Hengshuo semiconductor (Hefei) Co., Ltd
Zbit Semiconductor, Inc.
(building 11, alumni enterprise innovation park, Luyang University of science and technology, northwest, the intersection of Tianshui road and Taihe Road, Luyang District, Hefei) revised instructions on the reply to the first round of examination and inquiry letter of hengshuo semiconductor (Hefei) Co., Ltd. on the application documents for IPO and listing on the science and Innovation Board
Sponsor (lead underwriter)
(No. 18, Meishan Road, Hefei, Anhui)
February, 2002
Shanghai Stock Exchange:
Hengshuo semiconductor (Hefei) Co., Ltd. (hereinafter referred to as “hengshuo”, “issuer” and “company”) and the sponsor Guoyuan Securities Company Limited(000728) (hereinafter referred to as “sponsor” and ” Guoyuan Securities Company Limited(000728) “) corrected the F103 product technology authorization fee and share payment confirmation method in response to the second round of inquiry letter issued by your office, The company has re prepared the financial statements for January June 2021, 2020, 2019 and 2018, and approved the report 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. Please review.
Unless otherwise specified, the abbreviations or terms used in this reply are consistent with the prospectus of hengshuo semiconductor (Hefei) Co., Ltd. for initial public offering and listing on the science and Innovation Board (application draft) (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
Amendments and supplements to application documents (BOLD)
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.
catalogue
Question 1: about Wuhan Xinxin 5 question 2: about core technology and scientific innovation attributes 13 question 3: about the main products Question 4: about industry characteristics and market competition 19 question 5: about major suppliers 22 question 6: about major customers 23 question 8: about the shareholders LV Yinan, Dong Qiang (his son Dong Xiangyu), Luan Ligang and Meng fanan (his daughter Meng Xiangwei) 29 question 9: about income 30 question 10: about cost and gross profit margin 38 question 11: about share based payment 49 question 13: about inventory 58 question 14: on other matters 61 general opinions of the sponsor 65 I. 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.
The issuer and the sponsor’s reply to the first round of inquiry letter involves the revised content. The specific situation after the revision is as follows: Question 1: about Wuhan Xinxin 1.1 about the business cooperation with Wuhan Xinxin
1、 Issuer description
(I) distinguish between nor flash and MCU product lines, comprehensively sort out and explain the business cooperation mode with Wuhan Xinxin, the background, reasons and main contents of the relevant cooperation agreement, the rights and obligations of both parties in technology research and development, intellectual property rights, product purchase and sales, and the pricing basis and accounting treatment of relevant businesses, Whether mutual authorization and licensing of sales leads to direct competitive relationship between the two sides and specific impact
2. MCU specific cooperation
(3) Pricing basis and accounting treatment of related businesses
1) 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 the two sides 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. 1.2 about licensing NOR Flash technology to Wuhan Xinxin
1、 Supplementary disclosure of the issuer
(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)
1.8V 4Mb、8Mb、16Mb、32Mb
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%
Gross profit margin of authorized products sold by the issuer in each period of the reporting period
