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authorXu Lisi Mo Ying

Science and Technology Innovation News reported on July 17 that Shenzhen Jie Microchip Technology Co., Ltd. recently disclosed its prospectus to the U.S. Securities and Exchange Commission (SEC), and plans to go public on the Nasdaq in the United States with the stock code JIE.

As early as June 6, 2023, Jie Microchip secretly submitted its listing to the SEC and publicly disclosed its prospectus on January 26, 2024, intending to raise up to $100 million through its initial public offering (IPO).17 million US dollars (about 120 million RMB)。

Then, regarding the metaverse concept involved in Jiewei's business, the US Securities and Exchange Commission asked the company to explain the specific situation and confirm whether there are any circumstances prohibited by laws and regulations, whether it involves services or support for virtual asset transactions, etc.

Jie Microchip also mentioned in its prospectus that the company does not conduct any business related to virtual currency mining, nor does it provide support or services related to virtual currency mining to anyone.

Founded in 2019, Jiewei Chip is headquartered in Yuehai Street, Nanshan District, Shenzhen.Products covering the entire value chain of the Metaverse computing infrastructure industry, including upstream chips, midstream customized servers, and downstream cloud gaming terminals. Initially, due to limited funds, Jiewei Chip focused on customized servers, but as more funds were obtained, the operating entity has expanded its product line to include upstream chips and downstream cloud gaming terminals.

From fiscal year 2022, fiscal year 2023 to fiscal year 2024 (the fiscal year ends on March 31), the net profit of Jiewei Chip showed a very obvious "U"-shaped fluctuation. The net profits of the three fiscal years were6.6527 million, -809,100, 1.3575 million US dollars (approximately 48.29 million, -5.87 million, 9.85 million RMB), from profit to loss and then back to profit.

Currently, JMC has not had any institutional investors involved and has not gone through multiple rounds of financing. The highly concentrated shareholder structure makes the company dependent on the founders and core team, and maintains a high degree of equity autonomy and decision-making efficiency.

In the first two years, the revenue was 36.71 million US dollars, and the net profit turned from loss to profit nearly three times.

Jiewei Chip mainly provides products and services related to the Metaverse computing infrastructure. Its products include chips, customized servers and cloud gaming terminals, as well as computing resource optimization software, technology and maintenance services and server leasing, catering to the ever-changing needs of the Metaverse industry.

According to the prospectus, in the past fiscal years of 2022, 2023, and 2024, the revenue of Jiewei Chip was21.6011 million US dollars, 9.5387 million US dollars, 21.7808 million US dollarsThe corresponding net profits are6,652,700, -809,100, US$1,357,500.

It turned sharply from a profit of US$6.6527 million in fiscal 2022 to a loss of US$809,100 in fiscal 2023, and the gross profit margin also dropped sharply from 52% to 14%, mainly due to changes in the number of customers, with Jie Microchip losing 42 customers.

The number of servers sold also shrank significantly from 2,560 to 594, and the average sales price dropped from $5,144 to $4,650. This series of unfavorable factors combined to hit the company's hardware product sales hard.

At the same time, Jiewei Chip's software licensing revenue and service revenue have also been impacted to varying degrees, further exacerbating the decline in the company's overall revenue.

At present, Jiewei Chip's revenue mainly comes from products, software, services and rental income. From fiscal year 2023 to fiscal year 2024, product revenue will be US$7.007 million and US$17.617 million respectively, an increase of151.4%, accounting for 80.9% from 73.5%, mainly due to the company's increased chip sales.

Software revenues were US$560,000 and US$1 million respectively, service revenues were US$1.75 million and US$3.07 million respectively, and rental revenues were US$210,000 and US$89,000 respectively, all of which showed a significant decline in their respective proportions.

In terms of sales expenses, Jiewei Chip's sales expenses were US$230,000 and US$380,000 in fiscal years 2023 and 2024, respectively, an increase of more than 60%.

In terms of R&D expenses, Jiewei Chip increased from $25,000 in fiscal year 2023 to $435,000 in fiscal year 2024, an increase of more than$400,000, which is mainly due to the company signing a US$500,000 intellectual property technical support service agreement with a third party.

In addition, from fiscal year 2023 to fiscal year 2024, Jie Microchip's liabilities climbed from US$300,000 to US$1.7 million.

2. Hardware products dominate revenue, highlighting product customization

From the perspective of business structure, Jiewei Chip's revenue sources mainly come from four aspects:Hardware product sales, software product licensing revenue, service revenue and rental revenue.The product's application scenarios mainly involve cloud gaming, cloud social networking, film and television rendering, intelligent driving, AI computing power, AI office, etc.

Hardware products, mainly includingCustomized chips, customized servers, and Metaverse application terminals, bringing the company a total revenue of US$24.624 million in the fiscal years 2023 and 2024.

Fanxing No. 1 Customized ChipIt is mainly used for cloud gaming and cloud computing, with built-in customized hardware acceleration algorithms and modules, which reduces the computing latency in metaverse scenarios such as cloud computing and cloud gaming. The chip design adopts two implementation methods based on the combination of standard circuits and customized circuits to optimize power consumption, area and yield.

