Dongxin Co., Ltd. released a performance report, with an operating income of 5.531 billion yuan in 2023, a year-on-year decrease of 53.70%, and an operating income of 530 million yuan after deducting business income unrelated to the main business and income without commercial substance, a year-on-year decrease of 53.77%. Mainly affected by the global economic environment and the downward cycle of the storage industry, the overall market demand in 2023 will decline significantly compared with the same period last year, the market sales price of some products will decline, and the company's operating income will decrease significantly.
Net profit fell 265.13% year-on-year
Net profit after deducting non-recurring gains and losses - 327 million yuan, a year-on-year decrease of 298.13%. Dongxin's operating income will shrink sharply in 2023, and the profitability of its main business will be insufficient, turning profits into losses.
Figure: 2023 Dongxin annual report
The non-operating income in 2023 will be basically the same as that in 2022, and the net profit will be -306 million yuan, a year-on-year decrease of 265.13%.
With the empowerment of Huawei, the company's net profit increased by 10 times year-on-year in 2021, second only to Silan Micro that year, and the runner-up in net profit year-on-year. And now the company's performance is sluggish, which makes investors sigh.
In response to the decline in the performance of Dongxin, the company responded that there are three main reasons:
1. Operating income and gross margin levels in 2023 decreased significantly compared to the same period last year.
2. R&D expense growth: adhere to independent independent research and development. We will continue to maintain a high level of R&D investment, continue to expand the R&D team, continuously enrich the product line, promote product process iteration, improve product reliability, and increase the number of R&D personnel and R&D projects.
3. The provision for inventory decline increases: due to the decline in market demand and fierce competition in the industry, the sales price of some products has decreased significantly, and the impairment provision for inventory has increased significantly year-on-year due to prudential considerations.
Gross profit margin decreased by 28.81%
In 2023, affected by various factors such as the global economic environment and the semiconductor industry cycle, Dongxin will still face a severe test of slow demand recovery. However, due to the significant decline in the company's downstream customer demand and the fierce competition in the industry, the sales price of some products has decreased significantly, and the company's operating income and gross profit in 2023 have declined sharply year-on-year.
Figure: 2023 Dongxin annual report
The memory chip industry in which Dongxin is located has a higher degree of standardization in the semiconductor market, and its cyclical fluctuations are more obvious, and the industry's prosperity is significantly affected by the relationship between supply and demand.
In 2023, affected by the global economic environment and the downward cycle of the storage industry, downstream customer demand will decline significantly, and at the same time, the industry competition will be fierce, the sales price of some products will drop significantly, and the company's operating income will decline significantly. At the same time, the company's purchase price is also on a downward trend, but the decline is small, and the cost has a certain lag, so the cost during the reporting period is relatively high, the decline in cost is less than the decline in revenue, so the gross profit margin is larger than the year-on-year decline. In 2023, the gross profit margin of Dongxin will decline by 28.81%.
From the perspective of products, NAND products and MCP products will account for a relatively large proportion of revenue in 2023. Among them, the revenue of NAND products decreased by 66.54% year-on-year, mainly due to the significant reduction in demand in the field of network communication such as carrier-grade equipment, and the sales volume of large-capacity NAND products of Dongxin Co., Ltd. decreased significantly, so the overall revenue and gross profit margin of NAND declined significantly, and the revenue of MCP products decreased by 13.17% year-on-year, which was a small decline, mainly due to the company's active expansion of industrial and vehicle module customers during the reporting period, and the product demand was relatively stable.
From the perspective of regions, due to the large decline in demand in the communication field and the consumer field, the fierce price competition in the product market and the sharp decline in the company's selling price led to a year-on-year decrease of 60.43% in revenue and a year-on-year decrease in gross profit margin of 38.77 percentage points.
R&D investment increased by 24.71% year-on-year
In 2023, Dongxin's R&D investment will still be large in the context of declining performance, and the company's R&D expenses will be 182 million yuan, accounting for 34.34% of the current operating income, a year-on-year increase of 24.71%.
Dongxin Co., Ltd. has applied for 23 invention patents, 14 new authorized invention patents, 1 software copyright, and 13 integrated circuit layout design rights. As of the end of the reporting period, the company had 84 valid patents at home and abroad, 14 software copyrights, 81 layout design rights of integrated circuits, and 14 registered trademarks. The company's patents involve the core design of memory chips such as NAND Flash, NOR Flash, and DRAM.
Figure: 2023 Dongxin annual report
However, the huge amount of R&D investment also carries the risk of R&D failure.
Memory chip products need to go through technical demonstration in the early stage and continuous research and development practice in the later stage, and the cycle is long. If Dongxin cannot keep up with the cutting-edge needs of the industry in the future and correctly grasp the direction of research and development, it may lead to product positioning deviations. At the same time, the R&D process of new products is complex, time-consuming, costly, and uncertain. If the company cannot launch products that meet market demand and have cost advantages in a timely manner, it may lead to a decline in the company's competitiveness, which will affect the company's subsequent development.
Dongxin Co., Ltd. adopts the Fabless business model, and the company's product production related links are entrusted to wafer foundries and packaging and testing factories, and wafer foundries and packaging and testing factories are the company's main suppliers. Due to the particularity of the integrated circuit industry, wafer foundries and packaging and testing factories belong to heavy capital enterprises and have a high degree of market concentration. The company has the risk of a high concentration of wafer foundries and packaging and testing plants.