Stock Views:
1. NOVOSENSE can provide more than 1,800 product models for sale, and the products have entered the supply system of ZTE, Inovance, Honeywell, Zhixin Micro, Sungrow, Hikvision, Weir Co., Ltd., etc., and the future focus of the development of vehicle-grade chips has also begun to supply to terminal manufacturers such as BYD, Dongfeng Motor, Wuling Motors, and Great Wall Motors.
2. After the acquisition of McGonn, the revenue of NOVOSENSE micro sensor segment will reach 465 million, surpassing power management products to become the second largest business, and strengthening NOVOSENSE in magnetic coding, magnetic switches and other subdivisions.
3. The gross profit margin and net profit margin of NOVOSENSE have fluctuated in recent years, and the downstream application market is gradually ushering in a demand inflection point, and the company's performance is expected to gradually improve.
Sensors are known as the "eye of technology", they are able to accurately measure and sense various parameters in the surrounding environment, such as temperature, pressure, light, sound, electromagnetic fields, etc., and convert these physical quantities into electrical signals, so that machines and systems can understand and respond to their environment. This capability allows sensors to play a vital role in automation, surveillance, medical, environmental monitoring, smart devices, and many other fields.
According to relevant statistics, the global magnetic sensor market size was $1.64 billion in 2016, increased to $2.6 billion in 2021, and is expected to further grow to $4.5 billion by 2027, showing a compound annual growth rate of about 9.61%, which is mainly due to the continuous development of automotive electronics, industrial automation and consumer electronics. At present, the mainstream players of global magnetic sensor chips include Allegro, Infineon, AKM, Melexis, TDK and other overseas manufacturers, especially in the field of automotive magnetic sensors, overseas leading players occupy a major share of the market.
Recently, the acquisition of magnetic sensor manufacturer Mai Geen by the domestic analog leader NOVOSENSE has become particularly eye-catching.
From consumer to pan-industrial, the leader of automotive analog ICs
Founded in 2013, Suzhou NOVOSENSE Microelectronics Co., Ltd. (hereinafter referred to as "NOVOSENSE", stock code: 688052) is an integrated circuit design enterprise focusing on the R&D and sales of high-performance and high-reliability analog integrated circuits.
Before 2015, the company's products were mainly sensor signal conditioning ASIC chips used in the field of consumer electronics, and successively launched three-axis accelerometer signal conditioning ASIC chips, pressure sensor signal conditioning ASIC chips and current sensor signal conditioning ASIC chips; In 2016, NOVOSENSE began to lay out the industrial and automotive fields, developed isolation chips based on sensor signal conditioning chips, launched pressure sensor signal conditioning ASIC chips for industrial control and automotive front-end markets, and invested in Xiangyang Zhenxin to expand the application of automotive medium and high pressure sensors; In 2017, the core device-level solution of ceramic capacitive pressure sensor for the medium and high pressure sensor market was launched; Since 2018, NOVOSENSE has successively launched standard digital isolation chips and isolation interface chips, digital isolation chips with integrated power supply, isolated driver chips and isolated sampling chips, realizing multi-category coverage of products in the field of digital isolation, and further expanding the category of sensor signal conditioning ASIC chips, launching infrared sensor signal conditioning ASIC chips, and launching integrated temperature sensor chips and integrated pressure sensor chips in the same year.
In the next few years from 2020, NOVOSENSE continued to focus on the development of products in the two market directions of automotive electronics and pan-energy, and completed the listing on the Science and Technology Innovation Board in April 2022, raising 5.811 billion yuan in IPO. In July 2023, NOVOSENSE and 10 shareholders of Quantum Micro signed the "Share Acquisition Intent Agreement" to reach a preliminary intention on the company's intention to acquire 33.63% of the equity of Quantum Micro in cash, and the purchase price will not exceed 1.5 billion yuan, in order to broaden the company's possibilities for developing products in the fields of wireless connection, general signal chain, and audio solutions; On June 23, 2024, NOVOSENSE announced that it plans to acquire 68.28% of the shares of McGoon for 682 million yuan, enriching the company's magnetic sensor product categories such as magnetic codes and magnetic switches, and complementing the company's existing magnetic sensor products.
