You can't buy a cabbage for 70 cents, but you can buy a chip.

Author Liu Junqun

Edit Li Baiyu

SOURCE Mustang Finance

U disk, which can be seen everywhere in our daily life, is mainly used to store pictures, videos, audio and other important documents. Because of its convenience, it is deeply loved by urban white-collar workers and student parties. U disk business hot, naturally led to its core components of the heat of the memory chip, memory chip once became the chip market the largest segment of the field.

riding on the east wind of memory chips, "the world's largest supplier of u disk control chips" Shenzhen core state technology co., ltd. (hereinafter referred to as "core state technology") opened an IPO, plans to raise 0.605 billion yuan from the science board, the funds raised will be used for SSD solid-state drive control chip and algorithm research and development project, UWB-BLE dual-mode centimeter-level high-precision positioning chip research and development and industrialization project, high-performance intelligent home appliance control chip upgrade and industrialization project.

Yema Finance looked through the prospectus and found that the R & D expense rate of Core State Technology was only half that of its competitors. On the company's official website, Core State Technology said that with self-research as the core, can its self-research capabilities support the ambition of the board's IPO?

the average selling price of memory chips is 7 cents, selling more than 0.2 billion chips a year

Since the birth of civilization, mankind has been looking for ways to effectively store information, cave paintings 40000 years ago, bamboo slips 6000 years ago, paper more than 1900 years ago ...... With the development of the modern Internet, storage methods have become CDs, U disks, etc., and human demand for storage has never stopped.

The main product of Core State Technology is the mobile storage control chip, which is mainly used in USB storage disks and SD memory cards. 2020, core state technology revenue of 99.07 million yuan, 2021 "lack of core tide" to bring a large area of capacity, hoarding storm, push core state technology 2021 revenue growth of nearly 80% to 0.175 billion yuan, 2022 to 0.192 billion yuan.

In addition, the company's three-year net profit has exceeded 0.11 billion yuan, 2020-2022 net profit of 39.7257 million yuan, 34.7549 million yuan and 38.1798 million yuan, respectively.

Source: Prospectus

In revenue, mobile storage control chips are its main source of revenue, accounting for 76.98 percent, 39.9 percent and 72.36 percent of revenue from 2020 to 2022, respectively.

Source: Prospectus

During the same period, sales of mobile memory control chips were about 0.107 billion, 0.099 billion and 0.217 billion, respectively. Core State Technology said that the production and sales rate of mobile storage control chips decreased slightly in 2021, mainly due to the tight production capacity of fabs and outsourced factories, and the company increased stocking to ensure chip delivery.

It is worth mentioning that according to the prospectus, the competitors of core state technology in the field of mobile memory control chips are mainly Taiwan companies, among which the more well-known companies include Anguo technology and point order technology. taking 2022 as an example, the revenues of anguo technology and point order technology are about 0.37 billion yuan and 0.44 billion yuan respectively.

The above two companies shipped 0.145 billion mobile storage control chips and 0.224 billion mobile storage control chips respectively in 2022. In contrast, the 0.217 billion core state technology and point order technology only 0.007 billion.

However, industry insiders said that the high sales volume of memory chips from Core State Technology is related to its low price. according to the prospectus, the price of a memory chip of core state technology is less than 1 yuan, and the average price of a memory control chip is 0.7 yuan/chip.

Source: Prospectus

Specifically, in 2020, the storage control chip will be sold at $0.71 per chip, with sales revenue of $75.4564 million. When the price is 0.7 yuan/piece in 2022, the sales volume has doubled to 0.136 billion yuan.

In addition, the cost of storage control chips is also declining, with a minimum price of 0.32 yuan per chip and 0.34 yuan per chip in 2020 and 2021, respectively, and a minimum price of 0.3 yuan per chip in 2022.

On the contrary, during the reporting period, the average selling price and cost of the "second growth curve" smart home control chip of Core State Technology showed an upward trend, with the selling price rising from 1.41 yuan/piece to 1.75 yuan/piece and the cost from 1 yuan/piece to 1.36 yuan/piece. during the same period, the annual sales volume of smart home control chips increased by 28.66 million from 15.86 million.

