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wrote a column · Aug 2, 2021 14:19

Major National Strategic Asset: Semiconductor│GigaDevice: The 'Chinese Samsung' with a Passion for NOR Flash and Financial Investment

According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer supply despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022.
Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter.
Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice ($GigaDevice Semiconductor Inc. (603986.SH)$) Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
From its inception, Zhaoyi Innovation has set its sights on becoming China's "Samsung Electronics."
The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance?
Zhaoyi Innovation's "Three-Star Dream"
Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University.
The company's two founders are Shu Qingming and Zhu Yiming. Shu Qingming is a graduate of the Class of 1985 from the Department of Wireless Communications at Tsinghua University, often referred to as "half of China's semiconductor industry." Zhu Yiming also earned both his bachelor's and master's degrees from Tsinghua University; he is an alumnus of the Class of 1989 from the Department of Physics. After graduation, from 1997 to 1998, Zhu Yiming worked at Beijing Anmei Fire Protection Technical Service Co., Ltd. In the same year, at the age of 26, he went to the United States to pursue a master's degree in electrical engineering at Stony Brook University, State University of New York.
Following another graduation, Zhu Yiming worked as a senior engineer and project manager at iPolicy Networks Inc. and Monolithic System Technologies Inc., respectively, from 2000 to 2004.
In 2004, with funding from alumnus Li Jun and other angel investors, Zhu Yiming and his senior alumnus Shu Qingming founded their first company, GigaDevice Semiconductor Inc., in a garage in Silicon Valley, USA, with 100,000 US dollars. Within just a few months, the two, supported by a part-time team, developed a new type of two-transistor memory that not only reduced costs by one-third but also tripled performance and efficiency.
The following year, the two returned to Beijing and decided to establish China's first domestic memory chip company, founding Beijing Xintejia Yi Microelectronics Technology Co., Ltd. This company would later become GigaDevice.
In the early days of the venture, Zhu Yiming and Shu Qingming divided responsibilities: Zhu handled external sales and market development, while Shu focused on R&D. Their products were positioned around high performance, low power consumption, and low cost. Given that most customers for high-performance memory already had established, large suppliers, GigaDevice initially targeted low power and low cost as its key differentiators in the memory market.
According to Zhu Yiming's vision, GigaDevice aims to become the 'Chinese Samsung Electronics' in the memory industry.
Shortly after its establishment, GigaDevice successively launched China's first Serial Flash product, its first static memory and IP technology, and its first GigaROM product, thereby pioneering numerous breakthroughs in the domestic memory industry.
In 2011, the company entered the mobile phone supply chain, marking the beginning of its procurement of cost-effective serial flash memory products manufactured in mainland China. The following year, GigaDevice's sales in the serial flash memory segment climbed into the global top five. During this period, GigaDevice filed more than 50 domestic and international patent applications.
In 2016, GigaDevice's sales network had already expanded across mainland China, Taiwan, South Korea, the United States, the United Kingdom, Japan, and other regions. On August 18 of that year, the company was listed on the Shanghai Stock Exchange, finally bearing fruit for the seeds sown years earlier by a group of Tsinghua University alumni. Deng Feng, one of GigaDevice's earliest angel investors and also a Tsinghua alumnus, had initially invested 50,000 US dollars out of goodwill; following the company's IPO, the market value of his equity stake soared to 11 million US dollars—a 220-fold increase. (Deng Feng later donated the entire proceeds from this investment to Tsinghua University.)
On July 16, 2018, Zhu Yiming, then General Manager of GigaDevice, announced his resignation from the post of General Manager while retaining his positions as Chairman and member of the Board's Professional Committees.
On the same day, Wang Ningguo, Chairman of Hefei Changxin—the first major memory chip manufacturer on the Chinese mainland—announced that he would be handing over the position of CEO to Zhu Yiming. The two companies, GigaDevice and Hefei Changxin, have since established business ties through Zhu Yiming.
Hefei Changxin is a major IDM player in the DRAM sector, covering all stages of DRAM product design, manufacturing, packaging, and testing, while GigaDevice adopts a fabless business model, outsourcing both foundry and packaging services and operating no fabs of its own.
Following the announcement that the two companies have "no equity relationship," they subsequently entered into a collaboration for the joint development, OEM production, and distribution of DRAM, enabling GigaDevice to enter the DRAM market through this partnership.
