Longxin Zhongke: the successful launch of the Science and Technology Innovation Board is imminent, and the construction of independent ecological escort digital transformation

“Xinchuang”, namely information technology application innovation, first appeared in 2016. After the “Prism Gate” incident, traditional financial institutions, mainly banks, actively carried out information and innovation campaigns such as de-IOE. After that, with the technology independence becoming a national strategy, the information and innovation industry received more and more resources and policy support, which also led the entire industry into a golden development period. This topic will focus on the core issues faced by the development of the information and innovation industry through case reports and other forms, and put forward relevant strategic suggestions.
abstract
√ Founded in 2008, SMIC is a general purpose processor R&D company, adopting the Fabless business model, focusing on developing independent and safe CPU products and solutions, and providing customers with complete technical support and after-sales services. Longxin Zhongke submitted a prospectus to the Shanghai Stock Exchange on June 28, 2021, and was approved by the municipal committee meeting on the Science and Technology Innovation Board on December 17.
√ At present, Longxin Zhongke carries out industrial ecological construction based on the two main lines of information system and industrial control system, and maintains comprehensive market cooperation with partners in the fields of network security, office and business informatization, industrial control and the Internet of Things. The series of products have been widely used in the fields of e-government, energy, transportation, finance, telecommunications, education and other industries.
√ From 2018 to the first half of 2021, Longxin Zhongke achieved operating revenue of 193 million yuan, 486 million yuan, 1.082 billion yuan and 563 million yuan respectively, and net profit attributable to owners of the parent company of 108 million yuan, 193 million yuan, 72 million yuan and 90 million yuan. The annualized compound growth rate of operating revenue of Longxin Zhongke in the last three years reached 136.66%, achieving rapid growth.
Produced | Zero One Think Tank
Author | Zhu Lingyue
Editor | Li Xin
catalogue
1、 Company Profile
（1） Deeply rooted in the field of chips, leading the domestic independent CPU
（2） Scale and financial situation
(1) Operating income
(2) Gross profit rate of main business
(3) Solvency
2、 Technological innovation and development strategy
（1） Technological model innovation
（2） Development strategy
3、 Products and business
（1） Main products and services
(1) Processor and supporting chips
(2) Solution
（2） Business model
（3） Customer concentration is high, and the top five customers account for more than 70% of revenue
4、 Risks and opportunities
（1） Risk
(1) Suppliers are too concentrated and may face the risk of price rise or supply cycle extension
(2) The loss of core technical personnel may lead to technical disclosure
(3) A dispute case with “Core Core”
（2） Opportunities
(1) Good policy environment helps the development of integrated circuit industry
(2) Strong demand and performance in the domestic chip market
(3) Committed to building an independent ecosystem
1、 Company Profile
（1） Deeply rooted in the field of chips, leading the domestic independent CPU
Loongson Zhongke Technology Co., Ltd., founded in 2008, is a general purpose processor developer. In 2010, the Chinese Academy of Sciences and the Beijing Municipal Government jointly led the reconstruction, aiming to industrialize the research and development achievements of Godson processor. Loongson Zhongke belongs to the integrated circuit design industry, adopts the Fabless business model, and is mainly engaged in the design of processors and supporting chips. With the mission of “safeguarding national information security and supporting the development of the information industry”, relying on Loongson’s research and development technology for more than ten years, it focuses on the development of independent and safe CPU products and solutions, and provides customers with complete technical support and after-sales services. By 2020, the company has 647 employees, including 419 R&D personnel, accounting for more than 60%. The total number of employees of the company increased rapidly year-on-year, mainly due to the rapid growth of the company’s business scale and the corresponding increase in the number of workers.
At present, Longxin Zhongke carries out industrial ecological construction based on the two main lines of information system and industrial control system, and maintains comprehensive market cooperation with partners in the fields of network security, office and business informatization, industrial control and the Internet of Things. The series of products have been widely used in the fields of e-government, energy, communications, finance, telecommunications, education and other industries.
Through market-driven technology, the company has continuously improved its technology and product competitiveness, independently developed hundreds of core modules, including processor cores, and has obtained more than 400 patents. The company has always followed the principles of openness, compatibility and optimization to build an ecosystem of the entire industrial chain that is open from end to cloud, open to attract industrial partners, compatible to form ecological synergy, optimized to improve user experience, and changed from following foreign ecology and catching up with foreign technology to building independent ecology. Loongson Zhongke has become the leader of domestic independent general-purpose processors and the builder of independent ecology.
Longxin Zhongke submitted a prospectus to the Shanghai Stock Exchange on June 28, 2021, and was approved by the municipal committee meeting on the Science and Technology Innovation Board on December 17. According to the information publicity on the Science and Technology Innovation Board of Shanghai Stock Exchange, the company’s audit status on February 23, 2022 was the submission of registration. The company will issue no more than 41 million new shares in this public offering, and plan to raise 3.512 billion yuan to invest in research and development and industrialization of advanced process chips, research and development of high-performance general-purpose graphics processor chips and systems, and supplement working capital. Figure 1: Professional composition of employees
Data source: company prospectus, zero one think tank
（2） Scale and financial situation
business income
The company’s operating income mainly comes from the sales of products and solutions such as processors and supporting chips. According to the prospectus, from 2018 to the first half of 2021, Longxin Zhongke achieved operating revenue of 193 million yuan, 486 million yuan, 1.082 billion yuan and 563 million yuan respectively, and net profit attributable to the owners of the parent company of 108 million yuan, 193 million yuan, 72 million yuan and 90 million yuan. The annualized compound growth rate of operating revenue of Longxin Zhongke has reached 136.66% in the last three years, achieving rapid growth.
Figure 2: Operating revenue and net profit attributable to parent company in the first half of 2018 – 2021 (unit: 100 million yuan)
Data source: company prospectus, Wind, and Zero One think tank
Gross profit rate of main business
According to the prospectus, from 2018 to the first half of 2021, the gross profit margin of the company’s main business was 62.65%, 57.29%, 48.73% and 47.54% respectively, which remained at a high level on the whole. The gross profit margin decreased in the first half of 2018 to 2021, mainly due to the rapid growth of the company’s income scale and the change of the product structure: the company’s products in 2018 are mainly industrial control chips, with a high gross profit margin; After the upgrading of the first two generations of chip products, the company’s customer base has gradually expanded, and cooperation with information-based customers has become more frequent. In the past two years, with the company’s continuous development of the information-based market, the proportion of the sales of Godson-3 series chips has increased significantly. Due to the relatively low gross profit rate of products in this field, the company’s overall gross profit rate has decreased.