in 2021, with a CAGR of 15.86% in 2019-2021, and the global analog chip market size is expected to reach $83.2 billion in 2022.
There are many types of power ICs, and global shipments lead. Power supply chips include battery management chips, AC-DC chips, DC-DC chips, LED driver chips, gate driver chips, etc. Battery management chip is mainly used to ensure battery safety and stable output energy, prolong battery life, specific and can be subdivided into metering chip, charging management chip, monitoring and balancing chip, input protection chip and fast charge protocol chip; AC-DC chip is used to convert high voltage AC to DC and step down; DC-DC chip includes linear regulator LDO and switching regulator (narrow DC-DC chip), linear regulator for buck, switching regulator for buck, boost, output constant voltage And the conversion voltage; the LED driver chip is used to drive the LED to emit light or make the LED module assembly work normally; the gate driver chip is used for the conduction of power devices such as MOSFETs and IGBTs. According to IC Insights data, in 2020, power supply chips are the most shipped semiconductor chips in the world, with shipments of 65.1 billion units, and products are widely used in household appliances, mobile phones and smart wearables, automobiles, industrial and other fields.
Downstream application demand is strong, and the market size of power supply chips is growing rapidly. According to SEMI data, the global power management chip output value from 2015 to 2017 was 191, 198 and 22.3 billion US dollars, respectively; the Prospective Industry Research Institute predicted that the global power management chip market size in 2018 was about 25 billion US dollars in 2018 according to the development of the industry; according to TMR data, the global power management chip market size is expected to reach 56.5 billion US dollars in 2026, and the CAGR in 2018-2026 is 10.73%. According to CCID Consulting data, from 2012 to 2018, China's power management chip market grew from 43.068 billion yuan to 68.153 billion yuan; according to Frost & Sullivan data, China's power management chip market size will reach 23.45 billion US dollars (164.15 billion yuan) in 2025, and the CAGR in 2018-2025 will be 13.38%.
Emerging application areas have become the main driving force for the growth of the power management chip market. According to IDC data, global smartphone shipments in 2012-2015 showed rapid growth after the growth rate slowed down, and in 2018 for the first time in negative growth, smart phones into the stock competition era, consumer electronics products represented by mobile phones for power management chips demand growth slowed down, consumer electronics chip products track gradually saturated, increasingly fierce competition. Under the background of the deep integration of information technology such as artificial intelligence, Internet of Things, and 5G with downstream automobiles, industry, communications and other fields, emerging application fields such as new energy, industrial control, communication base stations, and data centers will become a new driving force for the growth of the domestic power management chip market, bringing significant incremental demand for power management chips.
2.2. Competitive pattern: the concentration is low, and the substitution effect of subdivision areas is beginning to appear
The power IC market pattern is fragmented, and foreign companies dominate. At present, foreign enterprises represented by Texas Instruments (TI), Adeno (ADI), Infineon, etc. maintain a leading edge in the integrity of the product line and the overall technical level, and from the perspective of market share, foreign companies occupy more than 80% of the global power management chip market share. According to the Prospective Industry Research Institute, the global power management chip market distribution in 2018 was Texas Instruments (21%), Qualcomm (15%), Adeno (13%), Maxim (12%), Infineon (10%), cr5 71%. With the continuous expansion of the domestic integrated circuit industry market size, domestic local power management chip design enterprises in the fierce market competition gradually rise, the first to cut into the civilian consumer market, in the field of low-power consumer electronics has gradually replaced the market share of foreign enterprises, products have also been developed from small power to medium and high power. At present, the domestic power supply management chip has a market share of less than 20% in China, and the domestic replacement space for power supply is huge.
