Under on-site inspection! Chip companies planning to IPO are scared to delete data
Latest update time：2023-02-22
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How powerful are on-site inspections from supervision? The company planning to go public was so frightened that it deleted its system logs!
On February 20, the Listing Review Center of the Shenzhen Stock Exchange issued a regulatory letter to the proposed IPO company Huangshan Core Microelectronics Co., Ltd. (Chip Microelectronics).
Due to problems such as the deletion of the ERP information system logs during the on-site inspection, the inconsistency between the actual revenue recognition policy and the disclosure in the prospectus, the failure to fully disclose the risks of core patents about to expire, and utility model patents being declared invalid, Chip Microelectronics The listing review center takes self-regulatory measures with written warnings.
In addition, since the submission of the prospectus, the educational structure of Core Microelectronics’ employees has attracted much attention from the market. As of June 30, 2022, the educational composition of registered employees of Core Microelectronics shows that the number of employees with undergraduate degrees is 16, accounting for only 1.92%, and the number of employees with college degree and below has reached 816, accounting for 98.08%.
Failure to actively cooperate with on-site inspections
Delete ERP information system computer logs
According to the Listing Review Center of the Shenzhen Stock Exchange, the regulatory letter encountered by Chip Microelectronics mainly involves the following four major issues:
First, delete the ERP information system computer log.
In June 2022, the on-site inspection team discovered that the company had deleted the ERP information system startup logs before May 2022, and because the information system was not backed up, the on-site inspection team was unable to restore and query the relevant startup log records.
Second, the actual implementation of the revenue recognition policy is inconsistent with the disclosure in the prospectus.
According to the prospectus (draft application), the time point for the recognition of domestic sales revenue of Chip Microelectronics is after customer acceptance. An on-site inspection found that the company recognized revenue based on the provisional estimate of the courier note and delivery note when the express was sent, checked the express delivery receipts at the end of each quarter, and made revenue write-backs for unsigned orders. Chip Microelectronics did not use the disclosed "customer acceptance" as the revenue recognition time point, and the actual revenue recognition policy was inconsistent with the disclosure in the prospectus.
Third, the risk that core patents are about to expire and utility model patents are declared invalid is not fully disclosed.
An on-site inspection found that one of Core Microelectronics' core invention patents "thyristors, chips dedicated to manufacturing thyristors and manufacturing methods thereof" is about to expire in 2024, and a utility model patent has been declared invalid in 2021.
From 2019 to January to June 2022, the revenue generated by the products corresponding to the above two patents accounted for 74.81%, 68.98%, 55.03%, and 42.24% of the current main business revenue. Core Microelectronics did not fully disclose in the prospectus that the above-mentioned patent was about to expire and had been declared invalid, and it did not fully disclose whether there was a risk of significant adverse impact on production and operations.
Fourth, irregularities in financial accounting were not fully disclosed.
On-site inspections revealed that Core Microelectronics had issues such as insufficient provision for inventory depreciation provisions, inaccurate collection of salary expenses for some R&D personnel, failure to conduct separate impairment tests on accounts receivable with abnormal operating conditions, and government regulations related to assets. The amortization of subsidy deferred income is inaccurate, and R&D waste income is not used to offset R&D expenses.
In view of the above facts and circumstances, the Listing Review Center of the Shenzhen Stock Exchange decided to take self-regulatory measures of written warning against Chip Microelectronics. The Shenzhen Stock Exchange requires Chip Microelectronics to take warning, strictly abide by laws, regulations and the exchange's business rules, be honest and trustworthy, operate in a standardized manner, and ensure that issuance and listing application documents and information disclosure are true, accurate and complete.
IPO application will be subject to on-site inspection the next month
Many changes to financial data
Public information shows that Huangshan Core Microelectronics Co., Ltd. was founded in 1990. It is a joint-stock company established by the original Huangshan Electric Co., Ltd. of Qimen County, Anhui Province. It focuses on the research and development, production and sales of power semiconductor chips, devices and materials. .
Core Microelectronics' products are mainly thyristors, but also cover MOSFETs, rectifier diodes, Schottky diodes and upstream materials (polished wafers, epitaxial wafers, copper metallized ceramic wafers), which are mainly used in industrial control, consumer electronics, power transmission, etc. field.
In March 2022, Core Microelectronics submitted application materials to the Shenzhen Stock Exchange and planned to sprint for the GEM IPO. Regarding the selection of intermediaries, Chip Microelectronics’ recommended securities firm is China International Finance Securities, its accounting firm is Daxin Accounting Firm, and its law firm is Beijing Guofeng Law Firm.
The prospectus shows that Core Microelectronics’ IPO is expected to raise 550 million yuan, of which 235 million yuan will be used for power semiconductor chip and device production line construction projects; 169 million yuan will be used for silicon epitaxial wafer production line construction projects; 66 million yuan It will be used for R&D center construction projects; 80 million yuan will be used to supplement working capital.
