Espressif Technology's revenue and net profit increased significantly in 2019, and it will launch 4 AIoT chips in 2020

On March 10, Espressif Systems disclosed its 2019 annual report. The company achieved operating income of 757 million yuan in 2019, a year-on-year increase of 59.49%; and achieved net profit of 159 million yuan, a year-on-year increase of 68.83%.

       Regarding the reasons for the company's performance growth, Espressif Technology stated that it benefited from the rapid development of the downstream Internet of Things field, and the company's product sales increased significantly compared with 2018. It also benefited from structured deposit income, government subsidies related to daily operations, and preferential income tax policies.

       According to the disclosure, in 2019, Espressif sold a total of 143,520,900 chips and modules, an increase of 79.44% over 2018. Espressif pointed out that with the increase in sales, the unit price of our products to customers has been declining. At the same time, due to the scale effect brought about by the increase in sales, the unit cost has also decreased accordingly, and the decline is slightly lower than the decline in price. The comprehensive gross profit margin in 2019 was 47.03%, a decrease of 3.63 percentage points from 2018.

       In 2019, Espressif Systems applied for 20 new domestic invention patents and obtained approval for 8 domestic invention patents; applied for and obtained 1 U.S. patent through the Patent Cooperation Treaty (PCT); and applied for and obtained certification for 5 new software copyrights.

In terms of R&D, in 2019, Espressif's R&D investment totaled 119 million yuan, accounting for 15.81% of its operating income; the number of R&D personnel reached 246, accounting for 71.30% of the company's total number of employees. Espressif said that the company currently has sufficient reserve funds for R&D investment and will continue to actively expand its R&D team.

       In addition, Espressif plans to launch four AIoT chips in 2020, covering different market segments, price points and performance. The latest chip will adopt a new wireless architecture, which will enable it to maintain stable performance in an environment of -40°C~125°C while also having lower power consumption.

       In terms of development strategy, Espressif pointed out that as an advanced technology, Wi-Fi 6 will first enter high-end application fields such as smartphones, and the application in the field of IoT has higher requirements for cost performance, so in the short term, 2.4GHz Wi-Fi 4 will still be one of the mainstream Wi-Fi technologies in the field of IoT. We expect that after 2021, Wi-Fi 6 will gradually enter the field of IoT.

       Regarding investment and M&A strategies, Espressif said that the company will continue to pay attention to the development of IoT technology companies and remain open to investment and M&A opportunities. Future investments will focus on three aspects: supplementing technical capabilities, supplementing product lines, and strategic synergy. Supplementing technical capabilities and supplementing product lines will focus on chip companies. Strategic synergy will focus on downstream ecological chain companies that use the company's products.

      In terms of business plans, Espressif pointed out that due to the impact of the new coronavirus epidemic and its trend of spreading globally, the global economy is expected to be affected, so the company remains cautious about the revenue growth rate in 2020.

       It is understood that Espressif is a professional provider of total IoT solutions, adopting a fabless business model, and is mainly engaged in the research, design and sales of IoT Wi-Fi MCU communication chips and modules. Its products are widely used in IoT fields such as smart homes, smart lighting, smart payment terminals, smart wearable devices, sensor equipment and industrial control.

      According to an inquiry from Espressif Systems to Techno Systems Research, Espressif's market share in the Wi-Fi MCU field is expected to remain at around 30% in 2019, higher than other companies in the same industry, ranking first for three consecutive years. Other competitors with a relatively large market share include Qualcomm, Cypress, Marvell, MediaTek and Realtek.