Analog IC chip dual engine drive, the application field continues to expand. At present, Shengbon Stock has more than 3,500 products in 25 categories for sale, covering two major fields of signal chain and power management, and more than 20 product categories. The equity structure of the company in other subjects is relatively clear, with a total of five shareholding subsidiaries.
Figure 1. The growth of Saint Bond in recent years
Under no specific conditions, analog IC can be divided into signal chain analog chip and power management chip. Among them, the power management chip is the chip responsible for the transformation, distribution, detection and other power management responsibilities in the electronic equipment system, which is mainly divided into AC-DC AC/DC conversion, DC-DC DC and DC voltage conversion (suitable for large pressure difference), voltage regulator (suitable for small pressure difference), AC and DC regulated power supply. Power management chips play different voltage and current management functions in different product applications, so different circuit designs need to be adopted for different downstream applications. At present, power management is developing towards the direction of high speed, high gain and high reliability. Developing power management chips is an important way to improve the overall machine skills. The signal chain chip is a chip used in the path of a system signal from input to output, including signal acquisition, amplification, transmission, processing and other functions. In analog chips, the electronic system basically needs power supply, so the power management chip is the main body, accounting for about 53% of the analog chip market. The power management is widely used and mature, the technology iteration is slow, and the barriers are relatively low. Therefore, the domestic layout is wide. Signal chain chip market accounted for about 47%, the domestic layout of enterprises mainly include Sainbon shares, Huawei Hesis, etc. At present, 0.18μm/0.13μm process is widely used in analog chips, and some of them use relatively advanced 28nm process. Digital chip manufacturers mostly use 5nm and 7nm advanced process, which requires a higher level of chip process. In the research and development process, unlike digital IC, analog IC can rely on fewer EDA tools, most of which rely on manual parameter adjustment, requiring designers to master the physical characteristics of components, have mature topological structure design and wiring capabilities, and also need to take the wafer manufacturing process and flow into consideration. This requires sufficient experience in design, engineering, and successful mass production, often over 10 years. Most of the best simulation design engineers have 20-30 years of experience in simulation, and the industry barriers are high.
FIG. 2 Schematic diagram of analog chip products
Product line matrix is rich, product iteration drives performance. Sgmicro has strong independent research and development strength and innovation ability. In the past ten years, it has continuously increased R&D investment, which further strengthened the innovation ability of core technologies. It has accumulated a batch of core technologies in the two major fields of signal chain analog chips and power management analog chips, and introduced the products to meet the market demand. And a series of products with the characteristics of "diversity, uniformity, fine differentiation", some of the key technical indicators reached the international leading level. The company has launched more than 400 products annually for many consecutive years, involving various categories of power management products and signal chain products. New products have a lag effect on the promotion of the company's performance, and it may take 2-3 years of promotion to become the main product. The company's current performance growth is due to the products launched in previous years. The company's high-performance, high-quality analog integrated circuit products are independent forward research and development, comprehensive performance indicators reach the international advanced level of similar products, some key technical indicators reach the international leading, can realize import substitution. It is widely used in consumer electronics, industrial control, Internet of Things, artificial intelligence, cloud computing, new energy, automotive electronics, medical electronics, wearable devices, 5G communications and other fields. The sales share by application segment is: non-mobile consumer electronics close to 40%, mobile phones and communication equipment combined more than 20%, industrial control, medical instruments and automotive electronics combined more than 40%.
FIG. 3 Introduction of main products of Sgmicro Shares
Focus on analog chip design, distribution model. Sainbon is a fabless semiconductor company, focusing on R&D and sales of integrated circuits. The production process is outsourced to professional manufacturers, that is, purchasing customized wafers from wafer manufacturing plants and sending them to packaging and testing factories for packaging and testing, so as to complete product production. Fabless mode enables manufacturers to be more sensitive to the market, so that they can quickly perceive the changes in market product demand and make rapid responses to the market demand, and launch timely products. The company selects qualified suppliers through strict evaluation and assessment procedures. During the reporting period, the company's wafer manufacturers are mainly Taiwan Semiconductor Manufacturing Co., LTD., and its packaging and testing service providers are mainly Changdian Technology Co., LTD., Tongfu Micro Electronics Co., LTD., and Chengdu Yuxin Co., LTD. The company adopts the management mode of "distribution as the main, direct selling as the supplement" to improve sales efficiency, and has established long-term stable cooperative relationship with the distributors such as Beigaozhi, Maojing, Fengbao and Qigang. At present, Sgmicro has more than 3000 terminal customers, accumulated a large number of high-quality and loyal customers, and formed a strong brand influence.