Focus on subdividing the types of power SUPPLY ICs, and the domestic substitution effect has initially emerged. The company is deeply involved in the field of household appliances, based on the self-developed "high and low voltage integrated technology platform" launched AC-DC chips, DC-DC chips and gate driver chips (Gate Driver), has been in a leading position in the domestic manufacturers. Especially in the field of high-voltage power management chips such as AC-DC and Gate Driver, the company has strong technical strength and market competitiveness, and has become the mainstream domestic power supply chip provider of domestic home appliance brand manufacturers. Power management chip as a kind of analog chip, the product life cycle is long, the analog chip industry has anti-cyclical attributes, the overall competitive pattern is more dispersed, the characteristics are conducive to the company through product research and development from the subdivision track to cut in, and through the expansion of chip types to gradually achieve domestic substitution. (Source: Future Think Tank)
2.3. Comparison of comparable companies: benchmark PI, MPS, growth can be expected
AC-DC chip benchmarks PI, DC-DC chip benchmarks MPS. The company's traditional advantage products are AC-DC chips, and the downstream application scenarios are highly overlapping with the AMERICAN enterprise PI (Power Integrations), and direct competition in the downstream multi-field; DC-DC chips and driver chips are benchmarked against the American enterprises MPS (Monolithic Power Systems):
1) Founded in 1988 and headquartered in Silicon Valley, USA, PI is a supplier of high-performance electronic components for energy-efficient power conversion systems that offer integrated circuits and diodes that help design small, compact, energy-efficient AC-DC power supplies for a wide range of electronic products, including televisions, PCs, home appliances, smart meters, and LED lamps. PI is the Fabless business model, the same as the company, and highly comparable. A variety of the company's products in terms of performance can already be comparable to PI products, and with a higher cost performance to gradually replace imported products;
2) FOUNDED IN 1997 AND HEADQUARTERED IN SAN JOSE, CALIFORNIA, MPS IS A HIGH-TECH ENTERPRISE INTEGRATING R&D, DESIGN, MANUFACTURING AND SALES, FOCUSING ON THE DESIGN AND MANUFACTURE OF HIGH-PERFORMANCE ANALOG INTEGRATED CIRCUITS AND MIXED SIGNAL INTEGRATED CIRCUIT PRODUCTS, ESPECIALLY HIGH-POWER POWER MANAGEMENT CHIPS. MPS is an IDM business model, which is more proactive on the cost side and has a higher gross profit margin for products. In 2021, the revenue of MPS direct current to dc products (DC-DC) was 7.315 billion yuan, accounting for 94.99% of the revenue, and the advantages of DC-DC power products were obvious.
The company's operating scale is still small, and the growth is accelerated under the background of domestic substitution. From the perspective of revenue and profit scale, the company's revenue in 2021 is 16.8% of PI and 9.8% of MPS; in 2021, it is 19.2% of PI and 13.0% of MPS, and the scale of revenue profitability and total market value are still different from PI and MPS. Benefiting from the acceleration of the semiconductor domestic substitution process, the continuous introduction of new products and the increase in market share in downstream applications, the company's operating income increased from 313 million yuan to 753 million yuan in 2018-2021, 34.14% CAGR in 34.14%, and 75.44% year-on-year in 2021, higher than PI (44.02%) and MPS (43.03%), which has entered an accelerated growth period.
Increase the size of high-profit industrial-grade products, and the gap between gross profit margins has gradually narrowed. From the perspective of product structure, the company's household appliances and standard power products account for a high proportion, in 2021 household appliances product revenue accounted for 45.9%, standard power product revenue accounted for 34.4%, higher gross profit margin of industrial drive products only 15.7%. In 2021, the downstream applications of PI are distributed in consumer electronics (32%), communications (30%), industrial (28%), computers (10%), and the product structure is more reasonable, of which communications and industrial products with higher gross profit margins account for 58%, which is also the main reason why PI is higher than the company's gross profit margin compared to the company. From the perspective of gross profit margin, the company's gross profit margin in 2021 reached 43%, up 5.31 percentage points year-on-year, mainly due to the increase in revenue of high-gross margin industrial drive products, we believe that in the subsequent layout of automobiles and industrial-grade power supply and drive chips, resource tilt, the company's gross profit margin and profitability are expected to be further improved.
Increase research and development to continuously improve product performance. In 2021, the company's R & D expense ratio of 17.49%, higher than PI (12.08%) and MPS (15.79%), although some of the company's products have the same performance as foreign imported products, but considering the fierce competition in the semiconductor industry, domestic substitution is urgent, the company attaches great importance to research and development, we are optimistic about the company's continuous innovation and research and development to launch higher performance products to achieve the substitution of imported products.