Source: Prospectus

According to public data, during the reporting period, the average selling price of point sequence technology mobile storage control chips was about 0.85 yuan/piece, 1.6 yuan/piece and 1.94 yuan/piece respectively. Anguo Technology is 2 yuan/piece, 1.8 yuan/piece and 2.5 yuan/piece respectively. (Total revenue divided by volume, of which Anguo Technology's chip shipments are mainly storage control chips, point-order technology's chip shipments are storage control chips) In contrast, Core State Technology's memory chip prices are the lowest.

Source: Prospectus

R & D expense rate is only half of the competition

behind the low price and high sales, the three-year research and development expenses of core state technology were only 51.9833 million yuan. during the reporting period, they were 13.6515 million yuan, 17.0331 million yuan and 21.2987 million yuan respectively, accounting for 13.78, 9.76 and 11.11 percent of the operating income.

Source: Prospectus

As a company seeking to be listed on the board, the CSRC requires the issuer to invest no less than 8% of its operating income in research and development in the most recent fiscal year, emphasizing that research and development investment is an important indicator of an enterprise's technological strength and innovation capability. Core State Technology's R & D expenditure in 2022 will account for 11.11, slightly higher than the red line of 8%.

however, compared with the competition, the research and development cost rate of core state technology is at a low level, the research and development cost rate of anguo technology, the main competitor in the field of mobile storage control chip, is 26.85 percent in 2022, while that of point order technology is 21.09 percent. In addition, the micro-semi-conductor (688012.SH) listed on the board is 19.46 percent, and the leading chip design company Core Sea Technology (688595.SH) is also 30.13 percent.

In this regard, Xinbang Technology explained that the company has accumulated rich R & D design experience and a number of core technologies in the integrated circuit design industry. The success rate of new product R & D is high, and the cost of R & D materials is low.

In fact, the bulk of the research and development costs of Core State Technology were employee compensation and benefits, which accounted for 79.89 per cent, 75.60 per cent and 76.69 per cent during the reporting period.

As of the end of 2022, the company's research and development personnel will be 36, accounting for 39.56 percent of the company's total employees, including 10 core technical personnel, accounting for 10.99 percent of the company's total employees. Xinbang Technology stated in the "Prospectus" that if cannot continue to enrich the R & D team, there may be a risk of delaying R & D tasks due to insufficient R & D personnel, which will affect the development of new technologies and the speed of product iteration, and make the company compete in the market. Gradually lose its advantage.

From the number of invention patents, as of the end of 2022, Core State Technology and its subsidiaries hold 55 invention patents, 20 utility model patents, 5 appearance patents, a total of 80.

According to the data disclosed in the "prospectus", in recent years, the output speed of invention patents of core state technology has slowed down slightly. Since the blowout application of 23 invention patents in 2020, only two patents for design patents, smart cups and fingerprint cups, applied in April and May 2021 respectively, have been granted. Patents and corresponding authorizations applied for thereafter are not disclosed in the Prospectus.

However, lawyer Han Ruojun of Beijing Yinghe Law Firm mentioned that patent application takes a long time, especially for invention patents, two to three years is normal.

However, in terms of product advancement, Core State Technology is more cost-effective. The prospectus shows that the grain area directly affects the volume and cost of mobile storage products, and is one of the important indicators of mobile storage control chips. Simply put, the finer the general grain, the higher the strength and hardness, and the better the plasticity and toughness. and Core State Technology has reduced the grain area as much as possible under the same process conditions.

in the field of USB storage disk control chip, under the same 55nm process, the grain area of core state technology 2199E product is only 0.94 mm², while the grain areas of Anguo technology 6989SN-TA and three-place one-core 1179 comparable products are 1.55 mm² and 1.57 mm² respectively, which are larger than the grain area of core state technology 2199E.