Along the way, NOVOSENSE has assembled a luxurious investment lineup, including the deep participation of the national team's large fund subsidiaries Juyuan Juxin and Shenzhen Venture Capital, as well as well-known industrial capitals such as Hubble Investment and Xiaomi Yangtze River. In terms of equity structure, as of the end of 2024Q1, Wang Shengyang, Sheng Yun and Wang Yifeng held 10.87%, 10.13% and 3.80% of the shares respectively. Among them, Wang Shengyang and Sheng Yun are the founders of NOVOSENSE, and the company's core technical personnel have worked from ADI, Marvell and other overseas leading backgrounds, and have more than 10 years of industry experience.
At present, NOVOSENSE has been able to provide more than 1,800 product models available for sale, and the products have not only successfully entered the supply system of Huawei, ZTE, Inovance, Honeywell, Zhixin, Sungrow, Hikvision, Weir and other companies, but also began to supply automotive-grade chips to BYD, Dongfeng Motor, Wuling Motors, Great Wall Motors and other terminal manufacturers.
In addition, according to Transparency market research data, the domestic market share of NOVOSENSE microsensor signal conditioning ASIC chips in 2020 will be 18.74%, especially in the field of pressure sensor and acceleration sensor signal conditioning ASIC chips, with a market share of about 32% and 23% respectively, showing its leading position in this field; According to Markets and Markets data, the global market share of NOVOSENSE digital isolation chips in 2020 will be 5.12%, and it has reached or surpassed the level of international competitors in terms of performance indicators, such as CMTI, ESD protection, and working current.
Deepen the layout of the three major product categories
NOVOSENSE's application layout products are mainly concentrated in three types of markets, namely the pan-energy field, the automotive electronics field and the consumer electronics field.
The pan-energy field mainly refers to the industrial applications around the energy system, from the power generation end, to the power transmission, to the power distribution, and then to the power consumption end, including photovoltaic energy storage, industrial control, power electronics, white electricity, etc., and NOVOSENSE's related application products in this field contribute to the company's main revenue.
NOVOSENSE has the fastest revenue growth rate in the field of automotive electronics, and the main application scenarios are two aspects: three-electric and thermal management, and the overall layout is based on the trend of intelligent new energy vehicles. Due to the long AEQ certification cycle of automotive-grade chips, NOVOSENSE products also have considerable barriers to entering OEMs and Tier 1 customers.
The development of NOVOSENSE products in the field of consumer electronics is more inclined to supplement the overall track, and will do the directional development of some products, but does not do large-scale rollout. For example, in 2023, the company will launch a variety of temperature and humidity sensors and sensor signal conditioning chips used in the field of consumer electronics.
For these three main tracks, NOVOSENSE is mainly doing three corresponding product directions: sensor products (revenue accounted for 12.71%), signal chain products (revenue accounted for 54.10%), and power management products (revenue accounted for 32.81%).
Among them, NOVOSENSE has rapidly expanded its categories around the two core tracks of sensor products and signal chain products. The company's sensor products mainly include magnetic sensors, pressure sensors, temperature and humidity sensors. Magnetic current sensors are mainly used in the three-electric system of new energy vehicles, linear Hall current sensors are mainly used in phase current detection of electric vehicle electric drive systems and high-current detection of current modules such as industrial motor control and photovoltaic inverters, and angle sensors are mainly used in thermal management systems water valves, throttle valves, steering wheel corners, automobile wipers, EGR valves, etc.
Signal chain productsThe signal chain chip is the chip used in the path of the signal from input to output in the system, including the whole process of signal collection, amplification, transmission and processing, mainly including linear products, isolation products, converter products, interface products, etc. NOVOSENSE's WeChat signal chain products cover signal conditioning chips, isolation, interfaces, amplifiers, etc. in the signal chain segment.
Power management chip is a chip that realizes the conversion, distribution, detection and other power management responsibilities of electric energy in the electronic equipment system, and is a key device in electronic equipment. NOVOSENSE's power management products mainly include gate drive, power supply, LED driver, motor drive, power path protection and other chip products.