3. The three major product lines are working together and growing steadily in a stepwise manner
3.1. Household appliances: Based on small household appliances, major appliances have entered the upper stage
Home appliance chips aim at import substitution. The company has been deeply engaged in the field of home appliances for more than ten years, and the product performance and quality of home appliance chips have been comparable to the level of similar chips, compared with the home appliance chips of foreign enterprises, the company's home appliance chips have a higher degree of integration. In 2008, the company successfully entered the benchmark customers of the home appliance industry such as Midea, Suber, Jiuyang and Gree by virtue of the 700V single-chip integrated power chip developed based on the self-developed "high and low voltage integration platform", breaking the foreign monopoly in this field and quickly entering the home appliance market. The company's home appliance chips are AC-DC chips, the main products are low-power AC-DC power chip series, high integration AC-DC power chip series, high withstand voltage wide output AC-DC power supply chip series, etc., products are widely used in induction cookers, rice cookers, electric pressure cookers, hair dryers and other kitchen appliances and household appliances.
Actively expand into the major appliance market. With the technical advantages accumulated in the field of small household appliances, the company actively expands downstream applications in the field of home appliances. For the major appliance (white electricity) market, the company layout of high-withstand voltage wide output AC-DC power supply chip, the product with the same power with the advantages of higher withstand voltage margin, smaller solution size, by many major appliance customers widely recognized. According to the national household appliance industry information data, in 2021, the sales of high-end products in the online and offline markets of H1 home appliances have increased significantly year-on-year, and the power management chips of home appliances have benefited from the intelligentization of home appliances and the customization of the whole house, and the market scale will be further expanded. In the context of the extension of intelligent application scenarios, the company's market share in the small household appliance market will continue to increase in 2021; in the large appliance (white electricity) market, it has fully broken through the benchmark customers, and the power supply and drive chip have been gradually increased, and the annual sales have increased by 700% year-on-year.
Home appliance chips have obvious advantages, and revenue and sales continue to grow. The company's home appliance chip product sales increased from 174 million in 2017 to 565 million in 2021, 4 years CAGR of 34.24%, 2021 home appliance chip product sales increased by 56.08%; home appliance chip product operating income increased from 0.94 billion yuan in 2017 to 346 million yuan in 2021, 4 years CAGR was 38.51%, and the revenue of home appliance chip products in 2021 increased by 89.47%. As the company's dominant products, household appliance chip products show a rapid growth trend in sales and revenue.
It is estimated that the market size of power chips in the field of small household appliances will be 68.35 billion yuan in 2022, and the CAGR in 2022-2025 will be 18.69%; the market size of power chips in the white power field will be 1.405 billion yuan in 2022, and the CAGR in 2022-2025 will be 18.69%. The calculation assumptions are as follows: 1) According to the company's prospectus, a single home appliance usually has 1-8 power management chips built-in, using at least 1 AC-DC chip; the number of power chips for a single small household appliance is expected to be 3.5 in 2020, and the number of single white power supply chips is 4.5; 2) According to the company prospectus, it is expected that the power chip FOR small household appliances (household appliances, kitchen appliances, environmental appliances, etc.) will be 0.5 yuan in 2020; and the white electricity (air conditioner, washing machine, refrigerator) power chip ASP is 0.5 yuan 0.8 yuan; 3) It is expected that the growth rate of small household appliance power supply chips and white power supply chips in 2022-2025 will be -5%, -5%, -4%, -3% respectively; 4) the number of single small household appliance power chips and white power supply chips is expected to grow by 5%, 5%, 5%, 4% and 3% in 2021-2025, respectively.
The policy is favorable to the market share of home appliance chips to further increase. On July 1, 2021, the new national standard GB21455 "Room Air Conditioner Energy Efficiency Limit Value and Energy Efficiency Grade" jointly promulgated by the State Administration for Market Supervision and Administration and the Standardization Administration of the State was officially implemented, and the inventory air conditioners that did not meet the new national standard will not be allowed to be sold, and the sales of air conditioners that meet the new energy efficiency standards will increase significantly. The improvement of energy efficiency standards will promote the popularity of inverter air conditioners, and the company's ultra-low standby power consumption AC-DC chips and BLDC driver chips are expected to continue to improve significantly. At present, the new energy standards for refrigerators and washing machines are also being formulated, and with the implementation of the policy, we are optimistic that products in the field of white electricity (air ice washing) will become one of the main driving forces for the company's profit growth.