Star series self-developed chipsWithout replacing existing servers, server performance can be improved by expanding GPU/FPGA and other computing acceleration cards at full speed, avoiding performance issues such as heat dissipation and power supply of graphics processing units (GPUs) concentrated in the server's internal space, and reducing the number of server iterations.

In order to flexibly meet the various customized needs of customers and the diversification and rapid development of Metaverse applications, Jiewei Chip'sCustom ServerIt can provide higher computing power at a lower cost. Server products can be widely used in high-end cloud games, rendering, cloud desktops, cloud workstations, AI computing, cloud supercomputing and other application scenarios.

In terms of Metaverse application terminals, the company has launchedMetaBox Cloud Game BoxandMetaPro Cloud Gaming All-in-OneTwo Metaverse application terminal products.

Figure: MetaBox cloud gaming box and MetaPro cloud gaming all-in-one machine

Software products, mainly includingMaijie centralized control management system, Maijie OS system.

Meijie centralized control management system is aRemote cluster monitoring and operation management system, can provide remote optimization, operation and maintenance management, monitoring equipment operation status and other functions for the server, and generate real-time monitoring and corresponding alarms for key technical indicators such as power consumption, temperature, fan speed, frequency, etc. The system is compatible with all customized servers and can further improve server computing efficiency when combined with hardware optimization.

Maijie OS is a system that integrates and configures cloud gaming, cloud computing, and AI computing operating environments based on customer needs. It supports mainstream graphics processing units, including NVIDIA's 20 series, 30 series with ray tracing Texel eXtreme ("RTX") technology, and AMD's 5X and 6X series.

In addition, the system can also provide one-stop hardware solutions for rendering services including animation, architectural rendering, concept design, product design, virtual reality, visual effects, etc., and supports the normal operation of mainstream rendering engines such as V-RAY, Arnold, Cycle, and Redshift.

3. The customer base is relatively single and highly dependent on individual customers

In fiscal year 2022,Top five customersContributed to JMicrochip53.18%income.

By fiscal year 2023, due to the impact of the epidemic and customer loss, the proportion of revenue from the two major customers has risen to54.8%, namely Xi'an Xingpan Electronic Technology Co, Ltd and New Digital Trading Company Limited, accounting for 41.6% and 13.2% respectively.

In fiscal year 2024, Shaanxi Xinghan Panxin Co. Ltd alone accounted for45.9%。

This over-reliance on a single customer makes Jiewei's performance extremely vulnerable to changes in customer numbers and customer demand, and there is a greater risk of volatility.

In fiscal year 2023, Jiewei Chip's main suppliers are Shanghai Semider and Morgogo Company Limited, and the purchase amounts from the two suppliers are$3.75 million, $2.15 million, accounting for56.8%、32.7%。

In fiscal year 2024, Jiewei Chip's purchase amount from Shanghai Semider reached$8.55 million, accounting for55.4%。

4. The shareholder structure is highly concentrated, and the founders retain a high degree of equity autonomy

The prospectus shows that in the corporate structure of Jiewei Chip, Renekton Holding Limited holds 30.13% of the shares, Aixpower Holding Limited holds 13.87% of the shares, Mefis Holding Limited holds 6.46% of the shares, Lucky House Holding Limited holds 5.02% of the shares, and the other 15 shareholders hold a total of 44.52%.

In the shareholder structure of Jiewei Chip before its listing, its main shareholder was the founder Zhiwen Shen, who held 13.86% through Aixpower Holding Limited, and controlled Renekton, Mefis, Lucky House, iGeye, and 9 natural person shareholders who held 23.55% of the shares.83.69%。

The founder, Shen Zhiwen, is from Chaoshan, Raoping County, Chaozhou City. There is currently little public information about his background.

In addition, Weifeng Xu holds 4.66% through iGeye Holding Limited; Zhe Sun holds 6.46% through Mefis Holding Limited; and Dongsheng Chen holds 1.44% through Ming Van Holing Limited.

At present, Jiewei Chip has not had any participation from institutional investors, nor has it gone through multiple rounds of financing and equity distribution. From the perspective of a highly concentrated shareholder structure, the company relies on its founders and core team to maintain a high level of equity autonomy and decision-making efficiency.

Conclusion: The Metaverse is still developing rapidly, moving towards a more intelligent and diverse future

Today, the wave of generative AI is growing, and phenomenal C-end hit applications are emerging frequently, making it the focus of the global market. In contrast, the metaverse seems to have lost a lot of its popularity.

For Jiewei Chip, which positions itself as a supplier and service provider of the Metaverse computing infrastructure, although there are problems such as a single customer base and limited business scenarios, it has achieved a big leap in just a few years since its establishment and chose to go public in the United States, which also reflects that the Metaverse is still developing rapidly.

With the accelerated introduction of metaverse policies and the continuous expansion of the market scale, innovations in AI technology will empower the metaverse, and application scenarios will become more enriched and integrated. A more intelligent, diversified, and personalized metaverse may also come in the future.