Meanwhile, in the NOR Flash segment—where the company focuses its efforts—GigaDevice's global market share climbed to 18.2% in the third quarter of 2019, trailing only Winbond and Macronix from Taiwan.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
At least in the niche segment of NOR flash memory, GigaDevice is getting closer and closer to realizing its "Samsung dream."
Memory, MCU, and sensors launched in tandem.
Based on whether data is retained after power loss, memory devices are classified into non-volatile and volatile memory. The former includes ROM and flash memory, while the latter comprises DRAM and SRAM. Flash memory, in turn, is further divided into NOR flash and NAND flash. Among the various subcategories of memory products, DRAM and NAND flash represent the largest market segments, each exceeding RMB 100 billion in size.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
GigaDevice's early mass-produced NOR Flash chips enjoyed widespread popularity during the feature-phone era. Because feature phones boot up by reading and executing the system from the storage chip, and NAND Flash cannot execute programs, NOR Flash became the most widely used type of memory in that era.
However, with the advent of the smartphone era and the rapid expansion of mobile storage capacity, NAND Flash has once again become the market darling due to its high-density storage characteristics. By contrast, NOR Flash—with typical capacities ranging from 1 Mb to 32 Mb—is no longer suitable for modern applications; its market size shrank from USD 7 billion in 2006 to USD 4.33 billion in 2011, and further declined to just USD 2.411 billion by 2017.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
Following the industry's contraction, Samsung, once the dominant player in the NOR Flash market, exited the sector in 2010. In 2017, US chipmakers Micron and Cypress also announced phased exits from the low- and mid-capacity consumer and PC markets, shifting their focus instead to industrial control and automotive applications. By 2019, Micron and Cypress had fallen to fourth and fifth place in market share, respectively. Meanwhile, three NOR Flash manufacturers from Taiwan and mainland China defied the trend and rose to become the top three players in the industry. On the mainland, GigaDevice is widely recognized as the leading NOR Flash supplier.
However, with the advent of the 5G era and the emergence of IoT devices, wearables, and in-vehicle systems, new demand has been created for NOR Flash. IoT device modules typically require relatively small storage capacities, ranging from a few megabytes to several hundred megabytes. Thanks to its advantages—namely, the ability to allow the processor to directly access and execute system code, as well as its lower cost—NOR Flash combined with a processor chip has once again become the mainstream choice for IoT modules.
In addition, the widespread adoption of new consumer electronics—such as TWS earphones, 5G infrastructure, AMOLED displays, smart electric-vehicle instrument clusters, and high-definition infotainment system screens—has created new demand for NOR Flash. According to statistics and forecasts by Minsheng Securities, the NOR Flash market was valued at approximately US$2.3 billion in 2020 and is expected to grow again to US$3.9 billion by 2025, representing a compound annual growth rate of 11.14%.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
In the NAND flash market, GigaDevice's SLC NAND flash is primarily used in low-capacity applications that demand high storage reliability, such as network communications, voice storage, smart TVs, industrial control systems, set-top boxes, printers, and wearable devices. This segment represents a niche within the broader NAND market, with a relatively small overall market size. The leading players in this space include Samsung, Micron, SK Hynix, and Toshiba.
In 2020, the global memory market was valued at US$127 billion, with NOR Flash accounting for 2%, NAND Flash for 45%, and DRAM for 53%. GigaDevice has thus only managed to establish a competitive edge in the relatively niche NOR Flash segment. Consequently, in order to raise the company's growth ceiling, GigaDevice has partnered with Hefei Changxin to enter a new trillion-dollar market segment.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
DRAM stands for Dynamic Random Access Memory. This type of chip is characterized by high-speed data processing and volatile memory—meaning data is lost when power is removed—and is commonly used as the working memory in electronic systems. Currently, the market is dominated by Samsung, SK Hynix, and Micron, with a combined market share (CR3) exceeding 90%. Samsung alone holds nearly 50% of the market.
Zhaoyi Innovation and CXMT's collaboration in the DRAM sector encompasses three key areas: first, Zhaoyi serves as a distributor for CXMT's products; second, CXMT provides foundry services for Zhaoyi's independently developed DRAM products, which were launched in the first half of this year; and third, the two companies are jointly conducting R&D on new products to enhance their respective technological capabilities.