3.2. Standard power supply: judge the hour and size up the situation, increase the code and fast charge
Standard power supply chips are widely used. Standard power supply mainly refers to the AC input, DC output, external power module of various electronic equipment, usually an external power adapter and charger. Downstream categories include mobile phones and other wearable smart device chargers, fiber optic MODEM / router / set-top box / notebook adapters, electric bicycles / power tool chargers, medium and high power lighting adapters. In 2010, the company began to lay out the standard power chip market based on the second generation of "high and low voltage integrated platform", and at the end of 2010, the external adapter power chip was launched earlier in China, with the characteristics of 50mW ultra-low standby, and after 2012, it successively launched a 5-level energy efficiency adapter power chip and a 6-level energy efficiency adapter power chip. The company's standard power supply products are mainly ultra-low standby AC-DC power chip series, 5-level energy efficiency AC-DC power chip series, 6-level energy efficiency AC-DC power chip series, high-current fast charger built-in power chip series, etc.
Layout fast charging, adjust customer strategy, through a short period of pain. In 2019, the company's standard power chip sales were 171 million, down 15.35% year-on-year; the operating income of standard power chips was 0.93 billion yuan, down 13.08% year-on-year. The decline in sales and revenue of standard power supply chips in 2019 is mainly due to the low ASP of ordinary chargers, the performance and stability requirements of products are lower than those of other types of chips, and the fierce competition in the industry leads to lower gross profit margins. In 2020, the gross profit margin of the company's standard power supply chip was only 28.69%, which was lower than that of household appliances (44.69%) and industrial drives (43.47%). In order to solve this problem, the company judged the situation into the field of fast charging, grasp the opportunities brought by the rise of smart phone fast charging, in 2020 the company developed a new highly integrated fast charging primary control power chip, secondary synchronous rectification chip, wireless charging drive power chip, and formed a series of wired and wireless fast charging chip products and their solutions, fast charging products with high integration, peripheral simplification, small size, low temperature rise, low latency, high reliability characteristics by the downstream market widely welcomed. In 2021, the company's complete chip solution for PD protocol chips has broken through the benchmark customers. In addition, the company also further optimizes the customer structure, seeking cooperation with more high-quality customers, the company's main customers of standard power chips include Skyworth, ZTE, Huawei, Hikvision and other enterprises. In 2021, the gross profit margin of the company's standard power chip was 34.20%, an increase of 5.51 percentage points over 2020, and the subsequent rapid increase in the number of fast charging products, the gross profit margin of the company's standard power chip is expected to further increase.
Launched a multi-power fast charging program, 18W fast charging products to establish advantages. At present, the company has launched a variety of power fast charging solutions, of which 18W PN8161 + PN8307H program with high integration and high stability to get the recognition of many customers in the downstream, according to the charging head network data, in 2020 the company with this program to occupy 18W fast charging market 9.52% of the market share, second only to PI (23.81%), Angbao (17.46%), and Dialog (9.52%) flat. In 2020, Apple announced the cancellation of the standard charger of the iPhone 12 series, which greatly released the market demand for 20W USB PD fast charging, bringing benefits to domestic third-party charging manufacturers. The company's 20W PN8162+PN8307H solution has the characteristics of high integration and simplified peripheral circuits, and we are optimistic about the performance of the solution and are expected to occupy the dominant position in the 20W fast charging market.
Turn to the high-power market, the main promotion of 40W fast charging solution. After completing the layout of 18W and 20W fast charging products and achieving market advantages, the company continued to exert efforts in higher power fast charging products. In 2022, the company launched the 40W fast charging set solution (analog + PD protocol) has entered the mobile phone brand; the 66W set plan has also completed customer introduction, the supply of two power fast charging products has been in the climbing stage, and the multi-power layout of fast charging products has injected new growth momentum into the standard power supply business.
Fast charging applications are diversified, and ASP improvement helps performance growth. Smartphone fast charging has gradually become the mainstream, according to the charging head network data, the global smartphone fast charging penetration rate will increase from 67.9% in 2020 to 99% in 2025. According to IDC data, in 2021, the global smartphone shipment volume is about 1.355 billion units, according to the value of the fast charging chip (AC-DC and PD protocol chip) contained in a single fast charging adapter is 3 yuan, and the value growth rate in 2022-2025 is -5%, -4%, -2%, -2%, -2%, and -2%, respectively, in 2021, the global smart phone fast charging chip scale will reach 3.05 billion yuan, and it is expected that the mobile phone fast charging chip market size will reach 3.68 billion yuan in 2025. Under the background of the continuous increase in output power and the emergence of circuit topology architecture innovation, fast charging technology has gradually penetrated from mobile phones to terminal products such as tablet computers, notebook computers, displays, new energy vehicles, and Internet of Things devices, and the diversification of application scenarios will lead to rapid growth in demand for standard power supply chips.
