The pre-listing performance continued to hit a new high, but the first annual report card after listing fell sharply, and Loongson Zhongke did not "announce" investors in the New Year.
According to the performance forecast disclosed a few days ago, Loongson Zhongke expects that its revenue in 2022 will decline by more than 30% year-on-year, and the decline in net profit attributable to the parent will exceed 70%, excluding non-recurring profits and losses such as greatly increased local subsidies, Loongson Zhongke will lose money for the first time in five years.
Looking back at the glory of Loongson Zhongke when it landed on the science and technology innovation board in June last year, investors can't help but wonder, why did the performance of this "first domestic CPU stock" whose revenue rose to a level in the past year take a sharp turn?
In June 2022, Loongson Zhongke landed on the Science and Technology Innovation Board
Compared with performance, more people pay attention to the development of Loongson CPU. Among the domestic CPUs, Loongson is known for the "highest degree of autonomy", but Loongson's commercialization is also the most difficult.
More than two years ago, Hu Weiwu, chairman of Loongson Zhongke, said that after the completion of the basic make-up course, Loongson processors can move towards open market competition in 2023. So, can we see Loongson CPU competing with Intel and AMD in the domestic open market this year?
Affected by performance and other factors, on the first trading day of the Year of the Rabbit (January 30), Loongson Zhongke closed down 4%, and its peer Haiguang Information fell by less than 2%. In terms of market value, Loongson Zhongke, which has a wider business, is currently around 38 billion, while Haiguang Information, which focuses on server CPUs, has a market value of nearly 100 billion.
Hu Weiwu, Chairman of Loongson Zhongke (video screenshot)
Information business revenue fell sharply
In 2021, one year before Loongson Zhongke landed on the science and technology innovation board, the company achieved revenue of 1.201 billion yuan, a year-on-year increase of 10.99%, and a net profit attributable to the parent of 237 million yuan, a year-on-year increase of 229.82%, both hitting a record high in scale.
However, by 2022, Loongson Zhongke expects revenue to be only 780 million yuan to 820 million yuan, down 32%-35% year-on-year; The net profit attributable to the parent was between 50 million yuan and 70 million yuan, down 70%-79% year-on-year; The net profit loss attributable to the parent after deduction was 140 million yuan to 160 million yuan, down 182% to 194% from the same period last year.
It is not difficult to see that the growth rate and scale of Loongson's performance have declined significantly compared with 2021.
Before discussing the reasons for the decline in Loongson's performance, in order to facilitate understanding, it is necessary to briefly understand the basic situation of the company.
Loongson has a distinct background in the Chinese Academy of Sciences, and the Chinese Academy of Sciences began to develop Loongson processors more than 20 years ago. However, at present, the actual controllers of the listed company Loongson Zhongke are Hu Weiwu and Jinhong, who serve as the chairman and investment director of Loongson Zhongke respectively.
More than 10 years after its establishment, Loongson Zhongke's products currently mainly have three categories: information chips, industrial control chips and solutions. In 2021, the revenue of Loongson information chips accounted for 55%, industrial control chips accounted for 25%, and solution revenue accounted for about 20%.
Loongson processor (data map)
Before 2022, the gross profit margin of Loongson information chips has been inferior to that of industrial control chips, but it can be seen from the proportion of revenue that the information business has a decisive impact on Loongson's performance.
In this performance forecast, Loongson Zhongke mentioned when explaining the decline in performance that in 2022, due to the combined impact of industry cycle fluctuations and the epidemic, the company's main business income will decline year-on-year. Specifically, the policy-based information market is in the project adjustment period, and the new market has not yet opened on a large scale, so the income of the information business has fallen sharply, but the income of the industrial control market has basically remained stable.
In addition, Loongson actively deploys according to market conditions and increases R&D investment. However, changes in market layout and product structure have led to a phased decline in the overall gross profit margin of Loongson Zhongke compared with 2021.
In fact, two months ago, Loongson Zhongke mentioned in an institutional survey that in terms of information business, the policy market is in the two-phase project handover period in 2022, and coupled with the impact of the epidemic, the first three quarters shrank year-on-year; The industrial control business increased year-on-year in the first three quarters, and the increase was relatively significant.
It can be seen from these statements that Loongson Zhongke informatization business still relies on the policy market, on the other hand, the growth of industrial control business cannot reverse the overall decline in performance.
If you look at it quarterly, Loongson's performance has actually begun to decline since the beginning of 2022. In the first three quarters of 2022, Loongson's revenue fell by 37.55% year-on-year; The net profit attributable to the parent decreased by 38.60% year-on-year; Net profit attributable to the parent after deduction decreased by 290.61% year-on-year. Based on this calculation, Loongson Zhongke's performance in the fourth quarter has picked up.
In this regard, Loongson Zhongke mentioned in the industry research and performance forecast that the domestic information policy market in the fourth quarter has been able to see some industry recovery trend, on the other hand, the company concentrated on combining specific application needs to form solution capabilities, accumulate open market competitive advantages, and achieved initial results in the fourth quarter, and the proportion of annual solution product revenue increased significantly.
