IC packaging and testing manufacturer Blue Arrow Electronics successfully passed the IPO on the Science and Technology Innovation Board

 On December 31, according to the results of the 128th review meeting of the Shanghai Stock Exchange Science and Technology Innovation Board Listing Committee in 2020, Foshan Blue Arrow Electronics Co., Ltd. (hereinafter referred to as "Blue Arrow Electronics") successfully passed the Science and Technology Innovation Board IPO.

However, the Listing Committee also raised four major questions. First, please ask the issuer's representative to: (1) Based on typical R&D projects, explain the process of the issuer's R&D projects from determining the R&D direction and personnel organization to project completion, R&D results evaluation and assessment, and disposal of R&D products; (2) Explain whether effective internal controls have been formulated and implemented around the entire process of the above R&D activities, including but not limited to the management of the working hours of R&D personnel involved in R&D, the management of the working hours of R&D equipment involved in R&D, the management of R&D materials, the disposal of R&D products, and the evaluation of R&D results; (3) With respect to the R&D investment during the reporting period, explain the relevance of such R&D activities to the issuer's improvement of the technical level and revenue scale in the field of advanced packaging; (4) By comparing the issuer's revenue structure and major financial indicators during the reporting period, analyze the commercial rationality of the issuer's cumulative R&D investment exceeding the cumulative profit during the reporting period, and explain the reasons why the issuer failed to achieve a significant increase in revenue and profit levels despite such high levels of investment; (5) Explain whether the issuer has made sufficient preparations in terms of technology reserves, R&D personnel training and recruitment, advanced technology product R&D and customer certification to invest in the raised funds projects and narrow the gap with comparable companies in the same industry in terms of technology level, product structure, and revenue scale. Please give clear opinions on the sponsor representative.

2. Please explain the verification procedures carried out before the application for the issuer's main product gross profit margin is significantly higher than that of comparable companies in the same industry, and its R&D investment includes non-full-time R&D personnel and non-dedicated R&D equipment, and express a clear opinion on whether the issuer's information disclosure on R&D investment, product gross profit margin level, etc. is true, accurate and complete.

3. Please explain the following on behalf of the issuer: (1) Whether the additional 40 R&D personnel as of December 31, 2019 compared to December 31, 2018 were from internal transfers, labor dispatch conversions or external employment, and explain the salary expenses of the 40 additional personnel in 2019 and from January to September 2020 and the specific R&D projects they participated in; (2) Whether there were any labor dispatch personnel who worked for the issuer for more than 183 days in total during the reporting period, and the rationality of not using the “total number of employees” to calculate the proportion of scientific and technological personnel in the enterprise. Please give a clear opinion on this.

IV. Please ask the issuer representative to explain the basis and rationality of using the repurchase price of 3.83 yuan per share in December 2018 as the fair price of equity incentives. Please ask the sponsor representative to express a clear opinion.

According to the prospectus, Blue Arrow Electronics is a national high-tech enterprise engaged in semiconductor device manufacturing and semiconductor packaging and testing. The company has a relatively complete R&D, procurement, production and sales system, and has mastered a series of core technologies such as metal substrate packaging, fully integrated lithium battery protection IC, power device packaging, ultra-thin chip packaging, semiconductor/IC testing, high-reliability welding, and high-density frame packaging.

Blue Arrow Electronics has a robot automated production system, which is fully applied in the company's semiconductor device manufacturing, testing and intelligent production process, gradually realizing the intelligence and automation of all related processes in semiconductor device manufacturing. The company's main products include discrete devices, integrated circuits and other semiconductor products. At the same time, it undertakes semiconductor packaging and testing business externally. It is one of the larger semiconductor device production bases in South China.

From 2017 to 2019, Blue Arrow Electronics achieved operating income of RMB 519.2388 million, RMB 484.7884 million, and RMB 489.9353 million, respectively, and realized net profit attributable to the company's ordinary shareholders of RMB 18.3806 million, RMB 10.7541 million, and RMB 31.7010 million, respectively.

Blue Arrow Electronics said that the semiconductor packaging and testing industry has a certain cyclicality, which has a great impact on the operations of companies in the industry. Affected by the cyclicality of the semiconductor industry and the fluctuations in supply and demand in downstream application fields, the company's operating performance has shown a fluctuating trend in recent years.

In this IPO, Blue Arrow Electronics plans to issue no more than 50 million common shares to the public, accounting for no less than 25% of the total share capital after issuance. After deducting the issuance expenses, the raised funds of 500 million yuan will be used entirely for the expansion project of advanced semiconductor packaging and testing and the construction project of R&D center.

Blue Arrow Electronics said that after the completion of the fundraising project, it will further improve the DFN series, SOT series and other packaging technologies, support the company's production practices in new technologies and new processes, enhance the company's core technological advantages, further enrich the company's product line, meet the production and development of different packaging processes and products of different specifications, optimize the product structure, meet the growing market demand, and consolidate and improve the company's market competitiveness.