In addition to its core memory business, GigaDevice has two other major business segments: MCUs and sensor chips. MCUs, or microcontroller units, are chip-level computers with a wide range of applications, including consumer electronics, smart instrumentation, and—particularly—smart vehicles. Since the second half of last year, the MCU market has been characterized by severe supply-demand imbalances.
Market share in this segment is also predominantly held by foreign vendors. Domestic players primarily gain market traction through competitive pricing and value-for-money offerings, with over 100 local MCU manufacturers operating in a highly fragmented landscape. GigaDevice ranks third in China's general-purpose Cortex-M MCU market, with a 9.3% market share in 2019—lower than that of ST and NXP.
The downstream customers of general-purpose MCUs are predominantly smaller-scale manufacturers, such as a toy company developing toys. When sales volumes are relatively low, these manufacturers tend to procure general-purpose chips and customize them to meet their specific functional requirements, rather than opting for more expensive application-specific chips.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
The final sensor-chip business is primarily handled by Silergy, which was acquired by GigaDevice. The company mainly manufactures fingerprint-recognition chips and posted a net loss of RMB 30.72 million in 2020.
According to CCID data, the global market size for fingerprint recognition chips was approximately US$4.17 billion in 2019, with the Chinese market accounting for about US$1.5 billion. Based on CCID's findings, in 2018 Silergy's global market share for touch-control chips was 11.40%, ranking it fourth; its global market share for fingerprint chips was 9.40%, placing it third, behind Goodix Technology and FPC, which held the top two positions.
In 2020, Zhaoyi Innovation's revenue from memory chips reached 3.283 billion yuan, accounting for 73% of total revenue, up 28% year on year, with gross margin declining by 3.9 percentage points; MCU revenue amounted to 755 million yuan, a year-on-year increase of 63.19%; and sensor revenue totaled 450 million yuan, up 122% year on year.
The company explained that the decline in its memory chip gross margin was due to the inclusion of lower-margin DRAM products starting mid-year, while the substantial increase in sensor revenue was attributable to Silithink being consolidated into the company's financial statements only in the second half of 2019.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
According to statistics from China Flash Market and CINNO Research, the global market size for NAND Flash and NOR Flash grew by 21% and 12%, respectively, in 2020. GigaDevice's memory chips are primarily based on NOR Flash, and the revenue growth rate of this product category outpaced the industry average.
In the first quarter of this year, GigaDevice reported revenue of 1.6 billion yuan, a year-on-year increase of 99%. The company stated that robust market demand and increased product supply during the quarter drove higher revenue across its product lines.
Overall, Zhaoyi Innovation's recent rapid performance growth has been primarily driven by robust demand in downstream markets. However, the company's ongoing integration and expansion of its product portfolio have led to significant changes in gross margin—for example, the introduction of DRAM products last year reduced the gross margin by 3.14 percentage points to 37.38%.
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In 2020, GigaDevice's net profit attributable to shareholders, excluding non-recurring items, was 560 million yuan, a slight year-on-year decrease of 1.8%.
The primary reason for the decline in the company's non-recurring, parent-company–attributable net profit is the previously acquired Silergy. In 2019, the company acquired Silergy for a total consideration of 1.7 billion yuan, paid in cash and shares, resulting in goodwill of 1.3 billion yuan. At the same time, Zhaoyi Innovation entered into an earnings-compensation agreement with Silergy, under which Silergy committed to generating, over the three-year period from 2018 to 2020, non-recurring, parent-company–attributable net profits of no less than 321 million yuan.
Ultimately, Silipu's three-year non-recurring net profit attributable to parent company shareholders amounted to 240 million yuan. In accordance with the compensation agreement, Zhaoyi Innovation was required to pay approximately 230 million yuan in compensation, resulting in a net gain of about 190 million yuan after deducting current income tax, which was recognized as trading financial assets and classified as non-recurring income. At the same time, Silipu recorded an impairment provision for goodwill of 128 million yuan, which was included in recurring profit or loss. As a result of these one-time inflow and outflow, Zhaoyi Innovation's non-recurring net profit attributable to parent company shareholders declined.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
Since 2021, the performance-compensation commitment period for Silipu has expired, and the company is no longer obligated to provide compensation; however, it has recognized less than one-tenth of the corresponding goodwill impairment, leaving room for further impairment in the future. Should Silipu experience an impairment, it would directly impact Zhaoyi Innovation's net profit attributable to shareholders.