The adjustment effect is obvious, and the revenue and sales volume have increased steadily. From 2017 to 2021, the company's standard power chip sales increased from 180 million to 430 million, and the 4-year CAGR was 24.32%; from 2017 to 2020, the company's standard power chip revenue increased from 0.91 billion yuan to 259 million yuan, the 4-year CAGR was 29.89%, and the standard power chip ASP increased from 0.44 yuan in 2020 to 0.60 yuan in 2021, and the volume and price rose significantly.
3.3. Industrial drive: actively research and development to create a new growth point for profits
Industrial drive chip technology threshold is high, high gross profit margin emerging growth market. Industrial drive chips refer to chips that are mainly responsible for energy conversion, distribution, detection and other energy control duties on industrial equipment and DC motors, usually including AC-DC chips, DC-DC chips, gate driver chips and so on. In 2013, the company officially entered the industrial drive chip market based on the third generation of "high and low voltage integrated platform", and in 2014, it took the lead in mass production of ultra-high voltage AC-DC power chip with built-in 1000-1200V intelligent MOS, successfully entered the smart meter and intelligent circuit breaker market of the State Grid and The South Grid, and realized the import substitution of high voltage power supply chips in the meter. The company's industrial drive chips are mainly AC-DC chips, gate driver chips, the main products include 800V intelligent protection AC-DC power chip series, 1000-1200V industrial AC-DC power chip series, zero-watt standby AC-DC industrial power chip series and 600V floating gate drive power chip series. Because the industrial drive chip has higher requirements than the general type of power chip in terms of performance and stability, the value of a single product is higher than that of the company's home appliances and standard power products. In 2021, the gross profit margin of the company's industrial drive chip was 55.01%, higher than the company's comprehensive gross profit margin of 43.00%, and the expansion of the scale of industrial drive chips will drive the company's profitability to increase and inject new momentum into the company's profit growth.
Sales revenue is already in the fast lane. From 2017 to 2021, the company's industrial drive chip sales increased from 0.4 billion to 120 million, the 4-year CAGR was 31.61%, and the sales volume of industrial drive chips in 2021 increased by 81.82% year-on-year; in 2017-2020, the company's industrial drive chip revenue increased from 0.53 billion yuan to 118 million yuan, the 4-year CAGR was 22.15%, and the industrial drive chip revenue in 2021 increased by 122.83% year-on-year. The rapid growth of industrial drive chip sales and operating income has begun, with a single chip ASP growing from 0.57 yuan in 2018 to 0.98 yuan in 2021.
3.4. Financial analysis: attach importance to research and development, financial health and development
Attach importance to technological innovation and research and development. Since its inception has always attached great importance to technology research and development, in 2021 the company invested 132 million yuan in research and development expenses, an increase of 124.80% year-on-year, research and development expenses rate reached 17.49%, the large increase in research and development expenses is mainly due to the direct investment in research and development projects, research and development personnel salaries, equity incentive expenses increased. In the context of a significant increase in R&D expenditure, in 2021, the company added 26 new patent applications (including 24 invention patents), of which 5 patents were authorized (including 4 invention patents); 21 new integrated circuit layout design exclusive rights. Adhere to R & D and innovation so that the company formed a sound intellectual property system and unique technical advantages, the company's a variety of chip products into the domestic initiative, instead of imported brands, to help the company quickly occupy the market.
Optimize the product structure, the gross profit margin level is located in the upstream of the industry. In 2021, the gross profit margin of household appliances, standard power supplies and industrial drive chips was 46.01%, 34.20% and 55.01%, respectively, an increase of 1.32, 5.51 and 11.54 percentage points year-on-year. The low gross profit margin of standard power supply chips is mainly due to the intensification of competition in the industry, so the company cut into the field of fast charging to increase the gross profit margin of standard power supply chips. In 2021, the company's household appliance chips, standard power supply chips and industrial drive chips achieved operating income of 3.46, 2.59 and 118 million yuan respectively, an increase of 89.47%, 54.88% and 122.83% year-on-year, and the proportion of revenue was 45.9%, 34.4% and 15.7% respectively. Through the adjustment and optimization of the product structure, the company's comprehensive gross profit margin increased by 5.31 percentage points year-on-year to 43.00%, compared with the rest of the listed companies in the industry, the company's gross profit margin is at a high level in the industry.
