31.4 billion domestic display chip leader, focusing on new automotive business

Reporter | Yang Song

Editor|Jiang Yuxuan

At this year's shareholders' meeting of Jichuang North, 113 representatives of 63 shareholders, including Yizhuang SDIC, Manufacturing and Equipment Fund, and SDIC Entrepreneurship, attended the meeting.

"Last year, the audit was completed, and we reported the situation to everyone as a whole, and at the same time reported to shareholders on the withdrawal of the listing in March."

Cheng Jianxun, director and secretary of the board of directors of Jichuang North, who presided over the shareholders' meeting, told the "21CBR" reporter that the withdrawal of the listing application from the science and technology innovation board has little to do with the company's fundamentals, but the industry is indeed in a "not very good cycle".

In 2022, when Jichuang North launched its listing, the sales of consumer electronic products such as smartphones and TVs declined, and the display chip industry as its accessories was also affected and affected.

According to Cheng Jianxun, the company's revenue in 2022 is still slightly higher than in 2021. In the three years from 2019 to 2021, the compound annual growth rate of Jichuang North reached 98%.

This display chip design leader is seeking new growth points by laying out new energy vehicles, human-computer interaction, medical imaging and other industries.

Based on the last round of financing of 72.92 yuan per share, the company's valuation reached 31.4 billion yuan.

Brew out the opportunity

Jichuang North was established in 2008.

Zhang Jinfang, then 23, who was a graduate student at Beijing Jiaotong University, was inspired by his mentor to believe that human-computer interaction has great potential. So he led four graduate students to start a business in a small office of 40 square meters in Zhongguancun.

At that time, domestic chip manufacturers imported hundreds of billions of dollars of integrated circuit products a year.

"At that time, I thought that since it was a 'money printer', it should be very good to make money, but in fact, it was too difficult to make money." Zhang Jinfang said that the investment in research and development in previous years was particularly large, and the products had to be cheaper than overseas products to be competitive, and it was almost unprofitable.

Among them, Cheng Jianxun, who joined in 2016 and was in the top 200 of the work number, has a deep experience.

At that time, Jichuang North had an annual revenue of only about 200 million and more than 100 employees, and the maintenance of operations was mainly supported by Zhang Jinfang's personal investment, "why not be easier than (making display chips)".

The chip industry has high capital investment and a long return period, which was biased towards financial investment institutions at that time and was not optimistic. Tianyan investigation shows that it was not until 2015, eight years after the establishment of the company, that Jichuang North did not introduce external investors.

Cheng Jianxun recalled that when he launched the B round of financing, he and Zhang Jinfang did a roadshow demonstration for investors, and came to twenty or thirty investment institutions, asking a lot of questions in the process, and few investors were willing to pay. Ultimately, that round of funding came more from industrial investors who were more familiar with the semiconductor industry.

In 2018, well-known domestic companies encountered a chip supply crisis, and the importance of chip supply chain security became increasingly prominent.

"There's a clear dividing line." Cheng Jianxun said that large customers in the industry have given more purchase orders to domestic chip companies.

Investors flocked to the city. In 2021, the company completed the E round of financing of more than 6.5 billion yuan, including vivo, China Development Bank Equipment Fund, Rockchip Investment, GGV Capital, etc.

According to the prospectus, Jichuang North has 61 shareholders of private equity investment funds, covering industrial, state-owned assets and financial investors.

Align with large customers

Benefiting from the wave of independent and controllable domestic chips, before 2022, Jichuang North revenue grew rapidly, from 1.45 billion yuan in 2019 to 5.67 billion yuan in 2021.

The company turned losses into profits in 2020, and its net profit reached 930 million yuan in 2021.

Why is there such a growth rate?

Jichuang North reached cooperation with several large customers before the wind came. For example, in 2015, the company reached a cooperation with the panel factory BOE, and then became a supplier of Huaxing Optoelectronics and Tianma.

Cheng Jianxun revealed that Zhang Jinfang moved the company's headquarters to Beijing Yizhuang Development Zone to facilitate contact with key customers, and he himself has often traveled to visit customers until now.

Strategic-level clients cooperate deeply at the capital level.

Important customer Huaxing Optoelectronics, the shareholder behind TCL, invested in Jichuang North in 2017, and downstream display chip application companies Vivo, Xiaomi, Huawei, etc., are also investors.

"Previously, the introduction of products to domestic customers was not very smooth."

Cheng Jianxun explained that the supply chain of panel factories is relatively stable, and there are usually only three suppliers in each category, and it is difficult for new players to squeeze into the supplier list.

Domestic chips are getting more and more attention, Jichuang North around the display chip, provide panel display overall solutions, accumulate word of mouth, sales soon reached 1 billion order.

At the beginning of its establishment, the company benchmarked against international top chip companies, not focusing on a single category, and its products covered panel display driver chips, power management chips, LED display driver chips, etc.

In Cheng Jianxun's view, this product strategy has diversified the company's revenue, and for customers, a full set of solutions reduces the difficulty of supply chain management, which is also a plus.

In order to realize the layout of multiple product lines, Jichuang North has invested a lot of money to ensure technological leadership. According to the prospectus, from 2019 to 2021, the proportion of the company's R&D investment to operating income exceeded 15%.

Binding large customers and having technical reserves, when the opportunity of the chip industry arrives, Jichuang North rides the wind.

Open up new categories

In 2021, the "lack of core" tide has attracted more and more startups to enter, and the competition in the integrated circuit design industry has intensified.

Cheng Jianxun said that although Jichuang North has achieved profitability and has sufficient funds, technology and customer reserves, it also has to face a more fierce competitive environment to solve problems such as the loss of scientific research personnel.

The bigger challenge comes to the market environment.

Zhang Jinfang said that since 2022, in the face of the complex and changeable political and economic situation at home and abroad and the weakening of the overall demand for consumer and electronic products, the semiconductor industry has faced cyclical adjustments.

Jichuang North develops new categories.

The ADT Division responsible for the R&D and design of advanced chips, mainly developed silicon-based OLED display driver chips, achieved mass production results.

Silicon-based OLED displays have the advantages of low power consumption, high pixel density, and small size, and are known as "mainstream displays in the metaverse". Apple's recently released MR headset product uses this display technology.

BOE, Samsung and dozens of other panel manufacturers have laid out silicon-based OLED displays.

According to DSCC's forecast, global sales of silicon-based OLED displays will exceed $1.3 billion in 2023 and are expected to exceed $2.6 billion in 2024.

Another area that Jichuangbei is optimistic about is automotive display chips.

"One of the core selling points of the smart cockpit is the application of the screen."

Cheng Jianxun said that the vehicle display chip is in a rapid growth stage, which is not much different from the consumer electronic display chip such as mobile phone in the underlying technology, but it has higher requirements for stability and safety, and products that meet the requirements of vehicle regulations need secondary development.

To this end, last year, the company specially established the automotive business department to coordinate R&D resource investment, product definition, marketing and so on.

The company has completed the layout and project pre-research in the field of automotive TDDI chip, automotive Bridge chip, Mini LED driver chip and automotive power management chip. Mini LED driver chip products, which have entered the testing stage, are expected to achieve mass production this year, and more automotive chip products will be sent samples this year.

At present, new businesses such as silicon-based OLED displays and automotive chips are still difficult to generate large-scale revenue, and consumer electronics and other fields are still the focus of revenue in Jichuang North.

"The increment (of new business) is not easy to judge now, the first thing is to stabilize revenue." Cheng Jianxun said.