Cambrian Breakthrough: A high level of customer concentration expands scale due to R & D

Cambrian Breakthrough: A high level of customer concentration expands scale due to R & D
On the afternoon of March 26, the Shanghai Stock Exchange disclosed a new copy of the science and technology board replacement enterprise, and the semiconductor company Zhongke Cambrian Technology Co., Ltd. (hereinafter referred to as “Cambrian”) was among them.In the past few years, because of its backing to the Chinese Academy of Sciences, the Cambrian has been adopted by Huawei’s annual flagship machine, which once attracted attention from the outside world and became a unicorn company in the field of artificial intelligence.  According to the prospectus, Cambrian planned to issue no more than 40.1 million shares for financing 28.RMB 110,000, CITIC Securities is the sponsor and lead underwriter, CICC, Guotai Junan Securities and Anxin Securities are the joint lead underwriters.The funds raised from this issuance will be used for a new generation of cloud training chips, cloud inference chips, edge-end artificial intelligence chips and their respective system projects, as well as supplementary working capital.  Since the company has not been profitable in the past three years, the company has selected the SSE’s science and technology board stock listing rules, which is expected to have a market value of not less than 1.5 billion yuan, and an operating income of not less than 200 million yuan in the most recent year, and the last threeThe ratio of gradual R & D expenditure to the cumulative operating income in the last three years is not less than the standard of 15%.The prospectus disclosed that the proportion of R & D investment in operating income in the last three years was 380 respectively.73%, 205.18% and 122.32%.  From 2017 to 2019, the Cambrian annual operating income was 784.RMB 330,000, 1.RMB 1.7 billion, and 4.44 trillion yuan, the increase in 2018 and 2019 is 1392 compared to the previous year.05% and 297.35%; the net purity is 3.RMB 8.1 billion, 4104.RMB 650,000, and 11.7.9 billion yuan.For the fluctuation of net clarity, the prospectus explained that it is essentially affected by non-recurring profit and loss items such as share-based payment and R & D expenses.  Under the blessing of the Chinese Academy of Sciences, the prospectus of entrepreneurs that came out showed that the Cambrian was established in March 2016 and completed the company change in November 2019 from “Limited Company” to “Limited Company”.The company’s main business is distributed classified cloud services, R & D, design and sales of intelligent core chips for edge computing equipment and terminal equipment, providing customers with products and system solutions.  Chen Tianshi, born in 1985, is the founder of this company, the controlling shareholder and the actual controller.He directly holds 33 shares.19%, indirect shareholding 1.16%, holding 34 shares in total.36%.Chen Tianshi attended the juvenile class of the University of Science and Technology of China in his early years and eventually obtained a doctorate in computer software and theory. He worked at the Institute of Computer Science, Chinese Academy of Sciences from July 2010 to September 2019.In 2019, his annual salary in the Cambrian was 108.RMB 0.96 million.  In addition to Chen Tianshi, deputy general manager Liu Shaoli, chief operating officer Wang Zai, and deputy general manager Liu Daofu were included in the founding team members. These members, like Chen Tianshi, once worked at the Computer Institute of the Chinese Academy of Sciences.Not only that, the wholly-owned Chinese computing source of the Institute of Computing of the Chinese Academy of Sciences is the company’s second largest shareholder with 18 shares.twenty four%.  The prospectus does not introduce Chen Yunji separately, but mentions him in the related party asset transfer in the related party transaction chapter.In February 2019, the Cambrian signed with Chen Tianshi and Chen Yunji for 42.420,000 transferred the 100% shareholding of Su Hangzhou Ai Cambrian held by the two.In the early Cambrian period, he once introduced that the company was jointly founded by Chen Tianshi and Chen Yunji brothers, and Chen Yunji was admitted to the juvenile class of the University of Science and Technology of China at the age of 14, and then entered the Institute of Computing Technology of the Chinese Academy of Sciences.  The prospectus shows that the scale of the report, Cambrian is based on the needs of research and development and business development. It also obtained a small number of technical authorizations from the Institute of Computing Technology of the Chinese Academy of Sciences and paid payment fees.190,000 yuan, 15 in 2019.The pricing method is 910,000 yuan. The pricing method is based on the routine procedures of the Institute of Computing Technology of the Chinese Academy of Sciences and is determined through consultation between the two parties. In addition, in 2018, the Cambrian entrusted the Institute of Computing Technology of the Chinese Academy of Sciences to participate in the development of the Bangla.  A large number of shareholder seats, Ali, Lenovo, HKUST Xunfei appeared in the prospectus, since the first capital increase in August 2016, the Cambrian has experienced six capital increases, and since April 2016, the company has also completedThree equity transfers.Before this offering, Cambrian had 32 individual and institutional shareholders directly holding shares, and due to changes in the shareholding relationship, shareholders with indirect shares and concerted action relationships also existed.  