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Jingguan Automobile

"For the first time in history, China's automobile industry is at the forefront of technological change in the global automobile industry and has contributed China's strength to the transformation and development of the global automobile industry." Xin Guobin, Vice Minister of the Ministry of Industry and Information Technology, said at the recent 14th China Automobile Forum.

In the first half of 2024, the development of China's automobile industry has been stable and improving, with intelligence and new energy becoming the most powerful driving factors.

Data shows that in the first six months, my country's automobile sales reached 14.047 million units, a year-on-year increase of 6.1%; among them, sales of new energy vehicles increased by 32% year-on-year, accounting for 35.2% of total new car sales, an increase of 6.9 percentage points over the same period last year; in terms of intelligence, sales of cars with assisted driving functions accounted for more than 50%.

At the same time, riding on the momentum of smart cars, automotive chips have become the hottest track at the moment, and who will be the first company to produce "smart driving car chips" has attracted much attention.

Luo Daojun, senior vice president of the Components and Materials Research Institute of the Fifth Institute of Electronics of the Ministry of Industry and Information Technology, said in his keynote speech: "China has the largest production capacity of new energy vehicles, and the use of (chips) is also increasing. However, the self-sufficiency rate of chips is currently less than 10%, which is a structural shortage."

Today, the rapid development of new energy vehicles around the world has brought huge demand for the automotive chip industry. In 2023, China's new energy vehicle sales will reach 9.4 million, with a penetration rate of more than 30%; the European Automobile Manufacturers Association (ACEA) predicts that by 2030, the penetration rate of new energy vehicles in Europe will reach more than 60%.

In terms of quantity, a single fuel vehicle only needs to use 300 to 400 chips, while new energy vehicles and vehicles with assisted driving functions will need to use more than 1,000 chips. Vehicles that achieve fully autonomous driving will use more than 3,000 chips.

According to IC Insight, by 2030, the global demand for automotive chips will exceed 100 billion, with the Chinese market alone requiring 46 billion. In terms of cost, the chip cost of a traditional fuel vehicle is about 2,270 yuan, while the chip cost of a new energy vehicle is about 4,540 yuan, twice that of a traditional fuel vehicle.

The industry's strong demand for automotive chips has spawned a group of unicorns, among which Heizhima Intelligence is one of the most active "participants".

As a well-known automotive-grade intelligent car computing SoC (System on Chip) and SoC-based solution provider, Heizhima Intelligence has recently passed the listing hearing of the Hong Kong Stock Exchange IPO. If the listing is successful, Heizhima Intelligence will become the "first stock of autonomous driving computing chips" in China.

According to the listing application information submitted by Heizhima Intelligence, Heizhima Intelligence was established in July 2016. As a supplier of automotive-grade intelligent car computing SoC (System on Chip) and SoC-based solutions, Heizhima Intelligence provides OEMs and Tier 1 with automotive-grade high-computing power SoCs, as well as SoC and algorithm-based solutions.

Information in the prospectus shows that according to data from business consulting firm Frost & Sullivan: Based on shipments of automotive-grade high-computing power SoCs in 2022, Heizhima Smart is already the world's third largest supplier; in addition, Heizhima Smart's market share in China will be 7.2% in 2023, an increase from 5.2% in 2022.

The Wudang series cross-domain computing chip platform launched by Heizhima Intelligence is the industry's first cross-domain computing chip platform for smart cars. The Wudang series can cover the needs of multiple different domains within smart cars, such as cockpit and intelligent driving, and has the ability of multi-domain integration.

At present, Heizhima Intelligent's chip products have formed two major matrices: the Huashan series and the Wudang series. The former is a high-performance automotive-grade autonomous driving computing chip, including A1000, A1000L, and A1000Pro, using a 16nm process technology. At the same time, the next-generation SoC Huashan A2000 is under development and is expected to be launched in 2024 and mass-produced in 2026. Compared with the previous generation of products, the A2000 series has been upgraded to use the 7nm FFC automotive process, and the computing power has been upgraded to 250 TOPS, which is about 5 times that of the A1000.

According to the prospectus, Heizhima Intelligence has cooperated with more than 49 automotive OEMs and first-tier suppliers, such as FAW Group, Dongfeng Group, JAC Group, Hychuang, Ecarx Technology, Baidu, Bosch, ZF and Magneti Marelli, etc. Heizhima Intelligence has received orders from 16 automotive OEMs and first-tier suppliers, and has mass-produced SoC products for 23 models, including 18 models of A1000, involving 11 automotive OEMs and first-tier suppliers; four models of A1000L, involving four automotive OEMs and first-tier suppliers.

Before the IPO, Heizhima Intelligence was already a unicorn company in the industry. In the seven years since its establishment, it has completed more than 10 rounds of financing, with a total financing amount of more than US$700 million. Investors include star companies such as Xiaomi, Geely, SAIC Group and Tencent, as well as first-tier capital such as Wuyuefeng Science and Technology Innovation, Industrial Bank Group and GF Securities.

In addition, according to the prospectus data, in recent years, the operating income of Heizhima Intelligence has doubled. From 2021 to 2023, the operating income of Heizhima Intelligence was 61 million yuan, 165 million yuan and 321 million yuan respectively. Correspondingly, the gross profit increased from 22 million yuan in 2021 to 49 million yuan in 2022, and further increased to 77 million yuan in 2023. Among them, the gross profit margin of autonomous driving products and solutions increased from 18.6% in 2021 to 24.2% in 2022.

Behind the continuous breakthroughs in products is the continuous investment of Heizhima Intelligence in research and development. The prospectus shows that as of December 31, 2023, Heizhima Intelligence's research and development team consists of 950 members, of which about 58.0% have a master's degree or above. Its research and development team accounts for 86.7% of the total number of employees. Heizhima Intelligence generated RMB 595 million, RMB 764 million and RMB 1.363 billion in research and development expenses in 2021, 2022 and 2023, respectively, accounting for 78.7%, 69.4% and 74.0% of its total operating expenses in the relevant years, respectively. In addition, Heizhima Intelligence has also built a solid intellectual property "moat". The prospectus shows that as of the last practical feasible date, Heizhima Intelligence has 104 registered patents and 174 patent applications, two integrated circuit layout design registrations, 92 software copyrights and 141 registered trademarks worldwide.

In recent years, automotive chips have become the most watched track in the current automotive industry. According to the "Key Points for Automotive Standardization Work in 2024" recently released by the Ministry of Industry and Information Technology, the market size of automotive chips this year will exceed 90 billion yuan. The industry generally believes that 2024 will be the year of the explosion of L3 and above intelligent driving technology, and companies represented by Black Sesame Intelligence have also accurately grasped the trend of industry development. If it can be successfully listed in the future, it will also reserve more sufficient "ammunition" for the long-term development of Black Sesame Intelligence, enabling it to obtain more support in technology research and development, talent introduction and other aspects.

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