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Yangtze Business Daily News● Yangtze Business Daily reporter Xu Jia

Xidiwei (688173.SH) has made another move after several months, intending to acquire the controlling stake in a Korean integrated circuit design listed company.

On the evening of July 14, Xidiwei disclosed its overseas investment plan. The company's second-level wholly-owned subsidiary HMI intends to acquire a total of 30.91% of the shares of Zinitix Co., Ltd. (hereinafter referred to as "Zinitix"), a Korean listed company, for 21.005 billion won (equivalent to about 109 million yuan). After the completion of this transaction, HMI will hold 30.93% of the shares of Zinitix, and Zinitix will become a holding subsidiary of Xidiwei.

A reporter from the Yangtze Business Daily noticed that as early as October 2023, Xidiwei had bought Zinitix shares in the secondary market, but had sold most of the shares by the end of March 2024.

Now that it plans to take controlling stake in Zinitix again, Xidiwei intends to quickly absorb Zinitix's mature patented technology, R&D resources, customer resources, etc., thereby broadening its technology and product layout, accelerating the expansion of product categories and downstream application areas, and enhancing the company's sustainable operating capabilities and market competitiveness.

It should be noted that Zinitix is ​​still in a loss-making state, and Xidiwei itself is also facing profitability problems against the background of reduced demand in the downstream consumer market. After listing in 2022, Xidiwei's net profit continued to lose money. From 2022 to 2023, Xidiwei's cumulative loss was 69.3371 million yuan. At the same time, in 2023, Xidiwei's main business gross profit margin was 36.57%, a year-on-year decrease of 13.85 percentage points, and a decrease of 17.44 percentage points from 2021.

The target continues to suffer losses and there are still disputes over equity transactions

According to the transaction plan, HMI, a wholly-owned subsidiary of Xidiwei, intends to acquire a total of 30.91% of Zinitix's equity for 21.005 billion won (equivalent to about 109 million yuan). After the completion of this transaction, HMI will hold 30.93% of Zinitix's equity (including 6,496 shares of Zinitix purchased through the secondary market as of the date of the announcement, accounting for 0.02% of Zinitix's total shares), becoming the largest shareholder of Zinitix and able to dominate its board seats. It will also appoint senior management personnel such as the chief financial officer to have decision-making power on its operations, personnel, finance and other matters. Zinitix will become a holding subsidiary of Xidiwei.

For Xidiwei, this transaction will help the company broaden its technology and product layout, accelerate the expansion of product categories and downstream application areas, and enhance the company's sustainable operating capabilities and market competitiveness.

According to information, Zinitix was founded in 2000 and listed on the Korean GEM KOSDAQ in 2019. It is an integrated circuit design company. After years of deep cultivation and innovation, it has formed diversified product categories and application fields. Its main products include touch controller (Touch Controller) chips, autofocus chips, touch driver (Haptic Driver) chips, DC/DC power management chips, touchpad modules and audio amplifiers, etc., which are used in terminal devices such as smartphones, smart watches, tablets and other mobile/wearable devices.

Since Xidiwei and Zinitix are both integrated circuit design companies, Xidiwei believes that the company can quickly absorb Zinitix's mature patent technology, R&D resources, customer resources, etc. through this transaction, and quickly expand the company's product categories, especially the touch chip product line, which will help the company expand its technology and product layout in the fields of mobile phones and wearable devices; at the same time, Zinitix's camera autofocus chip product line has strong synergy with the company's existing voice coil motor driver chip product line, which will help the company further increase the market share and technical strength of this product line. In addition, Zinitix also has a high degree of overlap with the company's existing customers, and has synergy in business.

However, the Yangtze Business Daily reporter noted that Zinitix is ​​still in a loss-making state. In 2023 and the first quarter of 2024, Zinitix's operating income was 33.068 billion won and 15.952 billion won respectively, and its net profit was a loss of 5.878 billion won and 238 million won respectively.

In addition, before this transaction, the seller had sold the target shares of this transaction to other investors twice, but the transaction failed to be concluded due to the reasons of other investors. At present, the aforementioned unsuccessful transactions have caused or may have caused two potential disputes.

Power management chip product sales fell 46%

As one of the leading semiconductor and integrated circuit design companies in China, Xidiwei's main business is the research and development, design and sales of analog integrated circuits including power management chips and signal chain chips.

In the past two years, as demand in the downstream consumer electronics market has declined and prices of some products have fallen, Xidiwei's profitability has come under pressure.

According to the data from Tonghuashun, during the period of IPO, from 2018 to 2020, Xidiwei achieved operating income of 68.1632 million yuan, 115 million yuan, and 228 million yuan, respectively, and net profit losses of 5.384 million yuan, 9.5752 million yuan, and 145 million yuan, respectively. In 2021, Xidiwei turned losses into profits, with operating income of 463 million yuan, a year-on-year increase of 102.68%; net profit and non-net profit were 25.6463 million yuan and 15.3395 million yuan, respectively, a year-on-year increase of 117.7% and 126.06%.

At the beginning of 2022, Xidiwei was listed on the Science and Technology Innovation Board. In the first year of listing, the company suffered losses again. In 2022 and 2023, Xidiwei achieved operating income of 559 million yuan and 394 million yuan, respectively, a year-on-year increase of 20.86% and -20.64%; net profit was -15.1525 million yuan and -54.1846 million yuan, a year-on-year decrease of 159.08% and 257.6%; non-net profit was -27.613 million yuan and -187 million yuan, a year-on-year decrease of 280.01% and 578.24%. The company's net profit has accumulated a loss of 69.3371 million yuan in two years.

Regarding the decline in performance in 2023, Xidiwei said that the consumer electronics market represented by smartphones and PCs continued to be sluggish in 2023, and the demand for consumer electronics products continued to decline, resulting in a significant slowdown in the company's business growth; affected by market conditions, competition in the analog chip market became fierce, and the prices of some products fell, which led to a decline in the company's gross profit during the reporting period. At the same time, during the reporting period, the company's expenditures on R&D investment, management and sales increased.

The annual report shows that in 2023, the gross profit margin of Xidiwei's main business was 36.57%, a year-on-year decrease of 13.85 percentage points and a decrease of 17.44 percentage points from 2021.

Among the company's main products, the sales volume of power management chip products dropped from 353 million units in 2022 to 190 million units in 2023, a decrease of 46.37%. The operating income of this product was 261 million yuan, a year-on-year decrease of 44.77%.

In addition, in 2023, Xidiwei's R&D expenses were 237 million yuan, a year-on-year increase of 17.26%, accounting for 60.32% of operating income.

In the first quarter of this year, Xidiwei achieved operating income of 123 million yuan, a year-on-year increase of 205.94%; net profit and non-net profit were -48.8914 million yuan and -54.1499 million yuan, respectively, a year-on-year increase of -191.09% and 18.54%.

According to a rough calculation, in the more than two years since its listing, Xidiwei's net profit has accumulated a loss of 118 million yuan.

It is worth mentioning that as early as 2023, Xidiwei began to invest in Zinitix. According to Xidiwei's response to regulatory inquiries, from October to December 2023, the company gradually purchased Zinitix shares based on the secondary market situation. At the end of 2023, the company held a total of 3.8123 million shares of Zinitix, accounting for 1.34% of Zinitix's total share capital. However, by the end of March this year, Xidiwei had disposed of 98.64% of its Zinitix shares.