“Investor Network” Cai Jun

Siripu (688536.SH, the “Company”) continues to be troubled.

On December 9, the company announced new progress in the acquisition of Shenzhen Chuangxin Microelectronics Co., Ltd. (hereinafter referred to as “Chuangxin Microelectronics”). Currently, the company and the shareholders of Chuangxinwei are still in negotiations, but no agreement has yet been reached on the terms of the deal. The company's counterparties include 17 natural persons and institutional shareholders of Chuangxinwei.

In the first three quarters of this year, Sirep's operating income and net profit attributable to shareholders of listed companies were 813 million yuan and 16 million yuan respectively, down 44.63% and 94.11% year on year, respectively. Like its peers, the company attributed the decline in performance to a slump in the terminal market.

However, at a time of downturn in the semiconductor industry, the company's ambitions have not changed. With sufficient capital in hand, the company's left hand continues to push for acquisitions, and the right hand develops MCU products. Whether this listed company, which specializes in analog chips, can grow into an “electronic giant” is worth watching.

Acquisition of “Heart to Heart”

Half a year has passed, and Siripu is still promoting “heart-to-heart” acquisitions.

In May of this year, the company announced that it plans to acquire 95.66% of Chuangxin Micro's shares by issuing shares and paying cash. Afterwards, the company announced the acquisition plan. The issue price is not lower than 80% of the average trading price of the company's stock in the first 20 trading days of the pricing benchmark. After negotiations between all parties, it was determined to be 182.76 yuan/share, but the final price has yet to be assessed and confirmed through negotiation.

According to data, Chuangxin Micro specializes in power management chips. From January to May 2021, 2022, and 2023, the company's revenue was approximately 200 million yuan, 182 million yuan, and 102 million yuan respectively, and net profit was -101 million yuan, 164 million yuan, and -4.4978 million yuan, respectively.

The obstacle to the acquisition is that the shareholders of Sirep and Chuangxinmicro have not yet reached a consensus.

In the plan, the company mentioned that it has not yet reached an agreement on some of the terms of this transaction with Core Energy Investment and Ningbo Yihui. If the latter two decide to sell their shares later, the company will “choose the opportunity to buy at the same price in this transaction.” Core Energy Investment and Ningbo Yihui held 3.82% and 0.52% of Chuangxin Micro, respectively. Among them, core power investment was initiated by BOE, the National Integrated Circuit Industry Investment Fund, and Beijing Yizhuang.

At the same time, the company disclosed that in Chuangxinwei's previous capital operations, the founder and financial investors had agreed that the transfer of shares required written consent from the latter.

In the December announcement, the company disclosed that it had reached a preliminary agreement with Core Energy and Ningbo Yihui on the main terms of the transaction, but “there are still a few counterparties that have not reached agreement with the company, and the company is actively negotiating with them.” There is no further disclosure of who the “few counterparties” are among them.

As of December 11, Sirep closed at 153.56 yuan/share. Despite the ups and downs of the acquisition, Sirep is determined to grow bigger and stronger through expansion.

In the November survey, the company stated, “Judging from the development history of TI (Texas Instruments) and ADI (Adderall Semiconductors), mergers and acquisitions are undoubtedly an effective way to simulate IC manufacturers to grow bigger and stronger and achieve leapfrog development. The company will also continue to search for targets in the market that match the company's DNA”.

The AB side of expanding ambition

Siripu's ambition is to attack proactively, but also to expand passively.

The courage to take the initiative has saved sufficient capital for the company. As of the third quarter of this year, the company's monetary capital was 763 million yuan, and a new round of fixed increases of 1.8 billion yuan was completed in October.

The incentives for passive expansion have impacted the company's core business, and it is urgent to reinforce the second growth curve.

In the first three quarters of this year, the company's signal chain chip revenue was 649 million yuan, a year-on-year decrease of 37.33%, accounting for 79.78% of revenue. The decline in performance and the weakness on the demand side are on the one hand, but the expansion of production and price adjustments by major international manufacturer TI is even more fatal.

Dongwu Securities pointed out in a research report that TI has expanded production by about 40% since this year, and has comprehensively lowered the price of general analog chips in the Chinese market since May, in order to seize more market share. In the first half of this year, the gross profit margin of the company's signal chain chips was 56.63%, down 5.26% from the previous year.