In addition to the risk of goodwill impairment at Silith Micro, Zhaoyi Innovation's capital utilization is equally intriguing. As of the end of the first quarter of this year, the company's total current assets amounted to 9.5 billion yuan, with cash and cash equivalents totaling 5.7 billion yuan and trading financial assets at 2.619 billion yuan, respectively. Together, these two components account for 88% of total current assets.
A substantial portion of Zhaoyi Innovation's cash holdings originates from proceeds raised through a non-public share offering. In 2020, the company conducted a private placement to five investors, raising a total of 4.32 billion yuan in accompanying funds. During the past year, the company utilized 1.02 billion yuan of these raised funds, with 960 million yuan allocated to replenishing working capital and the remaining 3.3 billion yuan held in demand deposit accounts at banks.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
In the first quarter of this year, Zhaoyi Innovation allocated 2.3 billion yuan of idle funds to purchase wealth management products, resulting in a 760% year-on-year increase in its trading financial assets. In addition, the performance compensation received from Silipu was also recognized as part of its trading financial assets.
According to a recent report by Taiwan's Electronic Times, severe shortages in upstream wafer foundry capacity have left NAND flash controller IC manufacturers struggling to secure sufficient wafer capacity, despite their best efforts. Industry sources estimate that next year's controller IC supply satisfaction rate will fall short of 70% to 80%, with capacity constraints persisting through the end of 2022. Notably, shortages are particularly acute for 28nm products, with tight supply persisting for mainstream offerings such as PCIe Gen3, SATA SSDs, and UFS devices, driving continued price increases for NAND Flash in the third quarter. Memory chip supplies are tight on the other side of the border, and mainland China is expected to face a similar situation. As the leading IC design company for memory chips in mainland China, GigaDevice$GigaDevice Semiconductor Inc. (603986.SH)$Another new wave of growth momentum has emerged. On July 27, the company's stock price hit an intraday record high of RMB 220.62, defying the broader market trend and more than doubling from its March low of RMB 105. From its inception, Zhaoyi Innovation has set its sights on becoming China's 'Samsung Electronics.' The next big growth opportunity is just around the corner—how far is GigaDevice from its target of matching Samsung's performance? Zhaoyi Innovation's 'Three-Star Dream' Like other leading domestic semiconductor chip manufacturers, GigaDevice's founding team also has strong ties to Tsinghua University. The company has two founders: one is Shu Qingming, who graduated from Tsinghua University's Department of Wireless Communications in 1985—a department famously known as "half of China's semiconductor industry"; the other...
As an IC design company, Zhaoyi Innovation has substantial funding needs, and it is understandable that it raises significant capital each year. However, the company ultimately allocates a considerable portion of its cash to wealth-management products and demand deposits with banks—a practice that is highly puzzling. At best, this approach does alleviate some of the pressure on the company's operating capital (as of the end of the first quarter this year, its total current liabilities stood at 1.227 billion yuan). Yet with such a large cash hoard on hand, why doesn't Zhaoyi Innovation use these funds to invest in and expand its business lines?
How far is it from China to Samsung?
From its inception, Zhaoyi Innovation has aspired to become the 'Chinese Samsung' of the storage-chip industry. Yet the company has taken an unconventional approach, focusing instead on NOR Flash—a relatively niche segment within the broader storage-chip market.
In the NAND Flash segment, GigaDevice's SLC NAND Flash also focuses on niche markets. Meanwhile, its in-house-developed DRAM products were only launched this year, and Silithink, which was recently acquired, is still in the early stages of development.
Over the past two years, the company has annually issued shares to specific investors to raise capital; however, most of these funds have been deposited in banks or invested in wealth-management products.
Driven by the recovery in the NOR Flash market, GigaDevice's recent performance has steadily improved quarter after quarter amid an overall industry upcycle.
However, when it comes to Zhaoyi Innovation—known for its passionate focus on financial management and investment and still operating in the relatively niche NOR Flash market—the gap between it and 'China's Samsung' remains quite substantial.
Author: Yan Shisan
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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