Sunsea Intelligence has invested heavily in the transformation of the Internet of Things, but the road ahead is still difficult

According to market data, my country's Internet of Things market size exceeded one trillion yuan for the first time in 2018, with an annual compound growth rate of over 25%; the global Internet of Things market will reach 1.1 trillion US dollars by 2025.

As the development of the Internet of Things industry becomes increasingly clear, the Internet of Things has become an important field that many companies are vying for. As a new player in the Internet of Things industry, Sunsea Intelligent Technology Co., Ltd. (hereinafter referred to as "Sunsea Intelligent", formerly known as "Sunsea Communications") has completed a series of acquisitions with huge funds and transformed from the traditional communications industry to the Internet of Things field. However, for Sunsea Intelligent, the gamble may not necessarily win.

Huge losses led to an acquisition turnaround

Sunsea AIoT is dedicated to providing first-class communication network connection, distribution and protection products and overall solutions for domestic and foreign operators, telecommunication equipment manufacturers and network integrators. Its products include optical fiber and cable management equipment (ODF), broadband main distribution frame (MDF), digital distribution frame (DDF), integrated wiring system, indoor and outdoor communication cabinets, power distribution system equipment, mobile network infrastructure (computer room, tower, antenna feeder and base station accessories, etc.). It has a leading edge in ODN solutions for fiber optic user access network (FTTX) construction and tower room integrated solutions for mobile base station construction.

From its establishment in 2003 to its listing in 2009, Sunsea AIoT has continued to deepen its roots in the communications equipment industry, established good cooperative relationships with the three major operators, and become a major supplier to more than 10 world-renowned telecommunications equipment manufacturers such as Huawei, ZTE, Alcatel-Lucent, Nokia-Siemens, Ericsson, and Nortel. Its current products and services have expanded to more than 30 overseas telecommunications operators.

According to the reporter's review of Sunsea Intelligent's financial reports over the years, Sunsea Intelligent's revenue increased from 685 million yuan in 2009 to 2.869 billion yuan in 2015; net profit increased from 72.54 million yuan in 2009 to 171 million yuan in 2012. The performance growth in the early stage of listing was quite significant.

Sunsea AIoT's revenue and net profit from 2009 to 2018

However, Sunsea AIoT's performance failed to continue to rise. In the fourth year after its listing, its performance took a big turn. Net profit began to decline sharply in the fourth quarter of 2013, and the net profit in the 2013 annual report was only 52.02 million yuan. Since then, performance has continued to decline, and the net profit in the 2015 annual report was -28.94 million yuan, and the loss continued until the second quarter of 2016.

As a result, Sunsea AIoT began to face the fate of being acquired. In 2016, when Sunsea AIoT suffered the most serious losses, Runliangtai, a domestic large-scale merger and acquisition fund, acquired Sunsea Communications and carried out a "major reshuffle" of Sunsea AIoT's senior management, replacing everyone from its shareholders to the core management.

Subsequently, under the leadership of the new executives, Sunsea AIoT has expanded into new business areas in addition to its original communications equipment business, and has made every effort to develop the Internet of Things industry, committed to creating a large Internet of Things industry landscape that includes terminals, cloud platforms, and multi-industry solutions.

Supported by the new business, in October 2017, Sunsea Smart joined hands with American Ella and established Sunsea Ella, expanding the business of the IoT cloud platform to overseas markets such as Europe and the United States. This to a certain extent solved the IoT data and equipment control problems at the time, and laid a solid foundation for Sunsea Smart to deepen its roots in the IoT platform field.

It is worth noting that in addition to promoting corporate transformation, Sunsea AIoT's layout and adjustments in strategic direction also included "big-ticket" acquisitions, laying the foundation for making the Internet of Things and Internet of Things technology the core development strategy of Sunsea AIoT.

After the transformation, it invested 700 million yuan to develop the Internet of Things

With Sunsea Technology's massive acquisitions, it can be said that 2017 was a watershed year for Sunsea Technology. Before 2017, it was "the Sunsea of ​​the past" as the chairman of Sunsea Technology said, and after that, Sunsea Technology was a pure Internet of Things company.

It is understood that from September to December 2017, Sunsea Communications spent more than 700 million yuan to acquire 68% of the shares of module manufacturer Longshang Technology and 100% of the shares of SIMCom, and previously invested in the Internet of Things PaaS platform American Ella, officially entering the Internet of Things industry.

Among them, SIMCom is the company with the largest shipment volume of cellular IoT modules in the world, and has mastered the module product development capabilities and core technologies based on wireless communication chips; Longshang Technology is also a world-leading wireless module and IoT solution supplier, and occupies a pivotal position in the industry. Sunsea AIoT's acquisition of SIMCom and Longshang Technology has improved its large-scale module shipment capabilities.

After these acquisitions and investments, Sunsea AIoT has established its position in the IoT industry. Subsequently, Sunsea AIoT changed its name. Sunsea AIoT announced that from June 22, 2018, the original company name "Shenzhen Sunsea Communication Technology Co., Ltd." will be changed to "Sunsea AIoT Technology Co., Ltd."

"Strike while the iron is hot." Three months later, Sunsea Intelligent Technology established the Sunsea Intelligent 5G R&D Center in Chongqing. The Internet of Things business has become the main contribution to Sunsea Intelligent Technology's performance.

According to Sunsea AIoT's 2018 annual report, total operating revenue in 2018 reached 4.42 billion yuan, a year-on-year increase of 47.84%; net profit was 71.7 million yuan, a year-on-year decrease of 29.72%; non-net profit was 40.18 million yuan, a year-on-year decrease of 39.50%. The annual report disclosed that Sunsea AIoT's revenue growth mainly came from: 1) the rapid expansion of smart city business, and the sales of IoT solutions in Shanghai, Yan'an, Beijing and other cities; 2) the increase brought by the consolidation of Longshang Technology and SIMCom.

Among them, the revenue of the Internet of Things industry was 2.092 billion yuan, accounting for 47.34% of the total revenue, an increase of 2776.39% year-on-year; the revenue of the communications industry was 2.328 billion yuan, accounting for 52.66% of the total revenue, a decrease of 20.20% year-on-year. Due to the decline in capital expenditures of operators in 2018, the revenue of Sunsea AIoT's communications business declined accordingly. At the same time, the revenue of the Internet of Things business grew rapidly, accounting for nearly half of the total revenue.

As the revenue of the IoT business has increased significantly and gradually become a core profitable business, Sunsea AIoT has formed three major business segments of IoT + edge computing + artificial intelligence, especially further laying out in the field of communication modules.

It is understood that in January 2019, Sunsea AIoT officially announced the establishment of the Module Business Group. Li Bin, a leading figure in China's mobile phone industry, former president of Coolpad Group and former chairman and CEO of ivvi, was appointed as executive vice president of Sunsea AIoT and chairman of the Module Business Group, in the hope of developing the advantages of the two major communication module companies, SIMCom and Longshang Technology.

However, with the advent of the 5G era, the scale of wireless connections has surged, bringing about major changes in communication module technology and market structure. Faced with this increasingly fierce market competition, and at an important moment in the development of the Internet of Things in 2019, every company is facing huge market dividends and competition reshuffles. As a new industry player that entered the market through mergers and acquisitions, whether Sunsea AIoT can maintain its advantages and seize the market "cake" in the future remains to be seen.