core point

core original shares is an enterprise that relies on independent semiconductor IP to provide customers with platform-based, all-round, one-stop chip customization services and semiconductor IP licensing services. the company is the number one semiconductor IP supplier in mainland China, and its intellectual property licensing fee revenue ranks fifth in the world. IP provides basic modules for chip design, and new products, process iterations, etc. create IP requirements. With the development of artificial intelligence, autonomous driving, high-bandwidth memory, etc., the advantages of IP reusability and diversity, bringing innovation in SoC chips and Chiplet technology, will bring performance flexibility to the company.

abstract

relying on independent semiconductor IP, ranking first in China and seventh in the world

the company is the first semiconductor IP supplier in mainland China, ranking fifth in the world in terms of revenue from intellectual property licensing fees. The company relies on its own semiconductor IP to provide customers with platform, all-round, one-stop chip customization services and semiconductor IP licensing services. Autonomous and controllable graphics processor IP, neural network processor IP, video processor IP, digital signal processor IP, image signal processor IP and display processor IP six types of processor IP, more than 1,500 digital-analog hybrid IP and radio frequency IP. The main application areas of the company's IP include consumer electronics, automotive electronics, computers and peripherals, industry, data processing, Internet of Things, etc. The main customers include chip design companies, IDM, system manufacturers, large Internet companies, cloud service providers, etc.

IP provides basic modules for chip design, new products, process iterations, etc. generate IP requirements Semiconductor IP provides basic modules for chip design, and Fabless and IDM companies are the main downstream customers of IP core manufacturers. Design IP revenue reached $6.677 billion in 2022, up 20.9 percent year-on-year, and the top 10 IP suppliers had a combined market share of 80.3 percent, with Core's original share of 2.0 percent. In terms of categories (processor, wired interface, physical, digital), the interface category grew from 18 percent to 24.9 percent between 2017 and 2022, making it the fastest growing category for IP. IP reuse reduces chip development costs and development cycles. Taking ARM ecology as an example, the development cost of 28nm SOC has dropped to nearly US $20 million, which is more than 50% lower than the cost without ARM ecology. At the same time, the reuse of IP can greatly reduce the development cycle, avoid duplication of labor, and reduce the design cycle from the original 3-4 years to 1.5-2 years.

Chiplet heterogeneous integration breaks through the bottleneck and is expected to become the second development curve of the company. The perception of everything, the interconnection of everything and the intelligence of everything will push the computing technology into a new round of high-speed development period. As the demand for computing power and data processing continues to increase, the current development of integrated circuits is restricted by "four walls" ("storage wall", "area wall", "power consumption wall" and "function wall"), the advanced packaging technology with the core particle (Chiplet) heterogeneous integration as the core will become the key path and breakthrough of the development of integrated circuits.

Chiplet (core grain) is a balance of computing performance and cost, improve design flexibility, and enhance the IP module economy and reusability of one of the new technologies.

Chiplet structure can be widely used and high performance computing, automatic driving, high bandwidth memory and other applications. As demand for computing power increases, the Chiplet market size will increase from $7.37 billion in 2021 to $23.91 billion in 2027, a compound growth rate of 26.54 percent.

IP reusability and diversity advantages, bring SoC chip and Chiplet technology innovation Chiplet of the new era is opening, IP new multiplexing mode. At present, a number of leading manufacturers in the integrated circuit industry chain, represented by AMD, Intel and TSMC, have successively released Chiplet solutions, interface protocols or packaging technologies that are feasible for mass production. Core has become one of the first enterprises in mainland China to join the UCIe alliance. As process nodes evolve, the company continues to develop chip customization technologies to improve its chip design capabilities on FinFET and FDSOI-based advanced process nodes. The company's customer base has gradually changed, and the proportion of system vendors, Internet enterprises and cloud service providers has increased. As of mid -2023, the company's revenue from system vendors, Internet companies and cloud service provider customers accounted for 44.31 percent of total revenue.

domestic independent IP leader, downstream penetration rate improvement ushers in performance flexibility. we expect the company's revenue from 2023 to 2025 to be 24.98/29.23/3.634 billion yuan, up -6.74, 16.99 and 24.34 year-on-year, net profit attributable to the parent to be 0.60/0.79/2.107 billion yuan, EPS to be 0.12/0.16/0.21 yuan/share, corresponding to PS to be 9X in 2024. since the company is the first listed IP company in China, we selected overseas industry comparable companies ARM, Synopsys, Cadence, CEVA, Worldcore, with an average PS valuation of 10X in 2024. As the company is the number one semiconductor IP supplier in mainland China, intellectual property licensing fee revenue ranks fifth in the world. The market share in 2022 is 2.0. Compared with international manufacturers ARM and others, the company provides a unique SiPaaS service mode. With the development of artificial intelligence, automatic driving and high bandwidth memory, the demand for IP reuse expands, and the company is expected to obtain the opportunity of rapid growth. Considering the low market share of Xinyuan shares and obvious future growth, we give a 6-month target price of 93.63 yuan with a PS of 16X in 2024, give a "buy" rating.

risk tips: design and development, technology upgrade iteration, technology licensing, chip customization business gross margin fluctuations and other risks.