Wingtech Technology announced that it would take the initiative to give up "specific customer" orders
Source of this article: Times Weekly Author: Yang Lingling
From rushing in to fleeing, another supplier may choose to abandon the Apple (AAPL.NASDAQ) order.
"There are no product quality problems, factory technical problems or production capacity problems in the company's specific customer optical module products, and the management of the optical module business evaluates the future plan and considers whether the optical module business is transforming or continuing to take new orders from specific customers in the current market environment. "On the evening of December 4, Wingtech Technology (600745. SH) disclosed the latest record of investor relations activities, saying that finally, Zhuhai Delta, the parent company of Guangzhou Delta, held a board meeting and decided to stop producing optical module products for specific customers based on the latest business progress with specific customers and changes in the market environment and the company's business plan.
Source: official website of the company
Two years ago, Wingtech Technology entered Apple's supply chain through the acquisition of Guangzhou Delta, which is held by OFILM, to supply camera modules for iPhones. Wingtech Technology said that after the acquisition, the optical module business lost tens of millions of dollars per month at the beginning, and now it has achieved breakeven.
In the eyes of industry insiders, Wingtech Technology's move may be related to optical module products or poor profits. In June last year, some media reported that Compal Computer (2324. TW) decided not to accept OEM orders for Apple Watch and iPad, and the team serving Apple began to disband and transfer personnel to other product lines or business units.
On December 4th, affected by the news of stopping production orders, Wingtech Technology dived at the opening, once fell more than 9%, and closed at 45.23 yuan / share on the same day, down 6.59%;On December 5, the impact of the news on the stock price continued, as of the close, Wingtech Technology fell 2.23% to 44.22 yuan / share, the latest market value of 55 billion yuan.
On December 5, in response to the relevant details of the cessation of the production of optical module products for specific customers, as well as the development plan of the company's other businesses, a reporter from Times Weekly called and sent a letter to the Securities Department of Wingtech Technology, but did not receive a specific reply as of press time.
Give up OEM for Apple?Guangzhou Delta's main business is the production of optical modules and the supply of camera modules to Apple. Its predecessor was Sony's production base in South China, which OFILM acquired in 2017.
In 2021, Wingtech Technology acquired 100% equity of Guangzhou Delta and equipment related to the supply of cameras to specific overseas customers owned by Jiangxi Jingrun Optical Co., Ltd. The transaction closed on June 1, 2021.
Source: Announcement disclosure of listed companies
Wingtech Technology disclosed that the company completed the equipment commissioning on November 3, 2021, and determined the mass production plan with the customer; on December 1 of the same year, the first batch of mass-produced products were shipped, and on December 11, the sample products passed the final verification of specific overseas customers, and entered the stage of formal mass production and normalized batch shipment according to the plan.
By November 30 this year, the products shipped by Wingtech Technology to specific overseas customers have completed the production of existing orders, and no new orders have been obtained at present.
On December 1, Zhuhai Delta, the parent company of Guangzhou Delta, held a meeting of the board of directors and decided to stop the production of optical module products for specific customers based on the latest business progress with specific customers, combined with changes in the market environment and the company's business planning.
According to Wingtech Technology's forecast, this business adjustment will reduce the company's annual net profit in 2023 by a total of about 733 million yuan. This amount accounts for 50.2% of Wingtech Technology's annual net profit attributable to the parent company in 2022.
At the same time, judging from the data disclosed by Wingtech Technology in the past two years, getting involved in the field of optical modules has not brought much profit to the company. According to the financial report of Wingtech Technology, the optical module business will lose 335 million yuan in 2021, 335 million yuan in 2022, and 7 million yuan in the interim report in 2023.
"From the state of losing tens of millions of dollars in the first month to basically breaking even in the following quarter, there are actually two reasons. On the one hand, the initial volume was very small, and with the continuous ramp-up of the production line production line, the revenue was gradually increasing, and on the other hand, with the normal development of the project life cycle, the company carried out cost and management expense control and personnel optimization. Wingtech Technology said in the record sheet of investor relations activities.
In addition, Wingtech Technology replied to investors that it would stop producing optical module products for specific customers, and other customers in the optical module business would not be affected. In addition, in addition to optical module products, the company's cooperation with specific customers also includes notebook computers, smart home related products, etc., and these product lines are still progressing smoothly.
