The landing of the registration system has given more technology companies the opportunity to enter the capital market, and Analogix (Suzhou) Semiconductor Co., Ltd. (hereinafter referred to as "Silicon Digital") recently submitted a table to the Science and Technology Innovation Board, which is mainly engaged in the design and sales of high-performance digital-analog hybrid chips.
Titanium Media APP noted that from 2020 to 2022, the revenue and attributable net profit of silicon shares maintained a growth rate, but the net profit after deduction fell sharply in 2022. Due to the acquisition of 100% equity of Silicon Number USA for a consideration of 2.635 billion yuan in 2017, Silicon Number added goodwill of 1.594 billion yuan. Since the acquisition, Silicon Numbers has made goodwill impairment provisions of approximately RMB971 million for Silicon Numbers in the United States. As of the end of 2022, Sishu still has more than 600 million yuan of goodwill. Under the loss of Silicon Number America in 2022, the high goodwill has become the "sword of Damocles" hanging over the head of Silicon Number.
Provision for impairment of goodwill of nearly $1 billion has been made
On September 26, 2016, Jiaxing Haida and Shanghai Shulong jointly invested to establish Silicon Digital Co., Ltd. (the predecessor of Silicon Number), with a registered capital of 2 million yuan (Jiaxing Haida contributed 1.4 million yuan and Shanghai Shulong contributed 600,000 yuan).
According to the prospectus, the shareholding structure of Silicon Digital shares is scattered and there are no controlling shareholders and actual controllers. As of the signing date of this prospectus, the top two shareholders of Sishu are Shanghai Xinanchor and Integrated Circuit Fund, holding 17.74% and 14.31% of the company's shares respectively.
Titanium Media APP noted that there is huge goodwill and intangible assets on the books of Silicon Digital, which is mainly due to a merger and acquisition a few years ago. In 2017, Silicon Digital Co., Ltd. acquired 100% equity interest in Silicon Numbers USA, which was a business combination under non-common control, with a merger consideration of approximately RMB2.635 billion, and the fair value of the identifiable net assets of Silicon Numbers USA on the date of the merger was RMB1.04 billion, and the difference of RMB1.594 billion was included in goodwill. At the same time, Sishu recognized intangible assets - trademarks, intangible assets - patents and know-how according to the assessed fair value.
From 2020 to 2022, the original book value of the intangible assets of Sishu shares was as high as about 982 million yuan, 1.005 billion yuan and 1.016 billion yuan, respectively. During the reporting period, the original book value of intangible assets - trademarks, intangible assets - patents and proprietary technologies was 730 million yuan, and the original book value of intangible assets - patents and proprietary technologies was about 216 million yuan.
Through combing through the prospectus, it was found that Silicon Numbers shares were established to acquire Silicon Numbers USA. Shanhai Capital (Managing Partner of Jiaxing Haida) is the investment initiator of the acquisition. In March 2016, Shanhai Capital initiated the establishment of Jiaxing Haida as the general partner as the M&A fund for this acquisition; In September 2016, Jiaxing Haida and Shanghai Digital Long, as an employee shareholding and reserved incentive platform, jointly established Silicon Digital Limited. In October 2016, Silicon Digital Limited established Shanhai Cayman as the direct acquisition entity, which was funded by Shanhai Cayman in accordance with the laws of the State of Delaware, USA as a special purpose company for this acquisition.
In January 2017, Jiaxing Haida, the original shareholder of Silicon Limited, and Shenzhen Xintianyu, Ningbo Jingyao, Jiaxing Qianheng and Hefei Runxin increased the capital of Silicon Number Limited in monetary terms, and the capital increase was used as a source of funds for the acquisition of Silicon Number in the United States.
Since the acquisition of Silicon Number America, Silicon Number has made goodwill impairment provisions of approximately 971 million yuan for Silicon Number America. As of 2022, the carrying value of goodwill of Sishu shares is 623 million yuan, and the carrying value of intangible assets - trademarks, intangible asset patents and proprietary technologies is 284 million yuan and 12.0737 million yuan, respectively.
Why did the acquisition of Silicon Number USA result in such a high goodwill impairment provision?
It is understood that Silicon Data America was established in March 2002, mainly engaged in chip sales, research and development business. As of the signing date of the prospectus, Silicon Data America also directly holds 100% equity interests in three companies: Silicon Digital Virtual Reality, Silicon Data Cayman and Silicon Data Technology. Among them, Silicon Data Technology does not actually carry out business, Silicon Digital Virtual Reality only undertakes a small number of procurement functions, and Silicon Data Cayman mainly carries out chip sales business and undertakes the main procurement functions.
Financial data shows that in 2022, Silicon Digital America achieved operating income of 121 million yuan and a net profit of -3.2525 million yuan.
What are the reasons for the loss of Silicon Number US in 2022? In response to the above questions, Titanium Media APP sent a letter to Sishu shares for consultation, but failed to receive a reply from the other party.
In the follow-up review, the high goodwill of Silicon Numbers is also likely to be focused on. This requires Silicon Digital to detail the operation of the target in recent years, the basis for the goodwill impairment provision, whether there is a data source or data support, and whether the goodwill impairment provision is sufficient and reasonable.
The concentration of customers and suppliers is high
According to the prospectus, Silicon Digital Co., Ltd. is mainly engaged in high-performance digital-analog hybrid chip design, focusing on high-definition display and high-speed connection fields.