On the signing date of the final prospectus, Chen Tianshi, Zhongke Suanyuan, and Aixi Partners were firmly seated in the top three shareholders.Among them, Chen Tianshi is a general partner of Aixi Partners, while other executives, personnel and employees with long-term labor contracts with the company are limited partners.Nanjing CMB and Hubei CMB held shares in China Merchants Bank International Capital Management and China Telecom System Integration Corporation.42%; SDIC Fund and Ningbo Hango hold a total of 7.35%; Paleozo Ventures and Zhisheng Kexun hold a total of 5.04%.  In addition, existing companies with higher shareholder visibility appear in the shareholder seats or hide behind direct shareholders.Alibaba Ventures has invested in the third and fifth capital increase, 1 trillion and 4995 respectively.520,000 yuan.On the signing day, Ali Venture Capital sat firmly on the tenth largest shareholder with a shareholding ratio of 1.94%.Lenovo Sustainable Hubei Lenovo and Na Yuanmingzhi entered the game. The latter two have a concerted relationship and hold 2 shares.39%.  Although HKUST has been in the shareholders’ seat since the first capital increase in August 2016, it transferred 0 to Guangzhou Huixing in the second allocation transfer in May 2019.25% equity.On the day of signing, HKUST’s direct shareholding ratio is 1.19%.  In addition, at the first level, Jinshi Yinyi, a wholly-owned subsidiary of lead underwriter CITIC Securities, directly holds shares1.19%, while holding CITIC Securities 15.CITIC Industrial, a wholly-owned subsidiary of CITIC Group with a 47% stake, holds Ningbo Hango8.33% equity, while Ningbo Hango holds Cambrian 3.43% equity.Funds managed by CICC Capital, a wholly-owned subsidiary of CICC, the lead underwriter, also hold shares through CICC and directly hold shares119%.  Large customer Huawei paid 1 in the past three years.8.6 billion pounds of modern artificial intelligence technology has been applied in the cloud, edge and terminal, and Cambrian products meet the needs of these three different types of equipment.The prospectus shows that in 2019, the proportion of business will be expanded, new businesses will be launched, and the number of reports will be reported. The main customers are chip design manufacturers, server manufacturers, and local governments in need of data center construction.  The initial product of the Cambrian is the terminal intelligent processor IP Cambrian 1A processor in 2016, followed by 1H and 1M in 2017 and 2018, respectively, with improved performance and corresponding expansion of the model.Both the cloud and the edge have launched chips and smart acceleration cards in the cloud. Among them, the cloud-based Siyuan 290 is being tested in samples, while the edge-side Siyuan 220 and the accelerator card released in 2019 have not yet launched actual sales.In addition, the Cambrian continued to develop and upgrade basic system software platforms to adapt to new chips.  The prospectus shows that the number of reports, in 2017 and 2018, more than 98% of the revenue came from the license revenue of the terminal smart processor IP, and in 2019, the system business was obtained through the cloud smart chip and the acceleration card business and intelligent computingWuji’s main business income has increased substantially by nearly four times.In 2019, terminal revenue accounted for 15% of total revenue.49%, the cloud accounted for 17.77%, the intelligent computing system accounted for 66.72%.  For the decline in the terminal side, the reason is that the mid-to-high-end equipment that adopted its IP achieved large-scale transformation in 2018, but at the same time, the Cambrian delivered IP to company A, which caused a decline in 2019.This part of the business does not sell physical chips, only IP. Sustainable company A is a major customer of the Cambrian. From 2017 to 2019, the Cambrian sales to company A totaled 1.8.6 billion yuan, accounting for 98% of revenue.34%, 97.63%, and 14.34%.Although the Cambrian Prospectus no longer discloses the sales amount of Company A, its customer is Huawei in the publicity of the battle.  Obviously, as a semiconductor company focusing on the design and sales of the Fabless model, Cambrian also included Huawei HiSilicon in its scope and risk warning.In fact, the deputy general manager holding the company ‘s shares, CTO Liang Jun joined the Cambrian in 2017, and in physics, he worked at Huawei and Hisilicon and served as a senior technical expert.Liang Jun and Chen Tianshi, Liu Shaoli and Liu Daofu were listed as the core technical personnel of the Cambrian, but they were the only non-founding team members.  The intelligent computing accumulation system will be customized and developed according to customer needs.In 2019, the Cambrian and Xi’an Fengdong Yixiang Technology, the Shanghai Brain Science and Brain-like Research Center, and the Commerce Bureau of the Hengqin New District Management Committee of Zhuhai City reached a relevant cooperation to start generating revenue in this part of the business.  However, company B, which entered the top five customers in 2019, accounted for 14% of revenue.34%, Cambrian never announced its name, but said the company was a related party.  