Per reporter: Chen Qing
■Related Company: MicroPort Optoelectronics (430198, NQ)
■ Core competitiveness: The company's industry market is mainly based on the transportation industry, taking into account the urban security monitoring market, and the main products include video surveillance informatization and intelligent video application products. MicroPort Optoelectronics has formed a series of core technologies for intelligent traffic monitoring, closely focusing on industry applications, and forming intelligent traffic monitoring solutions with core competitiveness. Through years of continuous cultivation, the company has formed a brand and service advantage in the transportation industry and become an industry-leading supplier.
■ Companies in the eyes of institutions: with software and hardware production capabilities and information system solution capabilities; smart transportation software construction leaders; cater to cutting-edge technology trends, preemptive layout of artificial intelligence technology products; take advantage of new infrastructure to accelerate development
■ Concept: smart city, intelligent transportation, communication system equipment manufacturing, video surveillance
"We're on the eve of a big change."
20 years ago, a group of young engineers in the Wuhan Postal Science Institute, not willing to give up the technology they were studying, quit their jobs that were envied by outsiders and went to the sea to start a business, and Minimally Invasive Optoelectronics was born.
In the past 20 years, Minimally Invasive Optoelectronics has stumbled, but finally persevered. In the first half of this year, the company won the title of "2021 Hubei Province Specialized Special New 'Little Giant' Enterprise", and under the background of locking the admission ticket of the Beijing Stock Exchange, the development of MicroPort Optoelectronics will enter a new stage.
The development of the enterprise has suffered several setbacks, but after 20 years of turmoil, MicroPort Optoelectronics has a place in the highway information industry. However, there are many doubts about the company's operation and development, for example, the company's largest supplier, hikvision, a security giant, may become a competitor of the company.
Recently, Chen Jun, chairman of MicroPort Optoelectronics, analyzed in an exclusive interview with the reporter of the "Every Person Interview with the Chairman" column that combined with the company's current stage of development, the highway industry is suitable for the company's segmentation, but this is not the main battlefield of Hikvision.
Chen Jun believes that under the rapid development of intelligent driving and intelligent transportation, the road transport industry may undergo subversive changes in the future. Before change comes, the most important thing for a business is to track the trend and be fully prepared. "The development of the enterprise must not be overtaking in the corner, but when the opportunity comes, you are ready."
Talking about entrepreneurship:
It originates from the technical complex of a group of engineers of Wuhan Postal Science Institute
Located in Wuhan Optics Valley, MicroPort Optoelectronics Office Address is an industry solution provider based on the field of intelligent transportation, mainly providing video-based surveillance information products and services for the highway industry.
One morning in mid-October, a reporter from the Daily Economic News came to the office of Chen Jun, chairman of MicroPort Optoelectronics. Chen Jun, dressed in casual clothes, looks easy-going.
Chen Jun, 53 years old, graduated from the Department of Electromagnetic Field and Microwave Technology of Huazhong University of Science and Technology in 1993 and went to work at the Wuhan Institute of Posts and Telecommunications Science (hereinafter referred to as the Wuhan Institute of Posts and Telecommunications).
The Wuhan Postal Science and Technology Institute is a well-known provider of products and integrated solutions in the field of information and communication in China, and a central enterprise directly managed by the State-owned Assets Supervision and Administration Commission of the State Council.
In the eyes of many people, the Wuhan Postal Science Institute is a good unit with good efficiency and stability. However, Chen Jun was not content with such stability.
In 2001, the Wuhan Academy of Postal Sciences adjusted the business of its subsidiary Wuhan Network Energy Information Technology Co., Ltd. and decided to suspend the optical fiber cable TV business. "At that time, the (Wuhan) Postal Science Institute believed that the market capacity of the cable TV business was too small and not their target market." Chen Jun recalled that from the end of the 20th century to the beginning of the 21st century, the Wuhan Postal Science Institute was groping for reforms. In the more than eight years of working in the Academy of Postal Sciences, Chen Jun has experienced many organizational and business adjustments, and this time he has adjusted the business direction again, which makes him and some other colleagues from the technical background a little unwilling.
Chen Jun, chairman of MicroPort Optoelectronics Image source: Courtesy of the company
"We have a strong engineer complex and feel that technical research needs to be accumulated and continuously strengthened. If you continue to change the direction of research, it is equivalent to constantly clearing zero, and it is difficult to accumulate advantages. Chen Jun said that at that time, it was out of the instinct of engineers that the technology being studied was a bit interesting, and hoped to continue to explore along the original technical direction.
