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Recently, Lianyun Technology (Hangzhou) Co., Ltd. (hereinafter referred to as "Lianyun Technology") obtained the approval of the China Securities Regulatory Commission for its registration application for the initial public offering of shares and listing on the Science and Technology Innovation Board.

It is worth mentioning that it took only 4 days for Maxyun Technology to register from submission to registration effectiveness, setting a new record for the registration speed since the opening of the Science and Technology Innovation Board. In the context of the current slowdown in IPOs in Shanghai and Shenzhen, it is not easy for Maxyun Technology to quickly achieve registration effectiveness.

However, Lanfu Finance found that Lianyun Technology's performance in recent years has been unstable, and the company's suppliers are too concentrated, which may lead to the risk of supply interruption. In addition, the company's largest customer is also its shareholder, and Lianyun Technology has a deep interest bond with it.

Performance ups and downs

The prospectus shows that Maxio Technology is a platform-based chip design company that provides data storage main control chips, AIoT signal processing and transmission chips. The company has now built a full-process chip R&D and industrialization platform including SoC chip architecture design, algorithm design, digital IP design, analog IP design, mid- and back-end design, packaging and testing design, and system solution development.

From 2021 to 2023, the total sales volume of Maxyun Technology's chip products will be RMB 35.3415 million, RMB 33.6219 million, and RMB 44.0003 million, respectively, with a compound growth rate of 11.58%.

However, the company's performance in recent years has been fluctuating. From 2019 to 2023, Maxyun Technology's net profit attributable to the parent company was -25.8616 million, -4.0066 million, 45.1239 million, -79.1606 million, and 52.2296 million respectively; the net profit attributable to the parent company after deducting non-recurring items was -43.8395 million, -31.9313 million, 3.0999 million, -98.3860 million, and 31.0503 million respectively.

Regarding the fluctuations in performance, Maxyun Technology stated that it was mainly affected by multiple factors such as changes in operating income and continued increases in R&D expenses.

In the prospectus, Maximus Technology clearly pointed out that if the demand in the company's downstream industries continues to decline in the future, or the company fails to continue to increase technological research and development and expand customer demand, it will cause product prices to fall, sales volumes to decrease, etc., which will lead to a decline in the company's operating performance.

As of the end of December last year, Maxyun Technology's accumulated retained earnings were -0.44 billion yuan, and the parent company's accumulated retained earnings were 1.21 billion yuan. The company's consolidated financial statements had accumulated unrecovered losses. Maxyun Technology believes that the continued high R&D investment and the incomplete release of revenue scale are the main reasons for the company's unrecovered losses at the consolidated financial statements level.

From 2021 to 2023, Maxio Technology's R&D expenses will be RMB 155 million, RMB 253 million, and RMB 380 million, respectively, accounting for 26.74%, 44.10%, and 36.73% of its revenue, respectively. Maxio Technology said that the AIoT signal processing and transmission business is still in its infancy, with large R&D investments, but has not yet achieved large-scale sales. If future market promotion is not as expected, it may be impossible to further expand sales.

In addition, due to the high technical requirements, complex processes and high wafer production costs of AIoT chip design, if Maxon Technology's product research and development fails, there is a risk that the initial investment funds cannot be recovered.

Supplier concentration is too high, and the company is highly dependent on TSMC

It is understood that after completing the design of the integrated circuit chip layout, Maxyun Technology will hand over the layout to the wafer manufacturer to produce wafers, and then hand it over to the packaging and testing manufacturer for chip packaging, testing and other work. After the packaging and testing are completed, it will be sold to the outside.

Due to the particularity of the integrated circuit industry, the wafer production and manufacturing process has high requirements for technology and capital scale and a high market concentration, and the number of manufacturers with advanced processes that can meet the relevant business needs is relatively small. In the entire industry, most integrated circuit design companies will choose to cooperate with individual wafer fabs and packaging and testing plants for considerations such as process stability and batch procurement cost advantages.

This may pose a hidden danger to the company's supply chain security. According to Maximus Technology, from 2021 to 2023, the company's purchases from the top five suppliers were RMB 471 million, RMB 482 million, and RMB 365 million, respectively, accounting for 85.29%, 92.10%, and 93.3% of the total purchases in each year, respectively. The suppliers are too concentrated. Among them, the company's wafer supplier is TSMC, and the company's purchases from TSMC accounted for 55.77%, 66.08%, and 63.62% of the total purchases in the year, respectively, which is a high proportion of purchases.

Since the main suppliers are relatively concentrated, if the suppliers are not doing well or the cooperation with the company is limited, Maxyun Technology will have to find suitable alternative suppliers in a short period of time, otherwise it may affect the stable production of products. In addition, if international export controls and trade frictions intensify in the future, the company's import of related raw materials will be restricted, affecting the normal fulfillment of orders, which will also have a significant adverse impact on Maxyun Technology's production, operation and financial situation.

It is worth noting that recently, former US leader Trump was shot at a campaign rally in Butler, Pennsylvania, and his chances of winning the election rose to 71%. If Trump comes to power again, he may launch a trade war against China. This will undoubtedly increase the operating risks of companies such as Maxio Technology. For Maxio Technology, it needs to find more suitable suppliers as soon as possible to prevent related risks.

The big customer is actually a shareholder of the company?

As mentioned above, Maxyun Technology's profitability is not stable, but the company's operating income has doubled, reaching 579 million yuan, 573 million yuan, and 1.034 billion yuan respectively. The top two customers contributed a lot, accounting for nearly 50% of the revenue.

During the reporting period, Lianyun Technology's largest customer E and second largest customer Jiangbolong (301308.SZ) were both its shareholders. This shows that Lianyun Technology has a deep interest bond with its "own people".

In fact, Maxyun Technology achieved a rebound in performance in 2023, thanks to the help of its largest related party, E. The sales amount of customer E and its subsidiaries in each period were 222 million yuan, 215 million yuan, and 318 million yuan, respectively, accounting for 38.44%, 37.57%, and 30.73% of the revenue, all exceeding 30%.

The prospectus shows that Client E has an affiliated relationship with Lianyun Technology. Through the list of related parties and the scope of business, Client E points to Hikvision, the second largest shareholder of Lianyun Technology. Among the 15 shareholders of Lianyun Technology, only Hikvision and its subsidiary Hikvision Technology conduct industrial operations and engage in business, while the others are professional investment institutions. During the reporting period, Hikvision also enjoyed a veto power at the board level, and its status was prominent.

In this IPO, is Maxyun Technology a spin-off of Hikvision's subsidiary? It is not known at present. However, since the beginning of 2024, spin-off listings have continued to cool down, and more than 10 listed companies have terminated "A-share splits". Whether Maxyun Technology can successfully land on the A-share market remains to be seen.