The potential market increment of NOVOSENSE is mainly concentrated in three aspects. The increase in the penetration rate of new energy vehicles + the new installed capacity of photovoltaics exceeded expectations, driving the demand for isolation chips; The supply of isolation devices in the field of industrial automation, 5G communication power supply, and downstream first-line customers of new energy vehicles has gradually realized batch supply; The application of drive-by-wire technology promotes the increase of magnetic sensing penetration.
According to the forecast of the State Information Center, the penetration rate of new energy vehicles will increase from 35.2% in 2023 to 60% in 2033. In the process of popularization of new energy vehicles, the three main electrification technology routes of pure electric vehicles (BEV), plug-in hybrid (PHEV) and range extension (REEV) will coexist for a long time, among which BEVs are expected to increase their market share rapidly due to their advantages of low cost and good driving experience. Compared with traditional fuel vehicles, new energy vehicles have a higher degree of electrification, so they need more electronic control units and power electronic equipment, and these devices work in high-voltage and high-current environments, and need isolation chips to ensure the safety and reliability of signal transmission.
According to TrendForce, the neutral expectation for new global PV capacity in 2024 is 474GW, up 16% year-on-year, and although it is slowing down from the 59% growth rate in 2023, it still shows strong market demand. With the rapid growth of the photovoltaic market, there is an increasing demand to ensure the safety of signal transmission between strong and weak circuits, and isolation chips can ensure the safe transmission of signals in high-voltage environments.
With the development of Industry 4.0, NOVOSENSE's layout of isolation devices also plays a key role in intelligent manufacturing and the Internet of Things, realizing secure communication between devices, which has been widely recognized by the market and has established cooperative relations with many industry leading enterprises. The company's strong competitiveness and market potential in the field of isolation devices can guarantee performance growth in the coming years.
In terms of technology upgrading of downstream customers, brake-by-wire technology, as a key technology of intelligent drive-by-wire chassis, has extremely high requirements for the accuracy and reliability of magnetic sensors, thus promoting the development and application of magnetic sensor technology. Among them, TMR (tunneling magnetoresistive effect) sensors are expected to replace Hall sensors in high-performance application scenarios due to their outstanding performance, such as good temperature stability, low current power consumption, and high sensitivity, and further improve the penetration rate of magnetic sensors in automobiles.
M&A complements business synergies
On the evening of June 23, 2024, NOVOSENSE announced that the company intends to acquire 62.68% of the shares of Shanghai McGonn Microelectronics Co., Ltd. directly held by Shanghai Silicon Technology Co., Ltd. in cash, and intends to acquire 5.60% of the shares of McGoun indirectly held by Silicon Technology through Shanghai Lyray Enterprise Management Partnership (Limited Partnership) in cash, and acquire 68.28% of the shares of McGonn in total, with a total purchase consideration of 683 million yuan.
In NOVOSENSE's current business structure, signal chain accounts for the main revenue (53.8%), followed by power management (32.63%), and finally sensor business (12.64%). Among them, the revenue of the sensor business last year was 165 million, and after the completion of the merger and acquisition of McGonn, the revenue of the sensor sector will reach 465 million, surpassing power management products to become the second largest business, and strengthening NOVOSENSE in the field of magnetic coding, magnetic switch and other segments.
After the completion of the merger and acquisition, the R&D team of NOVOSENSE does not need to repeatedly invest in R&D in similar product directions, which improves the focus of the entire R&D resources and is conducive to the development of more competitive products by NOVOSENSE. On the other hand, the overall shipment scale of NOVOSENSE in the field of automotive products will also become larger, and more collaboration will be completed in the supply chain, including the company's cost of the entire BOM and packaging and testing, which can remove some unnecessary duplicate investment and generate more reuse links, helping NOVOSENSE products build cost advantages, and then more calmly cope with the fierce competition of the entire automotive sensor.
At present, the sensor market is still fragmented, and overseas leading manufacturers have a high market share in some key application fields. The resource focus and supply chain cost reduction brought by NOVOSENSE's acquisition of McGonn, combined with the market opportunity of domestic manufacturers with a large gap in the penetration rate of magnetic sensors, NOVOSENSE may continue to promote the quality improvement and technological innovation of the automotive electronics industry.