In fact, TI's attack caused widespread injuries to domestic manufacturers. In the first half of this year, Nanochip's signal chain chip revenue was 410 million yuan, a year-on-year decrease of 22.27%. At the same time, as two mainstream manufacturers of analog chips, Sirep and NanoSilicon are still under pressure to remove inventory.

At the end of 2022, the inventories of similar products of Sirep and NanoSilicon were 157 million and 321 million, respectively, up 79.82% and 103.25% year-on-year respectively. The increase in inventory volume is related to the weak demand side during that year. Coupled with TI's production expansion and price adjustments this year, the pressure on domestic manufacturers has doubled.

In the first half of this year, Sirep's inventory balance was 50 million yuan, a decrease of about 0.2 billion yuan from the beginning of the year. The removal of inventory has had some effect. In contrast, during the same period, Nanochip increased by about 100 million yuan compared to the end of 2022, and the balance of inventory products reached 310 million yuan.

In any case, a rich product line is the only way to resist risk. Since 2019, Sirep has developed power management chips and has successively received orders from downstream customers such as security and industrial control. Customers include Hikvision.

Dongwu Securities pointed out in a research report that the total market share of the top five analog chip manufacturers in the world is about 71%, but mainland manufacturers are small, and each market share is less than 1%. There is room for domestic alternatives, and power management chips have also become a new battleground.

In the first three quarters of this year, Sirep's power management chip revenue was 160 million yuan, a year-on-year decrease of 62.94%, accounting for 19.75% of revenue. On the one hand, the nanoscale micro factor layout has already formed a larger scale even earlier. In the first half of this year, Nanosinmicro's similar products earned 226 million yuan, a year-on-year decrease of 0.79%.

On the other hand, Sirep's range of power management chips is not rich, that is, linear power supplies are the main ones, mainly used in communications and industrial markets. Compared with this, Chuangxinwei has a rich variety of similar products, and customers include consumer companies such as OPPO, OnePlus, and Xiaomi. Therefore, if the acquisition is successful, the company's categories of similar products and customers will increase.

Vehicle regulation MCU “many towns and villages”

There is a golden saying in the semiconductor industry. The future of analog chips lies in MCUs (microcontrol units).

MCU, commonly known as MCU, includes accessories such as memory, counter, USB, and digital-to-analog conversion. It is fully equipped and has various functions, all in one. However, for analog chip manufacturers, the difficulty of building an MCU is the development of digital signals and the conversion of digital-to-analog signals.

In order to enter this racetrack, Sirep established an embedded processor division in 2021 and invested 200 million yuan to develop an MCU product line. Many of the engineering teams in the division come from major international manufacturers such as Fujitsu, Infineon, and TI. Earlier, the company disclosed that it had completed the first industrial-grade MCU streaming and filled the gap in digital processing.

At the end of November, the company officially released the TPS32 mixed-signal MCU. Data shows that the core of this product chose STAR-MC1 instead of the traditional Cortex-M4F, which pursues differentiation and high performance. Dongwu Securities pointed out in a research report that the company's MCU products will enter the pan-industrial market in the early stages and then expand into the automotive sector.

There is a starting point on a long road, but there are still many challenges for Sirep to achieve the maturity of automotive MCU products.

On the one hand, the localization rate of automotive MCUs is not high. Currently, major international manufacturers are the main players, with a market share of over 90%. On the other hand, domestic production peers laid out one step earlier, presenting a pattern of “many towns and cities”.

Taking Nanochip Microelectronics as an example, a similar product, NSUC1610, was released this year. This product can be used in fields such as electronic water valves, active air intake grilles, and electronic air vents for air conditioners in thermal management systems.

Larger domestic manufacturers, such as GigaYi Innovation and Xilijie, enter the MCU by first completing the peripheral components, then developing and launching products after maturity. It's a bit like “the countryside encircles the city.”

As of October of this year, Sirep has mass-produced nearly 100 automotive regulation products. The categories include chips such as signal chains and automotive power supplies. Customers include Ningde Era and Aostar, and it has also obtained supplier qualifications and cooperated with electric vehicle customers (including some Tier 1). It is worth observing how far and wide the road of automotive chips can travel. (Produced by Thinking Finance) ■