Unfortunately, Core Microelectronics submitted its listing application in March 2022 and was selected for on-site inspection the next month. On April 22, 2022, the China Securities Association issued an announcement showing that based on the random selection results, two companies, Chip Microelectronics and Eagle Aviation, which plan to land on the Growth Enterprise Market, were included in the second batch of on-site inspections of first-time applicant companies in 2022.
At the end of September and November 2022, Core Microelectronics disclosed its updated prospectus for the semi-annual report and the responses to the first round of inquiries respectively. Among them, Core Microelectronics' financial data and financial indicators for 2019-2020 have been bolded in italics in many places, that is, the financial data has been corrected.
In addition, regarding patent issues, Core Microelectronics also explained in the new version of the prospectus: one of the company's invention patents "Thyristors, chips dedicated to manufacturing thyristors and their manufacturing methods" will expire in November 2024; one of the company's practical patents The new patent "a thyristor chip" was declared invalid by the State Intellectual Property Office on April 29, 2021.
Core Microelectronics said that if the company fails to continue investing in research and development, the patent protection will expire and the technology will be used by competitors.
Risks that may adversely affect the company's production operations and business development.
Only 16 undergraduate staff
98% of employees have bachelor’s degree or below
According to the prospectus, Core Microelectronics’ “technological content” is not low.
Core Microelectronics is a high-tech enterprise, a national-level specialized and special "little giant" enterprise, an Anhui Province technological innovation demonstration enterprise, an Anhui Province certified enterprise technology center, and an Anhui Province Engineering Technology Research Center. It has 6 invention patents and 14 practical items. New patents, so far it has undertaken national or provincial projects including the National Development and Reform Commission's new power electronic device industrialization project, the National Torch Plan industrialization demonstration project, Anhui Province's major science and technology special plan projects, the fifth batch of Anhui Province's major emerging industry projects, etc.
In addition, Core Microelectronics has established an Anhui Provincial Power Semiconductor Chip Engineering Technology Research Center, a provincial enterprise technology center, and a postdoctoral research workstation research and development platform. Core Microelectronics said that it has independent chip design and manufacturing capabilities, and has the first batch of strategic emerging industry technology leading talents in Anhui Province, Anhui Province's leading technology talents, Anhui Province's special support plan innovation leading talents, Huangshan City's top professional and technical talents, and The core team is led by well-known device experts in the industry with the title of senior engineer.
In terms of R&D expenses, the R&D expenses of Core Microelectronics during the reporting period were 15.4683 million yuan, 18.2504 million yuan, 22.8834 million yuan, and 11.2352 million yuan respectively. The proportions of R&D expenses in operating income were 9.16%, 7.96%, 6.05%, and 6.12% respectively. %. After excluding the impact of share-based payments, the R&D expense rates were 6.82%, 6.46%, 5.14% and 5.18% respectively, which were lower than comparable listed companies in the same industry.
However, since the announcement of the prospectus, the educational structure of Core Microelectronics’ employees has been criticized: As of June 30, 2022, the educational composition of registered employees of Core Microelectronics shows that there are 16 undergraduate employees, accounting for only 1.92%. The number of employees with college degree or below reached 816, accounting for 98.08%.
In terms of core technical personnel, Core Microelectronics announced five people: Rao Zugang, Wang Rixin, Wang Minan, Ye Minqiang and Xiang Jianhui. Among them, Rao Zugang holds a master's degree in electronics and communications engineering from Peking University and is a senior engineer; Wang Min'an holds a bachelor's degree in computer applications from Xi'an University of Electronic Science and Technology, and the other three are all college graduates.
In addition, the prospectus shows that the controlling shareholder of Core Microelectronics is founder Wang Rixin, and the actual controllers are Wang Rixin and Wang Minan, father and son, who directly hold 59.05% of the company's total share capital. Wang Rixin once achieved a breakthrough in thyristor technology, making Core Microelectronics one of the earliest domestic manufacturers of square thyristor chips. Wang Min'an is responsible for the management and control of the company's R&D projects and R&D processes, promoting the industrialization of R&D technology and improving the company's operating performance.
Some industry insiders analyzed that the power semiconductor industry in which Core Microelectronics operates has certain particularities. “The demand for high-end talents is not as high as the market imagines, and more emphasis is placed on craftsmanship and experience.” However, now that undergraduate education has become quite popular, it is still necessary for quasi-listed companies to increase their talent reserves.
Chip Microelectronics stated in its prospectus that compared with coastal areas and developed cities that have more regional advantages, the company's region lacks comparative advantages in talent attraction, making the company's ability to introduce outstanding talents relatively weak under the same conditions. Recruiting outstanding talents is relatively more difficult than comparable companies in the same industry with greater regional advantages. Core Microelectronics stated that it will enhance its technological innovation capabilities through the introduction, recruitment and internal training of R&D personnel, as well as the introduction of advanced R&D equipment.
Source: China Fund Daily
Source: China Fund Daily
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