SinoWen Electronics: The company's MCU product market share may gradually increase

Recently, Pan Yide, the secretary of Zhongying Electronics, said in an institutional survey that the sales growth of home appliance chips is limited by production capacity. The company's inverter refrigerators and washing machines have been mass-produced. Customers of inverter air conditioners require high product stability and long verification time. Now customers are in small-batch production and testing. In the long term, a small part of the company's white appliance chip wafer foundry will gradually shift from relatively mature 8-inch wafers to 12-inch wafers. As customers' domestic substitution strategies are still being orderly promoted, the market share of the company's MCU products is expected to gradually increase.

Regarding IOT research and development, Pan Yide said that the company's existing MCU+Bluetooth solutions have been used in medical applications, and the WiFi technology currently being developed is mainly based on low power consumption, high compatibility, high reliability, and long transmission distance. The company's existing 32-bit MCU is mainly used in the field of variable frequency air conditioners and Internet of Things applications. For smart homes, the company's MCU chips will reserve ports to allow customers to achieve interconnection of home appliances through WiFi or Bluetooth. It is hoped that in the future, customers will be able to provide solutions integrating MCU and wireless transmission.

In terms of lithium battery management chips, Pan Yide believes that this series of products involves product safety and has high technical barriers. The company's lithium battery management chips have made good progress in domestic substitution for branded mobile phones and TWS headphones, and the performance of the products has been recognized by customers; power lithium battery management chips are mostly used in electric bicycles, sweeping robots, power tools, etc.; lithium battery management chips for laptops have been produced in small quantities for large brand customers, and will be promoted horizontally this year. The company's lithium battery management chip products have gradually entered the original equipment market from the aftermarket.

In terms of AMOLED products, the process yield rate of domestic screen factories has improved significantly. The demand for mobile phone screens of AMOLED display driver chips has a clear growth trend. The display driver chips of the subsidiary are currently mainly taped out in domestic wafer factories. Since certain production capacity has been guaranteed in advance and the chips are highly competitive, they can guarantee growth this year. The subsidiary will communicate closely with the panel factory and help them solve problems in a timely manner. The verification time for new products in the future will be about 3 months. In the long term, as the domestic market scale expands, more sales growth opportunities are expected.

Pan Yide said that in the long run, the company hopes that Xinying Technology will be able to go public in the future, but there is no clear timetable at present.

Regarding the relationship between the company's new production capacity and product gross profit margin, Pan Yide said that the company has taken corresponding measures since the second half of last year to plan and layout the capacity increase in advance, and actively respond to the tight capacity of upstream supply chains such as wafer fabs and packaging and testing plants. The company has established a long-term strategic cooperation model with wafer fabs to obtain production capacity, which will have an impact on gross profit margin. The new production capacity that the company has strived for in the short term is still unable to digest customer order demand, but it is expected to improve quarter by quarter. The cost of the new production capacity is still increased. The company will also try to pass it on to customers.

In the long run, SinoWise's gross profit margin will fluctuate more as its product mix changes. Profit margins can be maintained. The gross profit margin of the company's MCU products is close to the company's average, while the gross profit margin of AMOLED display driver chips is lower than the company's average.

In the context of insufficient industrial capacity supply, Zhongying Electronics will appropriately pass on the cost increase to downstream companies in response to supplier price increases in order to obtain more wafer capacity. Pan Yide said that most of the company's products have been raised in price since January 1, 2021, and the price adjustment mainly reflects the increase in the upstream supply chain. If wafer prices continue to rise in the second half of the year, it is not ruled out that the company will adjust the prices of some products.