The three-year steep increase in research and development expenses, the salary accounted for in the big prospectus, from 2017 to 2019, the research and development expenses of the Cambrian were 2986 respectively.RMB 190,000, 2.4 billion yuan and 5.RMB 430,000, with R & D expense rates of 380 respectively.73%, 305.18% and 122.32%.The company said it will continue to invest in research and development to ensure that its technology is forward-looking, leading and core competition to increase profits.The prospectus lists a total of 8 projects at the development stage, and the cumulative expenditure is expanded to 6.5.5 billion yuan.  It can be seen that the highest proportion of R & D expenses is employee compensation, which is 74 in three years.16%, 41.21% and 52.15%.As of December 31, 2019, there were 680 Cambrian R & D personnel, accounting for 79 of the total number of employees.25%, and more than 70% of the R & D personnel have master’s degree and above.Obviously, the company has a part-time job as a member of the Institute of Computing Technology of the Chinese Academy of Sciences.  In addition, the testing and processing costs have also been reduced since 2018 to reduce research and development costs, compared with 36 in 2019.15% and 22.92%.The prospectus shows that this part of the cost is mainly the cost of the tape used for research and development, which is the key conversion of the chip from design to mass production.  However, in the risk alert, research and development is also one of the potential sources of risk in the Cambrian.Due to R & D expenditures, while the product is still in the market development stage, and reports the risk faced by the Cambrian due to the share payment amount due to equity incentives.  Not only that, before the sales revenue generated by artificial intelligence chip products, the company’s expanded resources increased due to the dependence on the Cambrian operating capital. Therefore, expansion beyond the financing amount will cause pressure and cannot maintain sufficient cash flow.It will be affected, resulting in, will affect the salary, thus affecting the introduction of talent and the stability of the existing team.  The loss of R & D personnel was excluded from the risk factors of the Cambrian.The company said that if various circumstances in the future cause the company’s spending policies and levels to be insufficiently competitive and attractive in the same industry, it will be difficult to restore the recruitment of more high-end technical talents, and even cause the loss of existing R & D personnel.  Risk factors: Unprofitable, intensified competition, and high supplier concentration. Due to the large amount of capital expenditure required for smart chip research and development, the Cambrian has been in a net pollution state for the past three years, and until December 31, 2019, the company has accumulatedThe distribution profit is 8.5.5 billion yuan.As of the signing date of the prospectus, the company has not yet made a profit and there are unreplaced replacements that have occurred.The Cambrian reminded that it may not be able to make profits or distribute profits within a certain period in the future.  On the tips about risk factors, Cambrian also pointed out that the risk of its core technology upgrade alternating with the industry’s future technological development direction, the reason is that the industry’s technological upgrades and product upgrades are faster, and the development direction has certain uncertainties.In fact, the research and development work did not meet expectations, technical leaks, and intellectual property risk are risk factors.  Risks that adversely affect its operations also include technology licensing and increased market competition.The Cambrian stated that the reported intelligence, the company’s integrated circuit IP and EDA tool suppliers are mainly ARM, Synopsys, Cadence, etc. If due to force majeure factors, the above suppliers have stopped the technology authorization from the company, which will have an adverse impact on the company’s operation.  Sharing with foreign manufacturers Nvidia, Intel, AMD, Cambrian still has conflicting differences in overall scale, financial strength, R & D reserves, sales channels, etc., and domestic companies such as Huawei HiSilicon and other chip design companies are gradually entering thisIn one market, the Cambrian is facing a situation of increasing competition.If effective countermeasures cannot be implemented, the Cambrian will face a situation where the sales of major products are lower than expected, and the product gross profit margin is reduced.  In addition to the fact that the revenue of the top five customers accounted for a relatively high risk, the high concentration of suppliers and the difficulty of replacing some suppliers are also risks of the Cambrian.According to the prospectus, the total purchase amount of the top five direct suppliers accounted for 92% of the purchase scale over the same period.64%, 82.53% and 66.49%.Some supplier products are scarce and exclusive.  In addition, in response to the risks caused by the new coronavirus epidemic, the Cambrian disclosed that if the supply capacity of the supplier enterprise is affected, it may cause the company to fail to perform the contract with the partner in time and fail to provide on-site support to the customer; it may cause some intelligent computingThe implementation of the business expansion has been delayed, or the introduction of chip products has slowed down significantly.Sauna, Nightnet Editor Liang Chen Yue Caizhou Sun Yong proofreading He Yan

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