The net profit of TWS headphones increased by 4751%. Has it always been in the limelight?

ETC has no lanes, but TWS is still popular...

In the past few years, a number of new demands have emerged in the consumer market, such as the TWS (true wireless Bluetooth headsets) trend started by Apple, the policy-driven ETC (electronic toll collection system) industry, and e-cigarettes that are chasing the "trend". The birth of these new consumer demands has also brought new growth to the semiconductor industry. For example, a number of smart Bluetooth audio chip companies have been born in China. However, a few years have passed, how are these trends still going?

01. TWS: Still a hot topic

Recently, Hengxin Technology released its 2020 financial report. According to the report, the company achieved total operating revenue of 1.06 billion yuan in 2020, a year-on-year increase of 63.6%, and net profit of 198 million yuan, a year-on-year increase of 194.4%; in addition, Hengxin Technology's revenue in the first quarter of this year was 290 million yuan, a year-on-year increase of 124.6%, and net profit of 79.73 million yuan, a year-on-year increase of 4,751.05%.

From the perspective of Hengxin Technology's product distribution, the company's main products are divided into three categories: ordinary Bluetooth audio chips, smart Bluetooth audio chips, and Type-C audio chips. Its customers include mainstream Android mobile phone brands such as Samsung, Huawei, and Xiaomi, as well as professional audio manufacturers such as SONY, Edifier, and Edifier, and Internet companies such as Baidu and Alibaba.

From the revenue structure, smart Bluetooth audio chips accounted for half of the revenue, accounting for 51.47%, followed by ordinary Bluetooth audio chips, accounting for 31.52% of the total revenue, while traditional Type-C audio chips only accounted for 8% of the revenue. In addition, in terms of gross profit margin, due to the impact of Hengxuan Technology on the high-end market, the gross profit margin of its smart Bluetooth audio chips has increased by nearly 3% in the past year.

02. Bluetooth audio chip companies are going public

Currently, Hengxuan Technology, Zhongke Bluexun and Jier are the three giants of domestic smart Bluetooth audio chips. In addition to Hengxuan Technology which has already been listed, the other two companies are also seeking to go public in the near future.

In November last year, Zhongke Bluecom hired CICC to provide listing guidance. At the beginning of this month, CICC issued an announcement that it had completed the listing guidance work for Zhongke Bluecom. It took only 5 months from the beginning to the end of the guidance, indicating that Zhongke Bluecom has made sufficient preparations for the listing.

Jie Li's road to listing seems a bit bumpy. Recently, the Guangdong Regulatory Bureau disclosed that Jie Li Technology had completed the registration for tutoring on April 20, 2021, which means that Jie Li Technology has made its third attempt at an IPO.

Prior to this, Jie Li had been accepted for registration and filing in November 2016 and May 2018, but failed to successfully complete the listing both times. Three years later, Jie Li once again tried to go public, and it seemed that it was well prepared.

03. Walker walks fast

In the downstream consumer market, also benefiting from TWS headphones, the market value of professional audio manufacturer Edifier increased sixfold from June 2019 to June 2020. And its revenue growth rate has not slowed down in the past year. According to its latest performance report, Edifier's revenue in 2020 was 1.934 billion, a year-on-year increase of 55.59%; net profit was 274 million yuan, a year-on-year increase of 123.15%.

04. ETC boom has passed

Like TWS, ETC was once a hot topic, but the market size is smaller and the trend died earlier. Currently, the main company providing ETC chips in China is Broadcom Integrated.

On May 28, 2019, the National Development and Reform Commission and the Ministry of Transport jointly issued the "Implementation Plan for Accelerating the Promotion of Electronic Non-Stop Quick Toll Collection Application Services on Expressways", with the goal of completing the installation and use of ETC on operating vehicles such as passenger vehicles, rental cars, and highway freight vehicles by the end of that year. The number of ETC users nationwide will exceed 180 million.

Driven by the policy, Broadcom Integrated's revenue for the year was 1.175 billion yuan, up 115.09% year-on-year, and its net profit after deducting fees was 240 million yuan, up 113.33% year-on-year. However, ETC is different from consumer electronics. Its products have slow iteration, long life, small market, and slow growth, so the increase comes and goes quickly.

According to the latest performance report, Broadcom Integrated expects the company's net profit attributable to shareholders of listed companies in 2020 to be lower than the same period last year.

05. Extinguished e-cigarette

Compared with ETC, the wind outlet of e-cigarettes is shorter, and it can even be said that the wind has not blown up yet, and the wind outlet has been blocked. Because smoking is harmful to health, coupled with the relevant policies issued by the state, e-cigarettes have been extinguished before they can be ignited.

Two months after its listing in the U.S., RELX Technology, the parent company of the e-cigarette brand "RELX", had a market value of nearly 300 billion yuan, with a high dynamic price-earnings ratio of more than 5,000 times. However, with the introduction of e-cigarette-related policies, RELX Technology's market value evaporated by nearly 100 billion yuan in one day.

In addition to atomizers, e-cigarettes also use electronic components such as MCU, power management IC, PCB boards, etc. Suppliers include Yiwei Lithium Energy, Dongshan Precision, Huada Semiconductor, Shengbang Micro, etc. However, after all, this part of revenue is only a very small market for most companies, so it has not caused a profound impact on specific semiconductor companies.

Summarize

In recent years, with the discovery of technology, more and more new products and new trends have emerged in the consumer market, such as TWS, smart speakers, wearable devices, e-cigarettes, etc., all of which have been flagged by semiconductors. TWS, smart wearables, etc. are full of vitality and have spawned a complete industrial chain and some semiconductor listed companies, while e-cigarettes are only a flash in the pan and have not caused much waves in the semiconductor industry.

For enterprises, if they can seize the trend, they may be crowned with glory and rise rapidly, as is the case with Luxshare Precision and Hengxin Technology. But at the same time, we must also pay attention that if we are overly dependent on the trend, once the wind stops, our revenue will also decline, which needs to be taken seriously.