The inflection point of demand is approaching, and the performance is gradually improving
In 2024, all downstream of NOVOSENSE are gradually ushering in an inflection point, and the company's performance is expected to gradually improve. Among them, the company's operating income and net profit in 2022 will be 1.670 billion yuan and 251 million yuan respectively, a year-on-year increase of 93.76% and 12%; In 2023, the company's revenue and profit will decline sharply year-on-year due to the weak terminal demand and customer destocking, with the current revenue of 1.311 billion yuan, a year-on-year decrease of -21.51%. The net profit after deduction was -322 million yuan, and the net profit was affected by the share-based payment expense of 221 million yuan; from the operating data of 2023Q4 and 2024Q1, the revenue of 23Q4 and 24Q1 both showed a quarter-on-quarter increase, but due to the high R&D expenses, the non-net profit loss was still occurring, but the overall operating data showed a certain warming trend.
NOVOSENSE's gross profit margin and net profit margin have fluctuated in recent years. Starting in 2023, the company's consolidated gross margin declined, from 38.6% in 2023 to 32% in the first quarter of 2024. This decline may be related to the intensification of market competition faced by the company, especially in the field of isolation chips, where NOVOSENSE experienced a price war in 2023, resulting in a sharp decline in gross profit margin. In terms of net profit margin, the net profit margin declined in the short term due to the increase in share-based payment expenses and the high expense ratio.
At the same time, due to the intensification of competition, NOVOSENSE's various rate expenditures have also increased to varying degrees. The company adhered to a variety of resource investment in the downward cycle of the industry, and the sales expense rate, management expense rate, and R&D expense rate continued to increase in 2023, reaching 8.96%/18.60% and 39.79%, respectively. It is worth mentioning that in order to ensure the launch of new products and technological innovation, the company has the highest proportion of R&D expense ratio, in order to achieve performance improvement and growth in the future.
The inventory level of NOVOSENSE Micro is still high, exceeding 800 million yuan, but the iteration cycle of analog chip products is long, and it will not depreciate rapidly due to rapid technology iteration, so it is mainly necessary to observe the destocking situation of the downstream application market. From the perspective of the downstream prosperity, in terms of automotive electronics, the penetration rate of new energy vehicles continues to increase, and the market has rebounded significantly with the destocking of the industry; In terms of consumer electronics, 2023 has ushered in a recovery, and terminal inventories have returned to a reasonable level; In terms of traditional industries, since Q3 2023, it has stabilized and improved, and inventory consumption has reached a relatively reasonable level; In terms of optical storage, due to the optimism of downstream customers in the early stage of demand expectations, the inventory of customers and channels is high, and it is still in the process of destocking.
Overall, NOVOSENSE's performance in 2023 will be affected by the macroeconomic and semiconductor cycle downturn, and the end market demand will be weak, resulting in a year-on-year decline in operating income. With the recovery of downstream demand and the promotion of new product layout, NOVOSENSE Micro products focus on strong growth tracks such as pan-energy and on-board electronics, and are expected to resume performance growth in the long term through new product layout and strengthening technical barriers.
summary
At present, NOVOSENSE is implementing the core market of the automobile and pan-energy strategy, and rapidly carrying out product layout, in order to distance itself from other players. According to the calculation of China Post Securities, NOVOSENSE has basically covered all domestic new energy models, with an average of 20-30 NOVOSENSE microchips per car, and the average sales volume is close to 100 yuan. According to the company's existing product planning, the maximum value that NOVOSENSE can provide for a car has exceeded 400 yuan. By 2025, the value of the whole car may exceed 2,000 yuan.
These product layout directions will become a new growth engine for NOVOSENSE in the next one or two years. In addition, NOVOSENSE is also laying out core chips such as audio, video, and audio-visual entertainment for cars, which may begin to contribute to revenue growth in two or three years.
Wang Shengyang, CEO of NOVOSENSE, said that the company's strategy still revolves around the core applications, starting from one subdivision scenario at a time, and making each subdivision scenario deep and thorough, so as to continuously bring growth contributions.