From 2020 to 2022, the operating income of Sishu Co., Ltd. will be 655 million yuan, 840 million yuan and 895 million yuan, respectively, with a three-year compound growth rate of 16.87%; The attributable net profit was 25.6657 million yuan, 79.847 million yuan and 113 million yuan respectively. However, before it was listed, the net profit after deduction of Silicon Digital shares declined, and the net profit after deduction increased from 12.8697 million yuan in 2020 to 93.5928 million yuan in 2021, and fell to 58.3867 million yuan in 2022.
Silicon Data Co., Ltd. believes that since the second half of 2022, the tight production capacity of the semiconductor industry has gradually eased, the overall market price of chip products has generally shown a downward trend, while the overall demand of the semiconductor industry has slowed down and shown structural characteristics, and the company's product market for the consumer electronics field has shown different supply and demand development trends, and there is a certain inventory digestion pressure in some segments. In addition, geopolitical conflicts and slowing down in global economic development have increased the uncertainty of market growth, and the company's downstream customers tend to be cautious in placing orders and picking up goods.
In terms of revenue composition, Sishu shares mainly come from the design and sales of integrated circuits (display main control chips, high-speed intelligent interconnection chips), IP licensing and chip design services. Among them, the design and sales of integrated circuits are the largest source of income, and the proportion of this business income in the past three years has exceeded 90% of the main business income, and the highest proportion has reached more than 97%.
The main business income of Silicon Data Co., Ltd. depends on the top five customers. From 2020 to 2022, the sales revenue of the company's top five customers was 534.6304 million yuan, 702.5492 million yuan and 714.8147 million yuan, accounting for 81.67%, 83.69% and 79.84% of the main business income, of which the revenue of LG, the largest customer, accounted for 29.38%, 42.75% and 41.03% respectively.
Sishu is an integrated circuit design company that operates through the Fabless model, and entrusts wafer manufacturing, packaging and testing and other production links to wafer foundries and packaging and test plants respectively. However, due to the fact that wafer manufacturing, packaging and testing are capital- and technology-intensive industries, the industry concentration of silicon number suppliers itself is high, which correspondingly leads to a high concentration of the company's suppliers. From 2020 to 2022, the total purchase amount of the top five suppliers of Sishu Co., Ltd. was 360.5876 million yuan, 349.6127 million yuan and 488.0937 million yuan, respectively, accounting for 94.96%, 95.62% and 97.46% of the procurement.
Titanium Media APP noted that due to the long chip production cycle and the concentration of upstream suppliers, in the case of continuous expansion of business scale and tight upstream production capacity, Silicon Digital will usually increase its stocking, resulting in its inventory rising year by year. From 2020 to 2022, the book balance of the inventory of silicon shares was 150.4417 million yuan, 185.562 million yuan and 350.516 million yuan, respectively.
However, affected by factors such as the pressure of customer inventory digestion and the cautiousness of downstream customers placing orders and picking up goods, the company has fully made provision for price reductions for some inventory. From 2020 to 2022, the proportion of provision for inventory decline of silicon shares (excluding contract performance costs) was 7.95%, 7.17% and 12.87%, respectively. During the same period, the average ratio of inventory decline provision provision of comparable companies in Silicon Digital was 11.84%, 7.3% and 9.45%, respectively.
Silicon Digital Co., Ltd. frankly said that the downstream application fields of the company's products are mainly consumer electronics applications such as personal computers, and the downstream market products and technologies change rapidly, if the company in the future due to changes in customer needs, failure to accurately judge downstream demand and other reasons make the company's inventory can not be sold smoothly, or there is an intensification of market competition, the company can not effectively maintain competitive advantages and other reasons, so that the product price will fall significantly, will increase the risk of inventory price decline.
With nearly 1 billion cash in hand, still raise funds to "replenish the flow"
Part of the funds raised is used to "replenish flow" has become the only choice for most enterprises, and Silicon Digital is no exception.
In this IPO, Silicon Digital plans to raise 1.515 billion yuan, in addition to investing in three major projects: high-definition display technology research and development and industrialization projects, intelligent connection chip research and development and industrialization projects, and R&D center construction projects, there is also 200 million yuan to supplement working capital.
In the view of Sishu, the demand for working capital has increased correspondingly, and supplementing a certain scale of liquidity is very necessary to improve the company's competitiveness and ensure the company's sustainable and healthy development.
In fact, Silicon Number shares are not bad money. By the end of 2022, the total assets of Sishu reached 3.44 billion yuan, of which current assets accounted for more than 65%.
According to the prospectus, the current assets of Silicon Digital are mainly composed of monetary funds and trading financial assets, of which the scale of monetary funds will "soar" in 2021. In 2020, the monetary fund balance of Sishu shares was only 80.1163 million yuan, which surged to 992.8347 million yuan in 2021, and decreased in 2022, but there was still 983.2679 million yuan.
Sishu said that at the end of 2021 and 2022, the company's monetary fund balance increased significantly compared with the end of 2020, mainly because in 2021 and 2022, the company received a cumulative equity capital increase of 1.771 billion yuan, of which the part of the unpurchased structured deposits and wealth management products was deposited in the form of bank deposits.
On the other hand, from 2020 to 2022, the asset-liability ratio of Silicon Digital shares continued to decline, reaching 13.2%, 10.95% and 6.27%, respectively, which was lower than the industry average of 23.4%, 23.5% and 15.21% in the same period. Based on the above, is it necessary for Silicon Number to replenish liquidity? (This article was first published in Titanium Media APP, author|Liu Fengru)