Under such circumstances, Chen Jun's partners decided to leave the sea to start a business, and Chen Jun, who had been the general manager of Wuhan Net Energy Information Technology Co., Ltd., joined in a few months later, and was quickly elected as the actual head of the company.
Because Chen Jun has accumulated certain experience in the field of security, and has the video technology accumulated in Wuhan Net Energy Information Technology Co., Ltd. as the basis, MicroPort Optoelectronics initially focused on the research and development, production and sales of video optical transmission equipment, that is, optical transceiver products, and the products are mainly oriented to the security field.
MicroPort Photoelectric Image source: Courtesy of the company
After 20 years, recalling the initial entrepreneurship, in addition to the engineer complex, Chen Jun believes that everyone's choice is also related to the vigor of young people. At that time, the Wuhan Postal Science Institute was a very good platform in the eyes of outsiders, but on the one hand, everyone was very confident at that time, even if the entrepreneurship failed, it was not difficult to find a job and make a living; on the other hand, everyone also wanted to know whether they could break through the famous after leaving the platform of the Wuhan Postal Science Institute.
Talking about equity diversification:
A few more pairs of eyes are not prone to extreme mistakes
Leaving the Wuhan Institute of Postal Sciences, young engineers need to start from scratch.
Chen Jun recalled that in 2001, the domestic video surveillance system related industries have just begun to improve, and the industry has slowly replaced domestic products from the previous import monopoly. Under this trend, dealers and agents in the security industry have launched their own brands. "These dealers and agents do not lack channels and markets, but they lack technology and research and development foundation."
MicroPort Optoelectronics aims at this opportunity. The company is responsible for R&D, design and manufacturing of products, OEM sales to these dealers and agents. It is also by relying on this FOUNDRY model that MicroPort Optoelectronics has survived the early stage of entrepreneurship.
But the good times were short-lived. Just when MicroPort Optoelectronics was preparing to show its fists, SARS came in 2003. "A newly founded company, there are not many old customers to support, we urgently need to expand our business." Chen Jun recalled that at the beginning of SARS, he once went on a business trip to Shanghai to run business, nearly 20 hours of green-skinned trains, wearing cotton gauze masks throughout the process. The mask of this material is not very breathable, and I often feel that I can't breathe when I sleep, and I sweat.
Subsequently, even wearing a mask on business trips. "At that time, everyone mainly ran the business through face-to-face, and if they couldn't run the business, they couldn't run the business." Chen Jun recalled that at that time, he did not know how long the SARS epidemic would last, and there was no hope and future, and everyone was very frustrated. "It felt like climbing in the dark, not knowing when I would be able to climb the top, but if I loosened my strength, I might fall and fall to my death."
For MicroPort Optoelectronics, the company faces a test not only from the external environment, but also from the internal environment. As the actual controller of the company, as of the end of the first half of this year, Chen Jun's shareholding ratio was only 7.87%. Together with the shareholding ratio of lu yuqing, Li Junjie, Wang Yun, Zhu Xiaobing and Tong Fang, the co-actors controlled 43.06% of the company's shares.
Image source: MicroPort Optoelectronics 2021 semi-annual report
Under the condition of relatively dispersed equity, how can the founding team of MicroPort Optoelectronics maintain cohesion? Have anyone thought about quitting during tough times? Chen Jun introduced that the founding team of the company is from the Wuhan Institute of Postal Sciences, and everyone has worked together and run-in for many years, forming a foundation of trust.
"At different stages, everyone's confidence will certainly be different, and the degree of wavering may be different, but it has not evolved into action." Chen Jun frankly said that in the process of the company's development, everyone's views cannot be completely consistent. In this regard, everyone respects each other on the basis of full communication, and the team as a whole trusts and tolerates each other. "At least 20 years without a breakup, the team has survived the test."
For the different opinions between the teams, Chen Jun believes that this is still a good thing to a certain extent. He mentions a point in the book "Seven Habits of Highly Effective People" to the effect that if the other person's intelligence is similar to yours, but he has a different view of something and you, there must be a reasonable side to his view.
Based on this, in the process of enterprise management, Chen Jun usually seriously considers the different views of his peers. "With a few more pairs of eyes, it's not easy to go to extremes and make big mistakes."
Fortunately, the SARS epidemic in 2003 was quickly brought under control, and the main founding team of Minimally Invasive Optoelectronics also survived this difficult period together.
