"Defeated" at the bottom of the cycle? How did the IPO of Chipbond Technology fare?

Shenzhen Xinbang Technology Co., Ltd. (referred to as "Xinbang Technology") failed to submit a reply to the inquiry from the Shanghai Stock Exchange as scheduled after three months, and instead chose to withdraw the application and terminate the IPO process.

On October 19th, the Shanghai Stock Exchange announced that due to Xinbang Technology's application to withdraw the listing application, the Shanghai Stock Exchange decided to terminate the review of its initial public offering of shares and listing on the Science and Technology Innovation Board.

It is worth mentioning that Xinbang Technology's application was initiated on June 29th this year, and the withdrawal was submitted on September 21st, which means that the IPO of this project was abandoned in less than 3 months of review time.

Xinbang Technology is a chip design manufacturer for mobile storage control chips, smart home appliance control chips, and other products.

Like many domestic chip design manufacturers, Xinbang Technology is also a fabless manufacturer without manufacturing capabilities, and needs to entrust wafer manufacturing, packaging and testing to external manufacturers.

Coincidentally, on October 18th, Canxin Semiconductor (Shanghai) Co., Ltd., which provides services to chip design companies, also encountered obstacles in the listing process and received a "suspension of review" outcome at the meeting. The Listing Committee requested further clarification on whether its relationship with major shareholder SMIC International affects its operational independence.

Although it is not a related party transaction, Xinbang Technology also relies too much on suppliers. In 2022, Shanghai Huahong Hongli Semiconductor, a subsidiary of Huahong Group, accounted for 47.15% of its procurement amount. In addition, Xinbang Technology has a high dependence on a single downstream distributor, with the largest customer accounting for as much as 45.08%.

Due to the unstable revenue structure of Xinbang Technology, its profitability is significantly affected by the cycle as the proportion of revenue from SD flash memory cards increases. It shows characteristics that are in line with the prices of memory manufacturers, and even has to get involved in price wars. Although its revenue doubled in three years, its net profit did not increase but decreased.

Fortunately, this cycle of storage chip price reduction and destocking is about to pass. Since this year, major storage manufacturers such as Changjiang Storage have announced price increases, but the impact on the IPO "failed" at the bottom of the cycle.

In July of this year, Xinbang Technology chose to withdraw the listing after failing to reply to the inquiry letter from the Shanghai Stock Exchange.

TradeWind01 made multiple calls to Xinbang Technology to inquire about the reason for the withdrawal, but failed to get through.

Xinbang Technology's main business is the design and development of mobile storage control chips, smart home appliance control chips, and other products. Among them, mobile storage control chips are the core components of daily-used storage devices such as USB flash drives and SD memory cards, along with flash memory chips.

In 2022, Xinbang Technology's revenue from mobile storage control chips reached 137 million yuan, accounting for a high proportion of 72.36%. Xinbang Technology's shipments reached 217 million chips, which is comparable to its major competitor in the Taiwan region, Pointext (6845.TWO). In the mobile storage controller chip business of Silicon Motion, the revenue contribution of storage disk controller chips in 2022 accounted for 84.22% of its total revenue. This part of the business has a relatively stable gross profit margin, even increasing from 53.68% to 56.95% in the past year when storage chip prices dropped significantly.

The revenue share of storage card controller chips is rapidly increasing, from 1.32% in 2020 to 15.78% in 2022.

However, as the scale grows, the gross profit margin of Silicon Motion's storage card controller chips is more affected by price fluctuations. The gross profit margin dropped from 48.13% in 2020 to 39.51% in 2022, and even as low as 27.59% in 2021.

Silicon Motion explained that this was due to proactive price reductions to maintain market position during the weak demand in the first half of 2021. It is not difficult to understand, as during the destocking cycle, Samsung Electronics, which produces flash memory chips, recorded a record loss of 8.94 trillion Korean won (approximately 49.93 billion RMB) in the first half of this year.

Compared to that, Silicon Motion, which achieved a net profit of 38.1798 million yuan last year, was relatively less affected by industry cyclicality. However, it is difficult to guarantee that as the proportion of its storage card controller chips increases, profit fluctuations will become more pronounced.

However, there are signs of recovery in the storage chip market. According to the Shanghai Securities News, domestic storage giant Yangtze Memory announced a price increase in August this year, and Samsung Electronics also announced a price increase of 10% to 20% for DRAM and NAND flash memory chips in September.

For Silicon Motion, which provides support for mobile storage disks and storage cards, its listing failure can be seen as falling at the bottom of the cycle.