FIG. 4 Distribution of downstream terminal customers of Sgmicro Shares
The management is experienced in the industry, and equity incentive helps the development. The management of Sgmicro Shares is stable all year round and the equity is relatively concentrated, which is conducive to the long-term stable operation and development of the company. By Q3 2021, Beijing Hongda Yongtai Investment Management Co., LTD. (100% owned by Mr. Zhang Shilong, the founder) is the largest shareholder of the company, accounting for 20.76% of the shares. The remaining shareholders hold less than 10% of the shares, and the joint shareholding ratio of concerted actions is 44.09%. Mr. Zhang Shilong, founder of Sgmicro Shares, has a doctor's degree. Before joining Sgmicro Shares, he was an engineer of professional design Institute of Ministry of Railways and an engineer of Texas Instruments (TI).
FIG. 5 The situation of shareholders acting in concert in Sgmicro Shares
In order to motivate employees, bind the common interests of employees and the company, and help the long-term development of the company, Sgmicro has paid cash dividends for four times since its listing in 2017, with a total cash dividend of 190 million yuan, with a dividend rate of 25.5%. Four equity incentive plans have been carried out, which have been granted to more than 200 people, including company executives, core management personnel, core technical backbone, etc., so as to improve the long-term development mechanism and enhance the comprehensive market competition driving force of the enterprise.
Figure 6 Company dividend in recent years
On January 28, the company released the forecast of 2021 annual performance, it is estimated that in 2021, the net profit attributable to the mother will reach 650 million to 722 million, with a year-on-year growth of 125%-150%, and the non-attributable net profit will reach 598 million to 671 million, with a year-on-year growth of 126.71-154.06%.
Revenue growth is fast and profitability is strong. From the perspective of revenue structure, in 2020, Sgmicro's total revenue was 1.20 billion yuan, among which the revenue of power management products was 850 million yuan, up 54.0% year on year, accounting for 70.9% of revenue, which was the main source of the company's revenue. The revenue of signal chain products reached 350 million yuan, up 44.1% year on year, and the operating revenue accounted for 29.1%. In Q3, the total revenue of the company was 1.54 billion yuan, up 77.95% year on year, and the profit was 451 million yuan, up 117.93% year on year. In terms of the revenue proportion of the company's products, power management products account for about 69.7%, and signal chain products account for about 30.30%. Against the background of core shortage in the entire analog chip industry, the company's performance soared, among which, the revenue of power management products soared. This is mainly because among the analog ics of integrated circuits, power management chips were most affected by core shortage, with the longest delivery delay to the near future, and the downstream demand was strong.
Figure 7 Revenue and operating cost of Sgmicro Shares by Q3 2021(ten thousand Yuan)
From the perspective of profitability, the gross profit rate and net profit rate of Shengbon have been in a process of growth since 2017, mainly because the company keeps expanding high-end simulation products, entering into emerging markets, and ensuring the speed and quality of R&D in terminal markets with higher gross profit rate. In 2020, the overall gross profit rate of the company is 48.7%. Among the main businesses, the gross profit rate of power management products is 44.7%, and the gross profit rate accounts for 65%. The gross profit margin of signal chain products was 58.6%, and the gross profit accounted for 35%. In the Q3 of 2021Q3, the overall gross profit rate of Shengbon shares was 54.74%, which increased significantly year-on-year, mainly because of the global chip shortage and the high business climate of the company's products.
Figure 10 Gross profit rate and net profit rate performance in recent
Excellent rate control level, high R&D expenditure to ensure product promotion. In terms of rate control, Sgmicro shares have maintained a high level in the industry. While the company's revenue and profit are growing rapidly, the three expenses are controlled at a high level. This is mainly due to the company's "distribution, direct sales as a supplement" sales model to improve sales and product promotion efficiency. On the other hand, Sgmicro maintains high R&D expenditure. In 2020, the company's R&D expenditure reached 207 million yuan, while in the third quarter of 2021, the company's R&D expenditure has reached 270 million yuan. From 2016 to 2020, the proportion of core technical personnel in the company has gradually increased. There are 416 technical research and development personnel, 135 more than last year. Only extensive and continuous research and development and launch of new products can ensure the steady improvement of the company's future performance. Currently, the company has about 3,500 products available for sale, which still has a large room for improvement compared with Texas Instruments' 80,000 products.
Figure 11 Three expenses and R&D expenses of the Company in recent years (ten thousand Yuan)
Cash flow from operating activities increased rapidly. In 2020, the net operating cash flow of Sgmicro shares was 320 million yuan, and the operating cash flow of 2021Q3 was close to 450 million yuan. Although in 2020 and 2021, semiconductor production capacity continues to be tight, but the leading siphon effect is obvious, leading companies often can obtain more abundant cash flow. At present, the company's cash flow overall in a healthy to good state.