Minimally invasive photoelectric workshop Image source: per reporter Chen Qing photo
Talking about R&D capabilities:
The advantage lies in providing individual solutions to our customers
In the past 20 years, the business direction of MicroPort Optoelectronics has also undergone many adjustments. According to Chen Jun, at the beginning of the company's business, the entire industry was still in the era of analog monitoring systems, and the company's products were also related to analog light transmission equipment. But with the upgrading of technology, the industry began to develop in the direction of digitalization and networked monitoring.
Compared with the beginning of the business, the business of MicroPort Optoelectronics has transformed from pan-security to the transportation industry and taking into account the urban security monitoring market. "From the application field, from the initial volume, extensive coverage, to the later focus, shrink to road traffic, especially the highway segment, to do solutions." For the adjustment of this strategy, Chen Jun said that in the era of analog monitoring systems, the company is in the leading position in the industry based on optical fiber communication technology. But with the upgrading of technology, companies need to find new core competitiveness.
According to Chen Jun, compared with other enterprises, the company's current core competitiveness lies in the accumulation of video and network information technology for many years and the understanding of high-speed industries, which can provide customers with personalized solutions. "The company understands the industry and understands the customer, and has the strength recognized by the customer."
A simulation system Visualizer of MicroPort Optoelectronics Image source: Photo by reporter Chen Qing
As a manufacturer of video surveillance information equipment and solution provider in the highway industry, At present, MicroPort Optoelectronics delivers products to its customers through solution development, software and hardware product design, raw material procurement, and outsourcing processing into mold components, and then through self-developed software entry, debugging, testing and packaging.
It is worth mentioning that there are voices of doubt about the company's production model. When the IPO application of MicroPort Optoelectronics was rejected in 2018, the Issuance and Review Committee bluntly said that "whether the proportion of purchased mold components is relatively high and the book value of machinery and equipment is low indicates that the issuer's independent operation ability and technology research and development ability are weak".
According to the company's public offering prospectus disclosed in July 2020, from 2017 to 2019, the main raw materials of the company's products are optical devices, chips, decoders, transcoders, and various module components. Among them, the purchase amount of mold components accounted for 63.4%, 63.25% and 55.05% respectively. Although the proportion of the company's module procurement amount has decreased in 2019, it still exceeds 50%.
Procurement of the company's main raw materials Image source: Screenshot of the "Public Offering Prospectus"
According to Chen Jun, the company's high proportion of purchased mold components in recent years is also related to the adjustment of the company's strategy. Because the company focuses on providing personalized solutions, it is not necessary to rely on volume to increase revenue, and it will be difficult to form a scale effect when the equipment is fully self-produced, and the unit cost may be higher than that of external procurement.
Chen Jun said that under the current operating model, MicroPort Optoelectronics has also achieved a higher gross profit margin. From 2018 to 2020 and the first half of 2021, the company's comprehensive gross profit margin was 58.83%, 61.12%, 56.84% and 59.59%, respectively.
Technology research and development capabilities are closely related to R&D investment. However, from 2017 to 2019, the company's R&D expense ratio was lower than the average of comparable companies in the same industry. In 2020, the company's R&D expense ratio was 9.45%, compared with 9.93% in 2019.
Does this mean that the company's R&D investment is low? Chen Jun did not agree with this. According to him, in recent years, the company's R & D expense rate has basically remained about 10%, which is not low in science and technology enterprises. As for the company's R & D expense ratio compared with its peers, it is mainly because the company attaches great importance to and continues to invest in software research and development in recent years, and the investment in software research and development is mainly related to the salary level of R & D personnel. The company is located in Wuhan, Hubei Province, and there is a certain gap between the salary level and that of Shangbei, Shanghai, Guangzhou, and Shenzhen.
Talk about industry competition:
The highway field is not hikvision's main battlefield
Micro-invasive optoelectronics, which started from the field of security, and the relationship with security giant Hikvision is also the focus of attention from the outside world.
As the largest security manufacturer in China, Hikvision is an IoT solution provider that provides security, visual management and big data services for the world with video as the core. According to the Omdia report, Hikvision has ranked first in the video surveillance industry for 8 consecutive years, with 24.1% of the global video surveillance market share. This means that There are many similarities between MicroPort Optoelectronics and Hikvision in terms of product and service positioning.
Main suppliers Image source: Screenshot of MicroPort Optoelectronics' 2020 annual report
Hikvision is also the largest supplier of MicroPort Optoelectronics. The company mainly purchases module components such as encoders, decoders and transcoders from Hikvision, and video codec is one of the core technologies in the field of digital video surveillance. According to the public offering prospectus disclosed by the company, from 2017 to 2019, the company's procurement amount to Hangzhou Hikvision Technology Co., Ltd., a wholly-owned subsidiary of Hikvision, was 13.3006 million yuan, 17.3444 million yuan and 13.8205 million yuan, accounting for 22.41%, 28.82% and 19.74% of the company's procurement amount respectively.
