China’s mobile phone ODM leader Wingtech Technology Co.Ltd(600745) is gradually going deep into the apple industry chain.
On March 10, Wingtech Technology Co.Ltd(600745) released an announcement that its smart home project cooperating with specific overseas customers officially began mass production and realized normal shipment, with a total amount of 5 billion yuan. Some media learned through the supply chain that the above customers are apple.
However, on March 11, the relevant person of Wingtech Technology Co.Ltd(600745) board secretary office told the reporter of Huaxia times that the company had not disclosed the specific information of customers. At present, he does not know the latest progress of computers and other products cooperating with the customer. However, he said that the company had previously cut into the optical module business through the acquisition of Guangzhou Delta (the former Ofilm Group Co.Ltd(002456) subsidiary), and some products had been mass-produced and shipped.
However, whether it is cutting into the fruit chain or arranging the semiconductor and optical module business, it reveals the ODM giant’s desire to continue to grow its performance. On March 11, Wingtech Technology Co.Ltd(600745) share price rose 1.06% to close at 109.45 yuan, which was nearly 40% lower than its highest point in February 2020.
large order mass production and shipment
According to the announcement, previously Wingtech Technology Co.Ltd(600745) ‘s product integration business has carried out a number of business cooperation with the above customers, such as computers, smart homes and so on. It said in the announcement that this cooperation can expand the product field, optimize the customer structure, and will have a positive impact on its operating results in 2022 and future years.
Smart home is the first project of their cooperation. Wingtech Technology Co.Ltd(600745) believes that this mass production and shipment can lay a foundation for its cooperation with specific customers in the field of multiple products.
Wingtech Technology Co.Ltd(600745) the person from the board secretary office told the reporter of Huaxia times that the smart home includes many products such as air purifiers, with a wide range, but it is not convenient to disclose the specific products shipped by the project. The above-mentioned person also said that this is a cooperation project between Wingtech Technology Co.Ltd(600745) ‘s product integration business and customers, and does not belong to the optical module business previously acquired by delta.
But this does not affect the market’s view that its order comes from apple. One background is that Wingtech Technology Co.Ltd(600745) has entered the fruit chain through two huge acquisitions.
In 2018, apple became a world-renowned semiconductor supplier with a total cost of 600 billion yuan. Thus, it also extends from an ODM company to the field of upstream semiconductor devices.
In 2021, Wingtech Technology Co.Ltd(600745) acquired the related business of Ofilm Group Co.Ltd(002456) supplying cameras to Apple at the price of 2.42 billion yuan, of which 1.7 billion yuan was used to acquire 100% equity of delta, a holding subsidiary of Ofilm Group Co.Ltd(002456) and 720 million yuan was used to purchase camera related equipment of its subsidiary Jiangxi Jingrun optics Wingtech Technology Co.Ltd(600745) also cuts into Apple’s iPhone supply chain.
According to the reporter of China times, Delta’s optical business has been mass produced and shipped. At the investor meeting at the end of December last year, Wingtech Technology Co.Ltd(600745) chairman Zhang Xuezheng said that the products related to the optical module business acquired by the company had been produced and shipped in Guangzhou. “Werta products will be used in Android phones, laptops and automotive customers of Wentai ODM.”
In addition, according to media reports, Wingtech Technology Co.Ltd(600745) is ready to join the apple MacBook assembly supply chain and is building relevant production lines in Zhejiang, Jiangsu, Yunnan and other places.
Jiang Han, senior researcher of Pangu think tank, told Huaxia times that for Wingtech Technology Co.Ltd(600745) for Wingtech Technology Co.Ltd(600745) , if the cooperation with apple can fully realize mass production, it will inevitably drive the rapid growth of Wingtech Technology Co.Ltd(600745) own business. However, it also faces the same risks as Ofilm Group Co.Ltd(002456) .
He also told reporters, ” Ofilm Group Co.Ltd(002456) has built too many specialized and even special production lines for apple, which will lead to huge problems if Apple does not purchase. Similarly, Wingtech Technology Co.Ltd(600745) should consider how to use flexible and general production lines to serve apple. Otherwise, once Apple’s strategy changes in the future, it may have a great impact on its business.”
more than “eating apples”
Wingtech Technology Co.Ltd(600745) ‘s two acquisitions may not be just for “eating apples”.
The new business has improved the valuation of Wingtech Technology Co.Ltd(600745) in the capital market. For example, during the acquisition of ANSYS semiconductor, Wingtech Technology Co.Ltd(600745) ‘s share price reached 171.43 yuan in February 2020, the highest since its backdoor listing in 2016.
It is also its important purpose to extend upward to the upper reaches of the industrial chain with higher gross profit margin.
According to the reporter of Huaxia times, when Wingtech Technology Co.Ltd(600745) was founded in 2006, it was mainly engaged in mobile phone scheme design (IDH). In 2008 Wingtech Technology Co.Ltd(600745) invested US $80 million to establish a mobile phone factory in Jiaxing, Zhejiang Province, from “selling mainboard” to “making mobile phone” (ODM). Since 2020, Wingtech Technology Co.Ltd(600745) will also expand the OEM business from mobile phones to tablets, laptops, automotive electronics and other fields. According to the financial report, in the first half of last year, the product integration business (i.e. ODM business) still accounted for more than 70% of its revenue.
Compared with the acquired semiconductor business, the gross profit margin has exceeded 30% for a long time. The gross profit margin of Wingtech Technology Co.Ltd(600745) ODM business established in the Jianghu was only 9.02% in the first half of last year. In 2018, the gross profit margin of this business was as low as 7.56%.
Behind this, Wingtech Technology Co.Ltd(600745) ‘s ODM business has already seen a decline in performance growth. Before the launch of fruit chain acquisition, Wingtech Technology Co.Ltd(600745) 2018’s revenue increased by only 2.5%, and the net profit fell by more than 80%. However, after the layout of semiconductor business in 2019, the revenue and net profit of Wingtech Technology Co.Ltd(600745) year doubled.
However, such rapid growth has not been sustained. In 2020, the revenue and net profit of Wingtech Technology Co.Ltd(600745) also achieved year-on-year growth of more than 20% and more than 90% respectively. However, in the first three quarters of last year, Wingtech Technology Co.Ltd(600745) the revenue growth rate was less than 1%, but the net profit fell by nearly 10% year-on-year.
Behind this, affected by the epidemic and the rise in the price of raw materials in the past two years, the OEM business of Wingtech Technology Co.Ltd(600745) had a revenue of 18.01 billion yuan in the first half of 2021, a year-on-year decrease of 7.25%. The net profit of this business in the current period is 75 million yuan, which means that its net profit margin in this business is only 0.42%.
However, according to the research report released by Puyin international securities in November last year, the lack of core in the supply chain in 2021 dragged down the profits of Wingtech Technology Co.Ltd(600745) ‘s ODM business segment. However, the lack of core in mobile phones has been alleviated since the third quarter of last year and further improved this year. Therefore, the ODM business of Wingtech Technology Co.Ltd(600745) will usher in an inflection point in 2022.
Xu Ke, chief analyst of Semiconductor Industry Research Institute insemi research, said to the reporter of Huaxia times that Wingtech Technology Co.Ltd(600745) previously was a system biased assembler with a large volume, so it is difficult to achieve rapid improvement of performance through the original ODM business. Therefore, extending to the upper reaches of the industrial chain with higher added value has become one of the choices to find new growth points.
He also said that the prosperity of power semiconductors has been very high and there is a lot of room for growth. “At present, Wentai is constantly strengthening its ODM strength. On the one hand, it is in the layout of chips. In the future, it may tend to a steady growth state.”