Expenses are well controlled and the financial situation is healthy. In 2021, the company's sales expense ratio and management expense ratio were 1.38% and 3.51%, up 0.16 and 0.12 percentage points respectively year-on-year, and the slight increase in expense ratio was mainly caused by the increase in sales personnel compensation and equity incentive expenses. In 2021, the cash flow generated by the company's operating activities reached 257 million yuan, an increase of 601.35% year-on-year, and the company's net-to-cash ratio reached 1.28, and the operating situation improved significantly. In 2021, the company's asset-liability ratio was 7.29%, down 0.17 percentage points year-on-year; the return on net assets was 14.35%, up 3.01 percentage points year-on-year, and the healthy financial situation laid the foundation for the company's subsequent product iteration upgrades and expansion of market scale.
4. Set the layout of "automobile + industry" to seize the opportunity of strategic development
4.1. Double expansion of the product market, and jointly build barriers to the production line
It will increase the layout of the automotive and industrial fields, and upgrade and expand the main business. On March 18, 2022, the company announced a pre-increase plan, which intends to issue no more than 33.93 million shares (30% of the total share capital of the company before the issuance) to raise no more than 1.099 billion yuan for: 1) new energy vehicle high voltage power supply and electric drive power chip research and development and industrialization projects; 2) industrial digital power management chips and supporting power chips research and development and industrialization projects; 3) Suzhou R & D center projects. The fundraising project has a total construction period of 4 years, and the company expects the project to start contributing revenue in the second year. On the one hand, the smooth implementation of the fixed capital raising project will expand the company's product matrix and expand the company's downstream application areas horizontally; on the other hand, the company is expected to further strengthen the market competitive advantage and open up medium- and long-term growth space with this strategic layout.
Jointly build production lines to enhance competitiveness, and the migration of platform advantages will help the growth of new tracks. The new energy vehicle project will develop a series of chips for high voltage power conversion distribution systems and high voltage drive systems for 400V/800V batteries, including high voltage power control chips, high voltage half-bridge drive chips, high voltage isolation drive chips, high voltage auxiliary source chips, and intelligent IGBT and SiC devices. In addition, the company will also build a production line with packaging and testing manufacturers to ensure the technical synergy and continuous iterative optimization of power chip design and module packaging. The company takes its own high-voltage power supply and high-voltage drive field as the entry point, based on the existing technical reserves of the vehicle specification level, expands the scale of the R & D team, actively explores the in-depth application of power chips in the automotive field, and forms a complete power solution. (Source: Future Think Tank)
4.2. The advantages of high pressure are obvious, opening up long-term growth space
Policy and market two-wheel drive, the car has become a deterministic track. According to data from the China Association of Automobile Manufacturers, the domestic production and sales of electric vehicles in 2021 were 3.545 million units and 3.521 million units, respectively, an increase of 160% year-on-year, and the market penetration rate increased to 13.4%, an increase of 8 percentage points compared with 2020. According to data from the Ministry of Industry and Information Technology, the penetration rate of L2-level intelligent vehicles in China will reach 15% in 2020, and the penetration rate of L2-level intelligent vehicles in 2021 will be 20%, and the process of automobile intelligence will enter the fast lane. According to Strategy Analytics data, the penetration rate of L3-level smart cars in 2020 is 0, and in 2022, major car companies including SAIC, Changan, Xiaopeng, etc. will launch L3-class smart cars, and we expect that 2022 will become the opening year of L3-level intelligent vehicle penetration into the domestic market, achieving a breakthrough of 0 to 1, and the penetration rate will increase from 1% in 2022 to 10% in 2025. According to IC Insights data, the global analog chip market size will reach $83.2 billion in 2022, and the market size of power management chips will be $21.2 billion, accounting for 25.5%; according to the application field, the market size of automotive analog chips will reach $13.8 billion, accounting for 16.6%. Traditional fuel vehicles to new energy vehicles, will greatly increase the value of automotive power semiconductors (especially power management chips and power devices), according to HIS data, the value of pure electric vehicle semiconductors in 2020 is about 830 US dollars, while the value of traditional fuel vehicle semiconductors is about 417 US dollars, the value of bicycle semiconductors has doubled, and the process of automobile electrification and intelligence has accelerated to open up new incremental space for power IC.
