The connector industry has the saying of “the strong is always strong”. At least, at this stage, international leading enterprises occupy absolute advantages in technology, scale and industrial chain.
However, with the support of China’s policies, some Chinese enterprises have continuously expanded their market share with the advantages of low cost, close to the market and rapid response, and some smaller enterprises have gradually established a good reputation in the sub field of connector and precision component industry by taking the sub field as a breakthrough.
This is the case of Henan Kaiwang technology, which was listed on the gem in late December. The company occupies an obvious advantage in the field of China’s security precision cable connection components.
According to the 2019 China connector market competition research report released by Zhiduoxing global electronic component industry research, the demand scale of security connectors in China in 2018 was about 4.06 billion yuan. According to the revenue scale of security precision cable connection components of Kaiwang technology in the same period, the company accounted for 8.34% of the market share of the industry.
More importantly, the company has established long-term and stable cooperative relations with Hangzhou Hikvision Digital Technology Co.Ltd(002415) , Zhejiang Dahua Technology Co.Ltd(002236) , Zte Corporation(000063) , Yushi technology and other security head enterprises.
While ensuring the “basic market” of the above security business in the future, the company also plans to gradually expand to rail transit, medical devices, new energy and other fields.
core business data grew steadily,
security connection components are the main revenue
Kaiwang Technology Co., Ltd. was established in November 2009, but the company has been deeply engaged in the field of electronic precision cable connection components for more than 20 years.
Chen Haigang, chairman of the company, founded the predecessor of Shenzhen Kaiwang as early as September 1999. He has more than 20 years of experience in the electronic connector manufacturing industry, and has presided over or participated in the R & D of many patented technologies such as “a high-speed transmission circular connector”, “a camera waterproof connection device and its application method”, “a multi-purpose intelligent serial port controller”.
There is no way to know the historical operation data of Kaiwang technology. Only from 2018, it is enough to see the development of the company’s security business.
In 2018, the company’s business revenue of security precision cable connection components was RMB 339 million, increased to RMB 412 million by 2020, and increased again to RMB 271 million from January to June this year.
At present, the security precision cable connection component business has become the first pillar of the company’s revenue, accounting for more than 90%.
In addition, according to the prediction of Kaiwang technology, the total operating revenue of the company will reach 580 million yuan to 650 million yuan, with a year-on-year increase of 32.56% to 48.55%.
Meanwhile, after deducting non recurring profits and losses, the net profit attributable to common shareholders of the company was 50 million yuan to 55 million yuan, a year-on-year increase of 53.77% to 69.14%.
It should be noted that direct materials account for about 50% of the main costs of Kaiwang technology. This year, the prices of bulk commodities such as copper and rubber have risen rapidly, and the cost of manufacturing has increased significantly.
Under the above background, it is not easy for Kaiwang technology’s net profit to keep pace with its revenue.
Next, with the diminishing marginal effect of global liquidity on commodity prices in 2022, if the bulk commodities fall next year, the profitability of Kaiwang technology is also expected to be significantly enhanced.
The steady improvement of revenue scale and profitability is the comprehensive embodiment of the company in technology R & D and product quality.
Different from other industries, connector suppliers need to have the ability of stable product quality, rapid order delivery and product innovation and R & D to meet the diversified and customized needs of customers.
For example, Kaiwang technology has established a technology center, under which there are connector R & D department, wire R & D department and wire assembly R & D department, which are responsible for the design and development of products in their respective fields and the formulation of product production standards.
The company’s technology center has strong R & D strength and has been successively recognized as “Henan enterprise technology center”, “Henan precision connection component engineering technology research center” and “Henan precision cable connection component industrial public technology R & D and design center”.
Its independent research and development of IP67 grade waterproof technology, blocking waterproof technology, signal integrity processing technology and other core technologies have formed large-scale production, which effectively solves customers’ air tightness requirements for security precision cable connection components.
Thanks to this, the company has become one of the core suppliers of connectors for security leaders such as Hangzhou Hikvision Digital Technology Co.Ltd(002415) , Zhejiang Dahua Technology Co.Ltd(002236) .
From 2018 to 2020, Kaiwang technology’s sales revenue to Hangzhou Hikvision Digital Technology Co.Ltd(002415) accounted for 54.21%, 52.05% and 46.02% of the company’s revenue respectively.
Now, with the successful listing of A-Shares of Kaiwang technology, the financing ability has been greatly strengthened, and the R & D strength and brand effect will be improved simultaneously.