MicroPort Optoelectronics admitted in the announcement that Hikvision, as the company's largest supplier, has formed a strategic cooperative relationship and a differentiated competitive pattern with the company, but with the continuous growth of the intelligent transportation industry market and the intensification of industry competition, it is not ruled out that Hikvision will form direct competition with the company in the highway market in the future. "If Hikvision directly enters the highway video surveillance segment where the company is located, it will intensify industry competition and adversely affect the company's operations."
But Chen Jun was not particularly worried about this. He analyzed that on the one hand, the company has focused on the highway industry for many years, and its competitiveness in this segment is not inferior to Hikvision; on the other hand, the business strategy and positioning of each company are different. The highway industry is only a small sub-battlefield, and Hikvision's main battlefield is not on it.
Chen Jun said that enterprises need to judge the situation and deploy future development strategies according to the needs of the market. The capacity of the highway industry is relatively small, and for a large enterprise like Hikvision, it is not cost-effective to focus on this segment. "If Hikvision really concentrates on the company PK, the result may be 'grabbing a green bean and losing a watermelon'."
According to industry estimates, the market size of video surveillance systems in the highway industry segment is about 6 billion yuan to 10 billion yuan. Hikvision's revenue in 2020 is about 63.5 billion yuan, and MicroPort Optoelectronics' revenue in 2020 is about 196 million yuan.
This also shows from the side that the industry market capacity is small, or it is difficult to attract giants such as Hikvision to enter the game, but does it also indicate that the industry ceiling is too low? Chen Jun believes that the positioning of any enterprise must match its development stage. "The industry is not bigger the better. There is a lot of food in the big rivers and seas, but there are also many whales and sharks, and small fish and shrimp may also starve to death. ”
Chen Jun said that the highway industry is a more suitable market for the company. As a not too small supplier in the industry, the company has certain advantages and has enough room for growth.
In the case that the industry capacity is not too large, how to consider the long-term development of micro-invasive optoelectronics? Chen Jun said that Rome was not built in a day, and the company's focus is still to deepen the highway industry and develop according to the original plan. Of course, from the perspective of the entire industry, under the condition of the rapid development of intelligent driving and intelligent transportation, the highway industry may undergo major changes in the future, and even subversive changes.
"We're on the eve of a big change." Chen Jun believes that many companies have a perception of the general trend of industry development, but whether they can cut in at the appropriate time point, three points rely on ability and seven points rely on luck. Before the tipping point of the industry really comes, the most important thing for businesses is to track the trend and be fully prepared.
Reporter's Note 丨 Industrial power, pay attention to specialized and special new enterprises
One autumn day, the reporter of the Daily Economic News conducted a field investigation of MicroPort Optoelectronics and conducted an exclusive interview with Chen Jun, the chairman of the company.
As a technology-based enterprise with a small scale, the development path chosen by MicroPort Optoelectronics is not an easy road. In the eyes of many people, the market capacity of the highway information industry is small, the company's development is tied, but the market capacity is large, and Hikvision, the largest supplier of micro-invasive optoelectronics, may bring a lot of competition to the company, and there is a natural contradiction behind the two.
The hard-working minimally invasive optoelectronics have also broken out of their own piece of the world in the cracks and grown into a "2021 Hubei Province Specialized Special New 'Little Giant' Enterprise".
In fact, not only minimally invasive optoelectronics, but also specialized new small and medium-sized enterprises, supporting the operation of large enterprises, but also playing a key supporting role in the industrial chain of the manufacturing industry.
The meeting of the Political Bureau of the CPC Central Committee held in July this year also put forward requirements to strengthen scientific and technological innovation and the resilience of the industrial chain supply chain, strengthen basic research, promote applied research, carry out special actions to supplement the chain and strengthen the chain, accelerate the solution of the "card neck" problem, and develop specialized new small and medium-sized enterprises.
The strength of industrial power, the strength of small and medium-sized enterprises, is the invisible code outside the aura of manufacturing power in large enterprises, and it is also the key success code. In the future, the market needs more specialized new small and medium-sized enterprises, and gradually grow into an international leading enterprise in related fields.
Reporter: Chen Qing
Editor: Wei Guanhong
Vision: Liu Yang
Typesetting: Wei Guanhong Wang Shujie
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