Sales of new energy vehicles are growing at a high rate, and the automotive power management IC market is expected to reach $2.1 billion. In 2021, the global and Chinese new energy vehicle sales were 6.75 million and 3.52 million units, an increase of 128% and 157% respectively year-on-year, and the rapid growth of new energy vehicle sales drove the expansion of the automotive power management chip market. According to Frost & Sullivan, the global automotive power management chip market will grow from $1.5 billion in 2018 to $2.1 billion in 2025.
High-voltage battery systems and charging piles are conducive to exerting their advantages. On the one hand, the traditional fuel vehicles turn to new energy vehicles, the degree of electrification of the car is improved, the electrical system is converted from the traditional 48V to more than 400V high voltage, according to the car's home data, the rated voltage of byying the BYDHan EV battery system has reached 570V; on the other hand, the fast charging demand background of the automobile high-voltage fast charging came into being, in 2019 Porsche Taycan took the lead in launching the 800V high-voltage electrical architecture, equipped with 800V DC fast charging system and supporting 350kW high-power fast charging, 2021 The annual high-voltage fast charging technology route is favored by more and more OEMs, and foreign manufacturers such as Hyundai and Kia and domestic manufacturers such as BYD, Great Wall, GAC, and Xiaopeng have also successively launched or plan to launch 800V platforms, which is expected to drive the construction demand of high-voltage high-power charging piles. The company has obvious advantages in the field of high-voltage power supply chips, and the high-voltage chips developed based on the self-developed fourth-generation "high-low voltage integrated platform" are conducive to the company's rapid entry into high-voltage application scenarios and successfully complete the expansion of new markets.
Layout digital power ICs cut into high-end industrial applications. This industrial project will develop high-power digital power control chips, high-frequency switch modules with integrated bridge drives and intelligent sampling, high-frequency GaN driver chips, intelligent GaN devices and GaN modules for high-power application scenarios such as data centers, servers, base stations, photovoltaic inverters, and energy storage, and support the construction of industrial-grade semiconductor test centers. With the gradual saturation of the consumer electronics track and the increasingly fierce competition, the company has judged the situation and cut into the high-end market in the industrial field, filling the gap of digital solutions for domestic power management chips while achieving double growth in revenue and profitability.
The rise of emerging industries has opened up incremental space in the industrial field. Carbon neutrality, the "East Counting West" project, and the upgrading of 5G communication technology have driven the shipment of photovoltaic inverters, servers, and base stations to increase rapidly. According to HIS data, the overall scale of addition and replacement of global photovoltaic inverters in 2021 is 135.7GW, the global photovoltaic inverter market size will reach 187GW in 2021, it is expected to reach 401GW in 2025, and the CAGR in 2021-2025 is 21.01%. According to IDC data, the H1 mainland server market shipped 1.706 million units in 2021, an increase of 8.9% year-on-year, and the market size reached $10.81 billion. We are optimistic that as the project progresses, the company will continue to benefit from the high demand for power supplies and power chips brought about by the rise of downstream applications.
5. Profit Forecast
Based on the company's overall business layout and market development, we forecast the operating income of each business segment of the company based on the following assumptions:
1) Household appliance chips: in 2021, the company's household appliance chip shipments reached 565 million, ASP of 0.61 yuan, considering the company's home appliance chips in the field of large appliances to accelerate the volume, we expect the company's 2022-2024 household appliance chip shipment growth rate of 42.5%, 29.5%, 12.5%, respectively;
2) Standard power supply chip: In 2021, the company's standard power chip shipments reached 430 million, ASP was 0.60 yuan, considering that the company cut into the field of fast charging and gradually replaced the ordinary charger market, we expect the company's 2022-2024 standard power chip shipment growth rate of 35.5%, 22.5%, 18.5% respectively;
3) Industrial drive chips: In 2021, the company's industrial drive chip shipments reached 119 million pieces, ASP of 0.98 yuan, considering that the company continues to expand the industrial downstream application field, raise funds to build industrial-grade high-power power chips, we expect the company's 2022-2024 industrial drive chip shipment growth rate of 65.5%, 46.5%, 30.5% respectively;
4) Other chips: due to strategic adjustments, sales of mobile digital chip products have declined year by year, and it is expected that the revenue of the company's other chip products will grow by -15%, -15% and -15% year-on-year from 2022 to 2024.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].