on September 5, 50 billion chip giant lanqi technology (688008) released the latest record of investor relations activities. The record shows that in August, Lanqi Science and Technology held a total of 10 exchange activities such as specific object research, institutional strategy meetings and teleconferences, with a total of nearly 460 investment institutions coming to investigate.

high-intensity research and development investment significantly increased interconnection chip shipments in the second quarter

the company secretary introduced the company's semi-annual and second quarter results. In the first half of 2023, due to the macro environment, demand in the server and computer industries declined, and the company was under pressure to de-stock the industry. In the first half of 2023, the company achieved revenue of 0.928 billion yuan, down 51.87 percent year-on-year, and achieved a net profit of 0.082 billion yuan, down 87.98 percent year-on-year. Excluding the impact of share-based payments, net profit was $0.141 billion, down 80.95 percent year-on-year.

The decline in net profit was mainly due to the year-on-year decline in the company's operating income; and the company maintained high-intensity R & D investment. In the first half of the year, the company's R & D investment increased by 47.03 year-on-year; and the company's fair value change income decreased by 0.222 billion yuan year-on-year, and the company's accrued assets Impairment losses increased by 0.145 billion yuan year-on-year.

In the second quarter of 2023, the company actively expanded the market, and a number of operating indicators improved from the previous quarter. With the shipment volume of DDR5 memory interface and module matching chips significantly increased in the second quarter compared with the previous quarter, the company realized operating income of 0.508 billion yuan in the second quarter, up 21.11 from the previous quarter. of which the sales revenue of interconnection chips was 0.498 billion yuan, up 20.57 from the previous quarter. Net profit attributable to the parent was 0.062 billion yuan, up 215.08 from the previous month. Benefiting from the increase in the proportion of DDR5 memory interface chip shipments, the company's gross interest rate in the second quarter of 2023 was 58.83, up 5.54 percentage points from the first quarter, of which the gross profit margin of interconnect chips was 59.55, up 5.6 percentage points from the first quarter.

Lanqi Technology's outlook for industry demand in the second half of the year stated that the company's main operating indicators in the second quarter improved significantly from the previous quarter, and the demand for DDR5 related products is expected to continue to increase in the second half of the year. Overall, industry demand in the second half of the year is expected to be better than in the first half. However, due to the short visibility of orders at this stage, the relevant situation is not clear. Specific to the product, according to the industry's outlook on the pace of DDR5 penetration, it is expected that the penetration rate may reach 25%-30% by the end of 2023, and the penetration rate may exceed 50% in 2024. Therefore, as the penetration rate of DDR5 related products continues to increase, the average gross margin of memory interface chips is expected to stabilize upward.

R & D investment accounts for more than 30% of successful mass production of chips and CPU products

in the first half of 2023, the company continued to maintain high-intensity R & D investment. semi-annual R & D expenses were 0.303 billion yuan, up 47.03 percent from the same period last year, accounting for 32.67 percent of operating income. Among them, R & D expenses in the second quarter were 0.169 billion yuan, up 43.71 percent from the same period last year, accounting for 33.19 percent of the current quarter's revenue. In the first half of 2023, the company obtained 7 authorized invention patents and applied for 21 new invention patents; newly applied and obtained 1 integrated circuit layout design; newly obtained 2 software copyright registrations. As an integrated circuit design enterprise with talents as the core, as of the end of June 2023, the company has 515 R & D technical personnel, accounting for 75% of the total number of the company, and 64% with master's degree or above.

Lanqi Technology introduced the specific progress of the company's R & D investment. During the reporting period, the company made a number of progress in product mass production and research and development. lanqi technology has two major product lines, namely, interconnect chip product line and jinji server platform product line. in terms of product mass production, successfully mass produced PCIe 5.0/CXL 2.0 Retimer chips and the fourth generation of cpu in the first half of the year. in terms of product research and development, DDR5 second-generation memory interface chip, MRCD/MDB chip, CKD chip and CXL MXC chip are in the preparation stage before mass production, and related work is progressing steadily. In terms of engineering research and development, the research and development of PCIe 6.0 Retimer chip, clock generator chip and the first generation AI chip were actively carried out. AI chip company carried out relevant testing and verification of engineering samples during the reporting period, and in the relevant application platform for business adaptation.

the company has room for improvement

With the rapid development of AIGC, it will drive the increase in demand for related chips. The related products that the company has deployed and the impact are mainly in the following aspects:

1, MRCD/MDB chip. AI applications will increase the demand for memory capacity and bandwidth, drive the demand for memory interfaces and supporting chips to remain stable upward, and drive the demand for high-bandwidth memory modules (MRDIMMs), thereby increasing the demand for MRCD/MDB chips;

2, CXL MXC chip. With the increasing demand for memory capacity, the application demand for memory expansion and pooling will continue to grow in the future, bringing long-term and broad growth space for CXL MXC chips;

3, PCIe Retimer chip. With the growth of AI applications, there will be more and more scenarios where GPU box needs to be configured, thus increasing the demand for PCIe Retimer chips;

4. AI chip . the AI chip currently being developed by the company is aimed at AI reasoning applications under big data throughput and is expected to benefit from the rapid development of relevant AI sub-sectors.

The company also stated that the CXL MXC chip is not specifically developed for AI servers and can also be used for general-purpose servers. Due to the higher demand for memory capacity in AI servers, the need for memory expansion and memory pooling may be more urgent, which will bring long-term growth space for CXL MXC chips.

With the growth of AI applications, there are more and more scenarios that need to be configured with GPU BOX, and the demand for PCIe Retimer chips will also increase. Taking a typical AI server with 8 GPU as an example, considering the requirements for signal integrity and transmission rate, the system needs to be configured with 8 or even 16 PCIe Retimer chips. If it is an AI server with 16 GPU, the number of PCIe Retimer chips to be configured will increase accordingly.

according to industry analysis, the market size of PCIe 5.0 Retimer chips is expected to grow significantly compared with PCIe 4.0. at the same time, for the sake of supply security, customers will generally choose 2-3 PCIe 5.0 Retimer chip suppliers to supply. As the world's second supplier of mass-produced PCIe5.0 Retimer chips, the company is a leader in research and development, and the company's self-developed PCIeSerDes IP has been successfully applied to this product, in the future continuous iteration of the product, the company has certain advantages.

Source: Read Chuang Financial Synthesis