The performance is far inferior to Haiguang
Up to now, Loongson processor products mainly include Loongson No. 1, Loongson No. 2, Loongson No. 3 three series, and bridge pieces and other supporting chips. Among them, the No. 1 series and No. 2 series are MCUs and SOCs mainly for the industrial control field, and the No. 3 series are mainly for information services, which are mostly used in desktops and servers, and some are oriented to high-end industrial control applications.
However, Loongson Zhongke, which has a wide range of business, has a significantly lower performance growth rate and scale than Haiguang Information, a peer of the Science and Technology Innovation Board.
According to Haiguang Information, the company is expected to achieve revenue of 5.010 billion yuan to 5.360 billion yuan in 2022, a year-on-year increase of 116.84% to 131.99%; The net profit attributable to the parent was 753 million yuan to 852 million yuan, a year-on-year increase of 130.20% to 160.46%; The net profit attributable to the parent after deduction was 705 million yuan to 806 million yuan, a year-on-year increase of 165.55% to 203.59%.
Simple calculation can find that as a domestic CPU manufacturer, Haiguang's revenue scale can reach more than 6 times that of Loongson.
In fact, Haiguang's business area is not as extensive as Loongson's. The prospectus disclosed that Haiguang currently has two main categories of products: CPU and DCU. Among them, CPU is mainly used in the server field, and DCU is used as a coprocessor, mainly used for artificial intelligence acceleration computing.
The observer network contacted the investor relations department of Loongson Zhongke about the performance, and the other staff said that Loongson and Haiguang have different product logics and should not directly compare performance; In addition, Loongson builds a basic software ecology based on an autonomous command system, with a large investment, while Haiguang's CPU underlying architecture is X86, backed by the support of server manufacturer Zhongke Sugon, which is standing on the shoulders of giants, and the growth rate has been relatively fast in previous years.
Haiguang CPU (Infographic)
However, Haiguang Information, which has better performance, has been criticized for its autonomy. Since the starting point is the X86 technology authorization obtained from AMD, Haiguang and other domestic CPUs are also called by Loongson as "like building a house on someone else's foundation, no matter how big and beautiful it is, it may not be able to withstand the wind and rain, and even vulnerable."
Loongson prides itself on high autonomy.
In terms of chip design, Loongson launched the autonomous command system LoongArch before the market; In chip manufacturing, Loongson mentioned that the company has laid out domestic processes and overseas processes at the same time, and got rid of its dependence on the most advanced overseas processes through design optimization and independent design of IP cores.
In addition to autonomy, another focus of domestic CPUs is performance, which is related to the problem of whether the processor can be used.
Some chip industry experts told the observer network that Haiguang has established a research and development team of 1600 people, and continues to improve on the AMD Zen1 IP core initially obtained, the company's latest generation of server chips will be sold in the second half of this year, the floating point computing performance of this chip has independently evolved to 10 times the original Zen1 IP core, more than 1 year later than AMD's own mainstream chip, and the speed of catching up is still considerable.
Loongson is also not shy about product performance. In the institutional survey in the second half of last year, Loongson revealed that the company has been in the PC field performance "make-up course", the latest product 3A5000 performance has approached the market mainstream product level, 3A6000 research and development has ended, is in the production process, simulation results show that it has reached the market mainstream product level, but it will take some time to fully productize, 3A5000 is still the main product in 2023.
At the same time, Loongson is also laying out server CPUs. The company revealed that the 16-core chip product 3C5000 has been launched, and the 32-core 3D5000 has also been successfully developed, "the server market is the company's incremental market, and there will be a relatively large opportunity in the future."
But the first mover still has a huge advantage. Recently, AMD and Intel have successively launched 96-core and 60-core server processors using advanced processes.
Will we be able to move towards open markets this year?
As early as October 2020, Hu Weiwu said in a program that the development of Loongson is a trial and error process, with the basic make-up course basically completed, Loongson CPU performance and the mainstream of the market is not bad, at least not worse than AMD, in the past many years in key equipment, e-government and a wider range of areas after completing trial and error, in 2023 Loongson CPU can go to open market competition.
However, according to the news disclosed by Loongson at the end of 2022, the company's competitive advantage is still in the industrial control business field, and the main application scenarios of some products in the open market include treadmills, walkers, smart door locks, etc.
In fact, in the field of informatization, Loongson and even other domestic CPUs want to open up the situation in the open market, it is not enough to complete the performance catch-up, the most difficult thing is to complete the leap from "usable" to "easy to use", which has to solve the problem of ecological construction.
Haiguang Information mentioned in the listing inquiry that in 2020, China's server market shipments were 3.534 million units, of which 3.439 million X86 server shipments were made, accounting for 97.3%; The X86 instruction set has the industry's best industrial ecological support, and most of the servers, hardware devices, and software systems in operation and development are based on or compatible with the X86 instruction set.
