About hengshuo semiconductor (Hefei) Co., Ltd
Application documents for initial public offering and listing on the science and Innovation Board
Revised description of the reply to the inquiry letter of the first round of audit
Rongcheng zhuanzi [2022] No. 230z0586 Shanghai Stock Exchange:
In response to the second round of inquiry letter issued by your firm, Rongcheng Certified Public Accountants (special general partnership) (hereinafter referred to as "reporting accountant") revised the F103 product technology authorization fee and share based payment confirmation method, and the Company re prepared the financial statements for January June 2021, 2020, 2019 and 2018, The seventh meeting of the first board of directors was held on January 28, 2022, and the resolution was approved and submitted. At the same time, the return of Jieli technology occurs before the approval date of the corrected financial statements, which constitutes the post balance sheet event of the newly issued financial statements. For the part of the sales return belonging to June 2021, the company retroactively adjusted the financial statements declared from January to June 2021, and correspondingly modified the relevant financial data in the first round of inquiry reply. Please review.
If the term "HENGCHUANG shares" is used in the prospectus (hereinafter referred to as "Hefei Kechuang shares") and is consistent with the explanation of the initial public offering of the company (hereinafter referred to as "the prospectus"). The font in this reply represents the following meanings:
Review the questions listed in the inquiry letter in bold
Reply to the questions listed in the audit inquiry letter
In this reply, if the mantissa of the total count is inconsistent with the mantissa of the sum of the listed values, it is caused by rounding.
1、 Background description of the revision of the reply to the original inquiry letter
(I) revised description on the accounting treatment of F103 product technology authorization fund
The issuer did not conduct accounting treatment when obtaining the relevant technical data of F103 product. Since F103 product technology only completes the design and preliminary streaming work at the time of delivery, and the design and chip verification process is incomplete, it still needs to invest subsequent R & D resources to realize engineering samples and mass production, and the results may be uncertain. If the engineering samples and mass production progress of F103 fail to meet the verification standards before December 31, 2022, both parties shall separately agree on the payment time, amount and further R & D plan. For the above reasons, when F103 product technology is delivered, the issuer cannot accurately measure and estimate the amount and time of payment of F103 product technology licensing fee. The issuer plans to conduct relevant accounting treatment after the amount and time of payment of F103 licensing fee are determined according to the subsequent F103 project samples and mass production R & D progress.
Although the issuer cannot accurately measure and estimate the amount and time of payment of F103 product technology licensing fee at the time of delivery of F103 product technology, considering that Wuhan Xinxin has delivered F103 product technology related materials to the issuer, in order to fully reflect the transaction in the financial statements, The issuer has provisionally estimated that the F103 product technology authorization fund of 20 million yuan has been included in the accounting of other non current assets according to the contract amount, and the provisionally estimated payable F103 product technology authorization fund of 20 million yuan has been included in the accounting of other non current liabilities.
(II) explanation on Revision of share based payment confirmation method
In combination with the relevant provisions on the disposal of shares after employees' resignation in the previous equity incentive schemes of the company, and with reference to the relevant cases in the recent capital market, the company has made clear the disposal of shares after employees' normal resignation in the previous equity incentive schemes. Accordingly, the company will adjust the expense recognition method of equity incentive in Hefei Henglian and Shenzhen Hengxin shareholding platforms from one-time recognition on the grant date to amortization by stages within the estimated waiting period, The cost recognition method of equity incentive implemented on Shenzhen shuoxin shareholding platform is adjusted from average allocation to allocation according to four independent share based payment plans. Due to the above adjustments, the company revised the relevant data of the first round of inquiry reply accordingly.
(3) revision statement of the balance sheet after adjustment due to returns
Due to the correction of F103 product technology authorization fee and share based payment confirmation method, the company has re prepared the financial statements for January June 2021, 2020, 2019 and 2018, which were approved and submitted at the seventh meeting of the first board of directors on January 28, 2022. At the same time, Jerry's return occurred before the approval date of the corrected financial statement, which constitutes the post balance sheet event of the newly issued financial statement. For the part of the sales return belonging to June 2021, the company retroactively adjusted the financial statements declared from January to June 2021, and correspondingly modified the relevant financial data in the first round of inquiry reply.