Figure 12 Operating cash flow of the Company in recent years (ten thousand Yuan)
Overall, Sainbon has performed well in terms of revenue growth, net interest rate growth and rate control, fully benefiting from the tight capacity, chip shortage and rising price of semiconductor integrated circuits. On the one hand, it benefits from the accumulation of technology in the analog IC field of the company. On the other hand, the large-scale stocking of components by terminal manufacturers also promotes the explosion of market demand.
Analog chip has the characteristics of large market scale, strong growth and wide application scenarios. From the demand side, there are three driving forces for the growth of the analog chip market.
The need for analog chips in electric vehicles. Automotive applications are the fastest growing area of downstream applications of analog chips. According to IC Insights, the automotive simulation chip market will reach 17.467 billion dollars in 2021, with a year-on-year growth of 31%. The authoritative agency predicts that the global autonomous vehicle shipment CAGR will be 20%-25% from 2020 to 2025. The rapid emergence of new energy vehicles drives the rapid growth of the demand for automotive chips, and analog chips account for 29% of the share of automotive semiconductors. The application of analog chips at the vehicle gauge level will also transition from the safety collision avoidance system, LED power management and fault protection system to the power management system of new energy vehicles, intelligent seat and ride system of intelligent purple car and autonomous driving system. It is embodied in: battery management system, charging, AC/DC, DC/DC demand; Intelligent cabin to increase the power IC, intelligent audio and video chip and interface requirements; Sensors and lidar will drive demand for analog chips such as ADCs and LDdrivers. At present, automotive power management chips still have strong technical barriers, and the suppliers of subdivided products are mainly overseas leading enterprises. At present, the mainstream chips used include AFE/MCC/ADC, etc., most of them are American manufacturers, and the domestic suppliers are mainly Saint Bond and Shrepper. The power management chip can perform voltage boost, voltage drop, voltage stabilizer, and voltage direction processing for the fixed voltage provided by the battery and power supply, effectively prolonging the service time and service life of the battery. At present, the unit price value of the power management chip in the traditional fuel vehicle is about $20, while the unit value in the new energy vehicle is about $100-400. Because watching the progress of domestic alternatives in the power management chip field can give companies a new level of valuation to some extent. Autonomous driving sensors also put forward new demands for analog chips, which are mainly reflected in the vehicle millimeter wave radar, vehicle laser radar, vehicle ultrasonic radar, infrared and camera sensors.
Automation upgrade of industrial control boosts the demand for analog chips. Smart city, security and monitoring, machine vision, motor control, robotics, power solutions, industrial automation and many other fields have a comprehensive demand for analog chips. Texas Instruments announced in 2020 to enter the industrial control field, it can be seen that the application of analog chips in this field has a huge prospect. In the process of industrial intelligent development, it is very dependent on the application of analog chips. It is expected that by 2022, the scale of analog chips in the industrial field is expected to exceed 19 billion dollars. Industrial analog chip profits are higher, overseas manufacturers occupy the main market share. Among the top 10 manufacturers in the world in 2020, Texas Instruments, Adnol Semiconductor, Anson Mei, Microchip and other main business areas include industrial analog chips.
The new demand for analog chips in the Internet of Things, consumer applications are the largest applications of signal-connected analog ics. The development of AIoT brings new opportunities for the development of analog chips such as horn driver, backlight, OLED driver, power chip, RF device and motor driver chip. The huge domestic market of the Internet of Things will provide a strong guarantee for the application of analog chips, and the landing of relevant Internet of Things application fields will also drive the rapid expansion of analog chips.
Supply side industry concentration is high, overseas giants stand in abundance, domestic substitution space is large. In 2020, the world's top ten analog IC manufacturers have a total sales of $354, accounting for 63% of the market share, among which Texas Instruments has the first market share with 19%. The competition pattern of the whole analog IC industry is dominated by overseas manufacturers, the pattern is very stable, and the industry presents a strong situation. China is the world's largest market for analog chips, with a market size of 28.7 billion US dollars. According to authoritative forecasts, the domestic market size will further expand as the epidemic is alleviated and the global core-shortage market accelerates the recovery of domestic substitution and downstream terminal applications. At present, the self-sufficiency rate of domestic analog chips is only 12%, so there is still a large space for domestic substitution. International manufacturers have rich product lines and monopolize the high-end market. Our analog chip manufacturers are limited by short development time and weak accumulation of technology and process, so their products are mainly distributed in the middle and low end.
The combination of power management and signal chain helps Sgmicro rise rapidly by constantly enriching categories. As a new force in the semiconductor field, Sainbon has made outstanding achievements in the accumulation of product lines and upgrading of technology in recent years, and its excellent performance has also brought rich returns to investors. At present, the company has a reasonable layout of product categories, more than 1,400 products in sales, high research and development costs to ensure the orderly launch of products, stable downstream supply chain, manufacturing and design tightly coupled degree for the company to build several barriers, optimistic about its potential leader first-mover advantage.
Source: Aijiwei