With rich ecology and available performance, it is not difficult to understand that Haiguang CPU is popular in various server collections. From 2019 to 2021, the compound annual growth rate of Haiguang Information revenue is as high as 146.88%.
Loongson's situation is completely different, especially after the launch of the autonomous command system LoongArch, Loongson, which "will carry out autonomy to the end", can be said to have entered an "ecological island". In order to break the ecological barrier, Loongson must adapt to other software and hardware in reverse on the one hand to solve compatibility problems, and on the other hand, it must be "autonomous" and build a software ecology based on LoongArch.
In the context of the significant increase in the difficulty of commercialization, whether the path chosen by Loongson is really suitable for the development of China's CPU industry is also full of controversy. Even the Chinese Academy of Sciences, which is behind Loongson, is betting on the open instruction set standard RISC-V while supporting Loongson.
Some industry experts told the observer network that the Chinese Academy of Sciences chose RISC-V because it is a new wave of technological development. The emergence of RISC-V has the potential to subvert the model of Intel and ARM in the past few decades (although not completely replaced), which is a subversion of the development model - the instruction set no longer belongs to one company. Loongson and Intel, ARM are still in the same wave, including the disappeared, decaying Alpha, SPARC, MISP, etc., all adopt the privatization model of instruction set companies.
Three mainstream CPU design architectures
Under the superposition of multiple difficulties, with the decline in Loongson's performance last year, some market rumors said that Loongson products faced a situation of almost out in the computer procurement in the field of information and innovation, and Loongson accounted for only 2% of the computer procurement of the tax system in the first half of the year.
In response to this matter, the aforementioned Loongson investor relations staff told the observer network that some rumors about Loongson in the market are not accurate, Xinchuang also has many segments, can not be generalized, Loongson will continue to disclose relevant winning information.
At the beginning of this year, Loongson officially disclosed that from 2022 to 2023, Loongson storage servers will be verified in a major project of an operator and put into use in large quantities in its production system; Loongson was shortlisted for the centralized procurement project of desktop notebook computers and desktop computer products of a communication operator; Shortlisted for Sinopec's desktop terminal equipment framework agreement procurement; It was shortlisted for the bidding project of domestic terminal computer procurement framework agreement of CCCC, accounting for 50% of the procurement share.
It is clear that these areas remain policy markets.
If domestic CPUs want to open the market, in addition to considerations such as autonomy, performance and ecology, cost and cost performance are also issues that cannot be ignored.
Observer.com inquired on an e-commerce platform and found that Tsinghua Tongfang was pre-selling a desktop computer equipped with Loongson 3A5000, and the computer was priced at 13,999 yuan under the configuration of 512GB solid-state drive, 1GB independent display, UnionTech UOS system, and 23.8-inch screen.
Screenshot of the e-commerce platform
In comparison, Lenovo is equipped with Intel i5-9500 (said to have a single-core performance slightly higher than the 3A5000, multi-core performance significantly higher than the 3A5000) processor, 1TB mechanical hard disk, 2GB graphics card and 23.8-inch screen and other configurations, priced at 5999 yuan.
Even laptops and tablet products equipped with Apple's latest processor M2 series are sold for under 10,000 yuan. In contrast, PCs equipped with domestic CPUs can be said to have no cost-effective advantage in the consumer market.
For the development of domestic CPUs, Hu Weiwu actually has a very clear understanding. He mentioned earlier that Intel has been developing for 50 years, and we can't catch up quickly, "When Intel has been working for 60 years, we have been working for 30 years, and we are close to its level, which is possible." ”
"In 2030, we can look ahead, for example, when you buy a computer you think, do I buy an Intel or do I buy a Loongson? Your main comparison may be its price-performance ratio. Hu Weiwu said.
Loongson executives mentioned in the aforementioned survey that the 2 to 3 years from 2022 will be an important turning point for Loongson to transform the advantages of independent research and development into cost-effective and software ecological advantages. The goal is to basically build a dragon architecture software ecosystem by 2025, which can smoothly run X86/Linux servers, X86/Windows desktop and ARM/Android mobile terminal applications, and the applications of independent programming frameworks are gradually enriched, and some applications are irreplaceable.
But until this goal is achieved, Loongson may still need to rely on policy markets and subsidies. The company mentioned in this performance forecast that the amount of non-recurring profit and loss in 2022 increased compared with the same period of the previous year, mainly due to the significant increase in R&D project subsidies and local subsidies recognized in 2022 compared with 2021.
For the domestic information policy market CPU bidding, Loongson executives revealed, "In the fourth quarter of 2022, we can already see some industry recovery trends, but it is not easy to predict whether the recovery will be in the first half of the year or the second half of the year, after all, the uncertainty of the international situation and the impact of the epidemic have increased the uncertainty." However, we expect that the overall recovery trend is irreversible, and it is not easy to predict when and to what extent. ”