Wingtech Technology specifically pointed out that the company's development plan for the laptop business of specific customers is clear, and now that new product orders have landed, there should be room for rapid growth in the scale of revenue in specific customers next year.
semiconductor Yes new incrementAccording to the official website, Wingtech Technology was founded in 2006 and became the world's largest mobile phone ODM company in 2012. In 2017, Zhongyin shares were listed on the backdoor.
In the capital market, Wingtech Technology is good at business expansion through acquisitions. In 2019, Wingtech Technology staged a "snake swallowing elephant" drama and completed the acquisition of Nexperia at a price of nearly 26.8 billion yuan, becoming the largest cross-border acquisition in the semiconductor industry in Chinese mainland at that time.
In addition to the semiconductor business, Wingtech Technology also entered Apple's supply chain through the acquisition of OFILM's optical module business. For a long time, entering the Apple industry chain was a symbol of strength and quality. Apple has also cultivated a number of star companies with outstanding performance and soaring market value in the industrial chain, such as Lixun Precision (002475. SZ), Goertek (002241. SZ), Lens Technology (300433. SZ) and so on.
However, it has been bound to Apple for many years, and Apple industry chain enterprises have also suffered from serious "apple dependence". Among them, from 2018 to 2022, Lens Technology's sales of Apple accounted for 46.97%, 43.07%, 54.97%, 66.49%, and 70.96% respectively. In the same period, Lixun Precision's apple sales accounted for 44.85%, 55.43%, 69.02%, 74.09% and 73.28% respectively.
In 2022, global smartphone shipments fell 12% year-on-year to 1.2 billion units, the lowest level since 2013, and in 2023, global smartphone shipments are expected to fall 6% to 1.15 billion units, a 10-year low, according to Counterpoint data.
In the face of downward pressure on the market, Apple's method of breaking through with innovation is gradually difficult to work, and the new iPhone products in recent generations are often ridiculed by netizens as "squeezing toothpaste innovation" and "the old is new". To this end, Apple began to boost sales through price cuts, promotions, etc.
A few days ago, Apple released its financial report for the fourth quarter of fiscal year 2023 and the annual financial report for the fiscal year ended September 30, 2023, showing that in the quarter, Apple's revenue was $89.498 billion, down 0.72% from the same period last year, and it was also the fourth consecutive quarter of decline in the company's revenue, creating the longest decline since 2001. At the same time, Apple's revenue in fiscal 2023 was $383.285 billion, down 2.8% from the same period last year, and its net profit was $97 billion, down 2.8% from the same period last year.
Source: Photo by a reporter from Time Weekly
Getting rid of apple dependence and looking for the second growth curve has become a common choice for many fruit chain enterprises. As a result, Foxconn and Luxshare Precision have gone out to build cars, Goertek has increased AR/VR, Lens Technology has entered photovoltaics, and Changying Precision has laid out the power battery structural parts business.
For Wingtech Technology, timely stop loss is also a good choice. According to the data, in the first three quarters, Wingtech Technology achieved revenue of 44.412 billion yuan, a year-on-year increase of 5.53%, and net profit attributable to the parent company of 2.1 billion yuan, a year-on-year increase of 8.08%. Among them, the revenue in the third quarter was 15.206 billion yuan, a year-on-year increase of 11.9%, and the net profit attributable to the parent company was 848 million yuan, a year-on-year increase of 11.42%.
According to the financial report information, the current revenue of Wingtech Technology is mainly composed of product integration business, semiconductor business and optical business, of which the optical module business contributes less than 5% to the company's overall revenue. Correspondingly, in recent years, the proportion of semiconductor business in the company's revenue has been increasing. From 2020 to 2022, the semiconductor business accounted for 19.1%, 26.2% and 27.5% of Wingtech Technology's revenue, respectively, and in the first three quarters of this year, the proportion was 26.3%.
Source: official website of the company
Today, the semiconductor business has grown into a profit cow for Wingtech Technology. According to Wingtech Technology, Nexperia's automotive customers account for more than 60%, and the single-quarter profit in the first three quarters is at the level of 6-700 million yuan.