2、 Specific amendments to the reply to the first round of inquiry letter
The contents of the amendment involved in the reply of the reporting accountant to the first round of inquiry letter are as follows: Question 1: about Wuhan Xinxin
Question 1.1: about business cooperation with Wuhan Xinxin
2. MCU specific cooperation
(3) Pricing basis and accounting treatment of related businesses
The exclusive licensing of product technology comprehensively considers the investment cost of authorized product technology research and development, the market prospect of the product at that time and other factors, and negotiates with Wuhan Xinxin to determine the royalty price and the charging standard of sales commission. The specific accounting treatment is as follows:
When obtaining exclusive license:
Debit: intangible assets - royalties / other non current assets
Credit: accounts payable / other non current liabilities
Amortization:
Debit: main business cost
Credit: intangible assets - accumulated amortization
……
3. Whether mutual authorization and licensing of sales leads to direct competitive relationship between both parties and specific impact
……
The issuer has updated and disclosed the "risk of intensified market competition" in "III. business risk" of "section IV Risk Factors" in the prospectus, as follows:
At present, the company's main products are nor flash chip and MCU chip. Their industries are facing high industry concentration and fierce competition. In 2020, the total market shares of the top five manufacturers of NOR flash and MCU in the world were 78.4% and 75.6% respectively. With the rapid growth of downstream market demand, leading enterprises in NOR flash fields such as Huabang, wanghong, Gigadevice Semiconductor (Beijing) Inc(603986) , cypress and micron, as well as leading enterprises in MCU fields such as Renesas, NXP, Infineon, Italian French semiconductor and microchip technology, continue to expand the market and improve their brand awareness and market position by virtue of their technical and financial strength.
Compared with the above-mentioned manufacturers, the overall scale of the company is relatively small, and there is a certain gap in capacity guarantee, R & D investment and technical reserve, product variety quantity, profitability and anti risk ability. There is a big gap in product layout between the company and industry leaders, and the company has not yet formed competitiveness in automotive electronics and industrial markets. In recent years, with the rapid growth of the market demand for downstream applications of NOR flash chips and MCU chips, the acceleration of the domestic substitution process of integrated circuits and the vigorous development of the integrated circuit industry by the state, the number of new Chinese enterprises in the company's industry is increasing, which will make the company face more severe market competition and the company's products may be replaced by competitive products, This leads to the risk that the company's market share and profit space will decline.
Question 1.2: About authorizing NOR Flash technology to Wuhan Xinxin
1、 Issuer disclosure
(II) list the product name, revenue, gross profit amount and proportion of the above technology used or likely to be used by the issuer, and the sales of Wuhan Xinxin under its own brand or a third-party brand
The technology authorized by the company is the design result of specific products, which does not involve the company's core technology itself. With regard to the sales of authorized products, the issuer has supplemented and disclosed the following in "VI. technology and research and development of the company" (VIII) about authorizing NOR Flash technology to Wuhan Xinxin "of" section VI business and technology "of the prospectus:
2. Sales of authorized products of the company
The products authorized by the issuer to Wuhan Xinxin are as follows:
Process voltage capacity and version
3.3V 4MB, 8MB (2 models), 16MB (3 models), 32MB (2 models) 65nm 4MB, 8MB, 16MB, 32MB
1.8V
Note 3.3V 16MB, 32MB
50nm 8Mb、16Mb、32Mb、64Mb、128Mb
1.8V
Note: up to now, seven 50nm authorized products have been developed and one has been completed.
During the reporting period, the sales of the above authorized products in the issuer are as follows:
Unit: 10000 yuan
Project from January to June 2021, 2020, 2019 and 2018
The company's actual income from selling authorized products is 10306.95 15990.41 10459.97 7955.12
Total sales of NOR flash of the company 24077.98 24279.82 12841.78 9862.89 revenue
Accounting for 42.81%, 65.86%, 81.45% and 80.66%
With the continuous iterative upgrading of the issuer's products, the proportion of the sales revenue realized by the issuer's sales of authorized products in the overall sales revenue of the issuer's NOR flash products shows a downward trend.
The gross profit of products authorized by the issuer is as follows:
Unit: 10000 yuan
Project from January to June 2021, 2020, 2019 and 2018
Sales revenue 10306.95 15990.41 10459.97 7955.12
Cost of sales 6155.58 11634.08 9046.47 6957.25
Gross sales profit 4151.37 4356.33 1413.49 997.87
Gross profit margin 40.28%, 27.24%, 13.51%, 12.54%
Comprehensive gross profit margin of nor falsh products: 36.38%, 25.33%, 13.29%, 11.44%
In each period of the reporting period, the gross profit margin of the issuer's authorized products is basically equivalent to the comprehensive gross profit margin of NOR flash products, showing an upward trend year by year.
3. Sales of Wuhan Xinxin under its own brand or third-party brand
The issuer settled the technology royalties based on the sales quantity of relevant authorized products of Wuhan Xinxin and Wuhan Xinxin. During the reporting period, the sales quantity of technology royalties settled between Wuhan Xinxin and the issuer is as follows:
Unit: piece
Project from January to June 2021, 2020, 2019 and 2018
Wafer sales quantity 2366.00 4692.00 4259.00 3233.00
Since it is impossible to obtain the income, unit price and other information of Wuhan Xinxin's sales of the above products, the sales amount of Wuhan Xinxin's sales of the above products is simulated and calculated based on the average selling price of the issuer's external sales of the above products, and the comparison with the sales income of the issuer's NOR flash products is as follows:
Unit: 10000 yuan
Project from January to June 2021, 2020, 2019 and 2018
Simulated calculation of Wuhan Xinxin's sales revenue of 2938.59 4212.48 4232.84 4042.43 authorized products (a)
Issuer's external authorized products
