Typesetting/Mung bean soup under the stars

At the beginning of 2025, the computing power sector will continue to be hot. The market value of Haiguang Information (688041), the leader of domestic computing power chips, has reached nearly 350 billion, and Cambrian (688256) is even more than it used to be.

At the beginning of 2023, Cambrian's market value is only about 30 billion; By the beginning of 2025, Cambrian's market value has exceeded 300 billion. In just two years, it has increased tenfold.

The popularity of the capital market has fully demonstrated the recognition of the development prospects of enterprises. So combined with the company's financial report, can Cambrian and Haiguang Information meet this expectation?

1. The demand for AI computing power has increased, and there is a broad space for domestic substitution

At the end of 2022, ChatGPT exploded out of the circle, kicking off the prelude to this round of computing power growth. However, in recent years, China's imports of high-end AI chips have been restricted, forcing the accelerated development of domestic chips. Especially in the GPU market, Nvidia, Intel and AMD occupy an absolute dominance, and there is a broad space for domestic substitution.

Cambrian and Haiguang Information, as the two leading enterprises of domestic chips, are naturally pinned on high hopes.

The largest shareholder of Haiguang Information is Sugon (603019), backed by the Institute of Computing of the Chinese Academy of Sciences, the technology originated from AMD, and its main business is R&D, design and sales of high-end processors. Cambrian focuses on the research and development of artificial intelligence chip products, and is committed to building core processor chips in the field of artificial intelligence.

However, it should be made clear that this processor is not the other processor, whether it is Haiguang Information or Cambrian, its chip products are not GPUs.

GPU is a graphics processing unit, which is a processor chip that performs image and graphics operations. At the same time, due to its powerful parallel computing capabilities, it has significant advantages in processing large-scale datasets and complex computing tasks, so it is gradually widely used in high-performance computing, including in the field of artificial intelligence.

The high-end processor products of Haiguang Information are Haiguang General Processor (CPU) and Haiguang Coprocessor (DCU). Among them, DCU is a deep computing processor launched by Haiguang Information, which is mainly used in artificial intelligence, big data processing, business computing and other fields.

Cambrian's products are mainly smart chips and smart acceleration card series products based on smart chips. Among them, smart chips refer to chips specifically designed for the field of artificial intelligence. The intelligent acceleration card is also oriented to specific fields and improves the computing performance of specific fields.

Cambrian has publicly stated that the smart chips developed by the company can replace GPUs in the field of artificial intelligence, but are not suitable for other fields other than artificial intelligence.

Source: Cambrian, an interactive Q&A platform

This is like a student who is seriously biased, but if you can achieve the extreme, it is also a big breakthrough.

Second, the leading domestic chip still has a long way to go

In any case, the sharp increase in the demand for AI computing power is a huge market opportunity for Cambrian and Haiguang Information, but there is also a long way to go.

In the first three quarters of 2024, Haiguang Information and Cambrian achieved revenue of 6.137 billion and 185 million respectively. In comparison, Haiguang Information's revenue has been quite large. However, according to the disclosure of Haiguang Information prospectus, the main product of DCU is Haiguang 8000 series. As of 2021, the revenue of the 8000 series is only 239 million, accounting for only 10.34% of the total revenue.

In recent years, Haiguang's revenue has grown rapidly, but it has not separately disclosed the revenue of DCU. It is not yet known what the proportion of DCUs will be.

Source: Haiguang Information Prospectus

In contrast, Cambrian, which focuses on AI chips, is obviously more concerned in this round of AI wave. This can also be seen from its tenfold market capitalization. But compared with Haiguang, Cambrian's revenue scale is indeed not too high. Since the revenue reached 721 million in 2021, there has been little growth in the next two years.

Of course, there are some special reasons behind this. Cambrian is one of the few companies in China with experience in complex chip design under advanced integrated circuit technology, and the Siyuan 290 and Siyuan 370 chips have adopted advanced TSMC advanced process technology. However, Cambrian is only a chip design company, and the stability of the supply chain has been affected to a certain extent since the end of 2022.

Source: Cambrian 2023 Annual Report

Judging from the data, in the past two years, the sales of Cambrian smart chips and accelerator cards have shrunk a lot.

Source: iFinD-Cambrian

However, the intelligent computing cluster system business supported Cambrian's performance.

The intelligent computing cluster system business is a data center cluster composed of Cambrian's self-developed acceleration card or training machine products, combined with server equipment, network equipment and storage equipment provided by partners, and equipped with the company's cluster management software.

In 2023, Cambrian actively participated in the computing infrastructure construction projects in Taizhou and Shenyang, and finally formed an intelligent computing cluster system to be delivered to customers, achieving a total revenue of 600 million+, a year-on-year increase of 31.85%.

This type of business has a characteristic, referring to the data of previous years, the fourth quarter may become the peak period for centralized revenue recognition.

Source: Flush-Cambrian single-quarter revenue

So from this point of view, in the first three quarters of 2024, although Cambrian's revenue is only 185 million, it is still too early to draw conclusions about the performance of the whole year, and wait for the annual report to be unveiled.

3. Down-to-earth development, growth takes time

For a long time, the profitability of Cambrian has also been a concern for everyone. After all, Cambrian has not been profitable since the data became publicly available.

Source: Straight Flush - Cambrian Net Profit

Taking 2021 as an example, Cambrian's revenue is 709 million, and R&D investment alone is as high as 1.118 billion, which is obviously beyond its means.

In fact, not only Cambrian, Haiguang Information also has this process. In the past, Haiguang Information's R&D investment also accounted for more than 100% of its revenue. However, since 2021, with the increase in revenue scale, Haiguang Information has begun to turn losses into profits, and the scale of profits has gradually expanded.

Source: Straight Flush - Haiguang Information Net Profit

For chip design companies, especially in high-barrier tracks such as AI chips, high R&D investment is essential. But on the other hand, if you can really pry open the market for domestic substitution, there will inevitably be good returns.

In general, the demand for intelligent computing power has exploded, providing a good opportunity for the rise of domestic chips. However, compared with the madness of the capital market, the business development of enterprises is often more down-to-earth. Growth requires a process, and the business needs to be given time. Rather than blindly touting it, once it fails to meet expectations, it quickly flees.

Note: This article does not constitute any investment advice. The stock market is risky, and you need to be cautious when entering the market. There is no harm in buying and selling.

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