Most of the funds raised by the company’s listing are invested in the capacity expansion projects of precision connectors and connecting components. The project is a supplement to the company’s existing product categories and expansion of production capacity.
It is estimated that 110 million pcs of precision connectors and connecting components will be added every year after the completion of production, including 95 million pcs of security connectors and precision components, 4 million pcs of communication connectors and precision components, 3 million pcs of consumer connectors and precision components, and 8 million pcs of other connectors and precision components.
At that time, the supply capacity of electronic precision cable connection components in the field of Kaiwang technology security equipment and the overall production capacity will be greatly improved, which is undoubtedly conducive to the stability of the company’s industry position.
industry barriers are high, and gradually penetrate into rail transit and new energy
The connector itself requires extremely stable product quality. Therefore, to become a qualified supplier for large manufacturers in downstream industries, connector manufacturers should not only meet the basic standards of the industry, but also pass their strict qualification certification.
When selecting suppliers, large downstream enterprises have strict requirements on the R & D capacity, production and delivery capacity, product quality and after-sales service of connector suppliers. In particular, the ability to cooperate with R & D has become a necessary condition for large manufacturers to select suppliers.
Taking a single product as an example, large manufacturers in the downstream industry need to conduct product review, small batch trial supply, batch supply and other links for suppliers before placing large orders. Once enterprises in the industry pass the supplier qualification review and enter the supply chain system of key customers, they can usually maintain a long-term and stable cooperative relationship. This strict supplier qualification recognition mechanism and long-term cooperative relationship form certification barriers for enterprises planning to enter the industry.
In addition, due to different types and manufacturers involved in the production of terminal products, there are often different requirements for the shape of required connectors and precision components, so connectors are non-standard parts and need customized production.
Therefore, connector suppliers are required to have strong R & D ability and rapid response ability.
The above requirements are an industry barrier for latecomers in the industry, but they have become a moat for companies such as Kaiwang technology that have entered the supply system of leading security enterprises.
With the completion of the above raised investment projects and the improvement of the R & D system, the first mover advantage of Kaiwang technology in the field of security will be further highlighted.
With the shift of the world manufacturing industry to China, the production focus of global connectors has gradually shifted to China, and China has become the largest connector production base in the world.
According to the data released by China industry information network, from 2011 to 2019, the size of China’s connector market increased from US $11.3 billion to US $22.7 billion.
As far as the security industry is concerned, with the acceleration of the construction of “smart city” and “safe city” and the extended application of security technology to the fields of visual management and smart family, the whole industry will continue to grow rapidly in the future.
As an important connection and transmission medium in the security system, security connectors and precision components are one of the important factors to ensure the stable and efficient operation of the security system. Security connectors and precision components play an important role in both security engineering and security products.
With the continuous updating of the varieties of supporting security industry and the continuous expansion of application fields, the market scale of security connectors and precision components will continue to increase year by year.
Kaiwang technology, which has the first mover advantage, is expected to enjoy the dividend of the steady improvement of the above market scale.
On the other hand, the data communication industry and consumer electronics market are also promoting the development of communication cable connection components and consumer electronics connectors respectively.
Before that, Kaiwang technology has also been involved in the above two fields. From 2018 to 2020, the two businesses can achieve a total revenue of about 20 million yuan. According to the revenue composition in the first half of this year, the revenue of the above two businesses will probably reach a new high in the whole year.
According to the company’s plan, the company’s connector products will gradually expand to rail transit, medical devices, new energy and other fields. The company’s above-mentioned investment projects also include 8 million pcs of other connectors and precision components.
The same is true of Kaiwang technology’s strategy. The company has formulated the strategic goal of “taking security precision cable connection components as the core and developing Kaiwang technology into a precision cable connection component integrator with outstanding core competitiveness”, so as to realize the corporate vision of “creating a world brand and building a century long Kaiwang”.
“The company will seize the historical opportunity period of national revitalization of electronic and information industrialization, strive to improve its R & D technology, produce products with excellent product quality and good reputation, provide customers with high-quality and efficient services, and build the company into a precision cable connection component manufacturer with core competitiveness.” The company pointed out.
It can be predicted that under the background of strengthening the “basic plate” of the company’s security business, the next industries such as data communication, consumer electronics and rail transit are also expected to bring more revenue increment, so as to provide solid support for the steady development of the company after listing.
(21st Century Business Herald)