Source: Prospectus

in the field of SD memory card control chip, under the same 40nm process, the grain area of core state technology 3380 is only 0.94 mm², while the grain areas of dot sequence technology AS2705EN and a micro YS6285EN are 2.61 mm² and 1.96 mm² respectively.

Source: Prospectus

core bond technology said that the advanced nature of the product is mainly due to the 32-bit CISC dedicated processor developed by the company for mobile storage control chips. it has the functions of customizing and freely adding and subtracting instructions on demand, allocating software and hardware resources on demand, simplifying code, saving memory space, etc., making its mobile storage control chips have advantages in performance, cost, optimization speed, etc.

Qingbei Xueba Brothers Return to China to Start Business, Intel and Lenovo Invest in Run-up

the technological advantages of core state technology cannot be separated from the two real controllers.

founder Zhang Hualong graduated from Peking University with a major in radio. In the 1980 s, he was sent to the United States by the Chinese Academy of Sciences to study for a master's degree in engineering management. he once presided over the design of world-class VLSI in the United States. The designed chips are widely used in the products of multinational companies such as Cisco and IBM. Another real controller of the company is Zhang Hualong's brother Zhang Zhipeng, who graduated from Tsinghua University in engineering mechanics and is currently the deputy general manager of the company.

The year 2000 was the year of the outbreak of integrated circuit design enterprises. In November of the same year, ZTE Microelectronics, which originated from ZTE's IC Design Department, was established. The following year, HiSilicon Semiconductor, formerly Huawei's Integrated Circuit Design Center, was established.

Source: Easy View

38-year-old Zhang Hualong in the overseas, considering returning from the United States to start a business.

At firstHualong's entrepreneurship can be described as smooth sailing. In 2003, it founded Xinbang Technology in Shenzhen. In 2004, the first U disk control chip of core state technology was put into production. In 2005, Core State Technology made a profit. in July of the same year, Intel venture capital fund and Lenovo jointly invested 2.5 million us dollars in core state technology.

With the blessing of two major capitals, core state technology is developing rapidly. According to the prospectus, core state technology successfully designed the first USB storage disk control chip in 2005, becoming one of the earliest enterprises in mainland China to realize the mass production of mobile storage control chips. by the end of 2006, the first generation of USB flash control chips of core bond technology had shipped more than 50 million chips, with a global market share of more than 40%.

according to "36 krypton" reported that in 2007, core state technology to start the listing process. Although it has been established for less than 5 years, the annual income of Xinbang Technology has reached 0.2 billion yuan, the net profit is about 60 million yuan, and the per capita output value is nearly 5 million yuan.

Source: Easy View

However, due to the financial crisis and the aggressive business strategy, Core State Technology was eventually forced to terminate the listing plan. later, Zhang Hualong said frankly that in 2009, the development of core state technology did not reach a higher level. instead, it fell a big fall with one foot in the air. the company lost staff and the product was relatively single. although it could still maintain profitability, the company's development was basically at a standstill.

the turnaround took place in 2012. at a home appliance chip exhibition in Shunde district of Foshan city, a well-known brand home appliance factory purchased chips from an American head manufacturer urgently looked for alternative products due to insufficient ability to resist microwave radiation interference.

finally, it was found that the microwave resistance of core state technology products reached the full scale, and many indexes met the standard. As a result, Core State Technology has cut into the power industry from a big brand.

in 2013, core state technology's first intelligent home appliance control chip product "capacitive full-function touch key chip" was successfully mass produced and cooperated with domestic first-line brand manufacturers such as midea, skyworth, TCL, boss electric appliance, huadi, supor and Jiuyang.

at that time, core state technology, holding two trump cards of storage control chip and smart home appliance control chip, was successfully listed on the new third board in 2014. in 2018, it introduced an ultra-low cost and ultra-low power fingerprint identification control chip, becoming the industry's first single-chip fingerprint solution. from March 18, 2020, the company terminated the listing of the new third board.

along the way, core state technology has cut through all obstacles. The IPO, graduated from Peking University founder Zhang Hualong waited for a full 16 years. After a dark moment, Core State Technology has set sail again and hit the board again, can it do so this time?

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