Wentai Technology: at present, about 1.4 million 8-inch wafers with two-wheel drive account for 30% of the revenue of non-mobile phone business.

Recently, the shortage of chips has become the core problem restricting downstream products. Wentai Technology (600745.SH)'s Anshi Group, as the leader of power semiconductors, has attracted wide attention from investors in wafer production capacity. At the performance meeting on May 20th, Dong Mizhou Bin said that the company currently has a production capacity of about 1.4 million 8-inch wafers.

At present, Anshi's wafer factories in Hamburg, Germany and Manchester, England have a total production capacity of 8 inches of 950000-1 million wafers, while contract manufacturers have put into production about 400000 wafers. In the future, through technological transformation, our own production capacity can be increased by more than 10%. Secondly, the product structure is optimized, and the effective production capacity can be expanded by 3%. Without considering the port-adjacent capacity, the production capacity can be increased by about 20% and 30% from this year to next year. " Zhou Bin said.

For card position automotive electronics, the company has acquired Anshi Semiconductor since 2018. Zhang Xuezheng, the chairman of the company, put forward a three-step strategy at the exchange meeting, believing that the company will develop from ODM system integration to semiconductor integration, and from a service-oriented company to a product-oriented company. "the company plans to increase the revenue ratio of non-mobile phone businesses such as flat-panel lithium battery, IoT, smart, hardware and automotive electronics from the current 5 per cent to about 30 per cent by 2023." Zhou Bin added.

Previously, the company set up a joint venture subsidiary with Zhuhai Gree Venture Capital as the main body to acquire the relevant business assets owned by Oufeiguang and supplying cameras to specific overseas customers. Some investors have asked the management why it is necessary to carry out acquisitions knowing that certain overseas customers have cancelled their orders, will it lead to the impairment of goodwill?

Zhang Xuezheng said at the exchange meeting, "this acquisition is a net asset acquisition and does not form goodwill." Certain customers stopped the business on March 31. But after we took over, we have re-established contact with it, and before the merger, we had in-depth exchanges with specific customers, who also recognized Wentai's acquisition. The company is continuously communicating with specific overseas customers to discuss the follow-up orders of trademark assets. "

At present, the company's goodwill is as high as 22.697 billion yuan, of which 1.3 billion yuan comes from the acquisition of Wentai Communications Co., Ltd. in 2015 and 21.397 billion yuan from the acquisition of the semiconductor business owned by Anshi Holdings, which was launched in 2018. Some investors question whether the company has the risk of goodwill impairment.

Zeng Haicheng, the company's financial director, explained that Anshi Group has two wafer factories, three closed test plants and one R & D center worldwide, as well as more than 200 patents, with high asset quality and can support existing goodwill. Although the gross profit margin affected by the epidemic fell slightly by 0.51% to 27% in the first half of last year, the goodwill impairment is more based on future profits, determining the recoverable amount of the goodwill asset group, and the temporary decline in performance does not necessarily lead to goodwill impairment.

According to the financial report, Anshi's performance has resumed growth since last year's Q3. This year, Q1's revenue is about $520 million, and its gross profit margin has risen to 34%. Revenue and profitability have returned to or exceeded the highest quarterly levels in the past two years.

Pacific Securities analysis believes that new energy vehicles and photovoltaic and other new areas of demand to squeeze a considerable proportion of global wafer capacity, so that the global IC supply is extremely tight, taking into account the continued growth of Anshi wafer and packaging capacity, the continuous expansion of delivery categories, it is expected that Anshi's excellent performance in the first quarter is expected to run through the whole year and continue to enhance quarter by quarter, becoming the company's most reliable profit driver in 2021.

It is worth noting that although the semiconductor business has resumed growth, the company's Q4 return net profit last year was 156 million yuan, down 78.39% from the same period last year. Zeng Haicheng explained that this is mainly due to the increase in the price of upstream devices in ODM business, including chips, screens and so on. Pacific Securities also believes that in the past two quarters, the shortage of upstream IC and materials, mobile phone material kit is difficult to complete, causing a certain drag on the performance of Wentai's mobile phone ODM field.

Zeng Haicheng said at the exchange meeting that with the changes in inventory and demand in the upstream and downstream of the industry, some enterprise device products have gradually stabilized, and the inflection point of price trend is expected to be formed in Q3 or Q4 this year.

According to the company's quarterly report, Q1 achieved revenue of 11.991 billion yuan this year, + 8.30% year-on-year, and net profit of 652 million yuan, + 2.56% year-on-year. Citic Securities believes that the current global supply and demand of components is tight, the company's ODM business is under pressure while the semiconductor business continues to improve. With the supply chain returning to normal, the company is expected to continue to maintain the growth trend of two-wheel drive.