On May 22, Goertek issued an announcement stating that the company’s board of directors agreed to terminate the spin-off of its subsidiary Goertek Microelectronics Co., Ltd. (hereinafter referred to as Goertek) to be listed on the Shenzhen Stock Exchange GEM and withdraw the relevant listing application documents.
In response to the reasons, Goertek said that based on the current market environment and other factors, in order to coordinate the operation planning of Goertek Micro Capital, after full communication with relevant parties and careful demonstration, the company decided to terminate the spin-off of Goertek and list it on the GEM. and withdrew the relevant listing application documents.
The road to IPO for “the largest domestic MEMS stock”
According to public information, Goertek is a MEMS R&D team established by Goertek in 2004 and established as a wholly-owned subsidiary in 2017 to operate independently.
In November 2020, Goertek began planning for the spin-off and listing of its holding subsidiaries. In December 2021, Goertek’s IPO application was accepted by the Shenzhen Stock Exchange, with plans to raise 3.191 billion yuan. Before its IPO, its valuation had exceeded 20 billion, and it was dubbed “China’s №1 MEMS sensor company.”
At the beginning, Goertek’s listing process was smooth. After passing two rounds of inquiries, in October 2022, Goertek successfully passed the review meeting of the GEM Listing Committee of the Shenzhen Stock Exchange.
However, 16 months after the approval, Goertek has not yet submitted for registration, and its subsequent progress has been repeatedly frustrated.
In March 2022, Goertek suspended its listing application due to the impact of the epidemic. Goertek responded that the suspension of the application is not expected to have a significant impact on the overall IPO process of Goertek Microelectronics. Industry insiders believe that Goertek took the initiative to stop the review because it decided that it could not answer the questions about the lack of business independence in the Shenzhen Stock Exchange’s inquiry letter and the fact that the actual controlling shareholder had a family relationship with the founder of the parent company.
In March 2023, because the financial information recorded in the IPO application documents had expired, additional submissions were required for the suspension of issuance and listing review. In June 2023, the financial information was updated and the issuance and listing review was resumed. This is Goertek’s last action during the IPO filing process.
It is reported that Goertek is mainly engaged in the research and development, production and sales of MEMS devices and microsystem modules. Its business covers key links in the industry chain such as chip design, packaging testing and system applications. It can provide customers with a “chip + device + module” solution. One-stop product solutions.
According to previous prospectus information, Goertek’s micro products are widely used in consumer electronics and automotive electronics fields such as smartphones, smart wireless headsets, tablets, smart wearable devices and smart homes. Its main end customers include Apple, Honor, Xiaomi, OPPO, Harman, Valeo, etc., and has established business relationships with customers such as Meta, NIO, DJI, etc.
In terms of performance, the previous prospectus showed that from 2019 to 2022, Goertek’s operating income was 2.566 billion yuan, 3.160 billion yuan, 3.348 billion yuan, and 3.125 billion yuan respectively, and the net profits attributable to the parent company were 309 million yuan and 346 million yuan respectively. yuan, 329 million yuan, 326 million yuan.
According to data from Yole, Goertek’s MEMS product sales ranked 11th, 9th, 6th, 8th and 9th among global MEMS manufacturers from 2018 to 2022. However, the world rankings have continued to decline after 2020.
As Goertek’s advantage area, its MEMS acoustic sensors once achieved the world’s number one sales in 2020, but they have also declined in recent years, with their market share falling from 32% in 2020 to 26% in 2022. .
What are the barriers to IPO?
Goertek’s road to listing can actually be traced back to the split of Goertek’s shares in 2019. In the past four years, Goertek has continued to promote the spin-off and listing of Goertek, which shows its firm determination to go public.
Just in early April 2024, Goertek released a record of investor relations activities. Some investors inquired about the IPO progress of its subsidiary Goertek. At that time, Goertek responded that the listing work was still in progress.
Therefore, there are different opinions about Goervi’s sudden retreat.
According to Wang Lihui, a financial expert specially invited by the National Development and Reform Commission and an IPO consultant for Shandong enterprises, the termination of Goertek’s spin-off and listing may be related to the new regulations of the Shenzhen Stock Exchange, Apple’s order cuts, and the decline in Goertek’s performance.
After entering the fruit chain in 2010, Goertek achieved both share price and performance increases. However, as a fruit chain enterprise, both Goertek and Goertek are highly dependent on Apple.
On November 8, 2022, Goertek experienced the cancellation of orders from its major customer Apple. Affected by this, in the fourth quarter of 2022, Goertek’s revenue growth trend came to an abrupt end, with year-on-year revenue rising slightly and a net profit loss of 2.091 billion yuan.
In 2023, Goertek also suffered an order cut from Apple. According to its 2023 annual report, Goertek achieved operating income of 98.574 billion yuan, a year-on-year decrease of 6.03%, and net profit attributable to the parent company was 1.088 billion, a year-on-year decrease of 37.79%. This is the performance of Goertek one year after Apple cut off the order. It is also the first performance decline of Goertek in the past five years.
On the other hand, the lower gross profit margin caused by its strong dependence on others is also a major obstacle on its way to listing.
The prospectus shows that from 2019 to 2022, Goertek’s purchase amounts from Infineon were 1.408 billion yuan, 1.586 billion yuan, 1.544 billion yuan and 1.212 billion yuan respectively, accounting for 64.81%, 65.40%, and 65.40% of the total procurement respectively. 58.78% and 52.66%.
In business development, Goertek mainly purchases raw materials for microchips, supplemented by self-research.
The prospectus shows that from 2019 to 2022, the total shipments of MEMS products equipped with the company’s self-developed chips were 238 million, 249 million, 192 million and 146 million respectively. The overall trend is downward, and accounted for 10% of the company’s MEMS products. The proportion of shipments is relatively low.
Due to the small proportion of self-developed chips, Goertek’s micro gross profit margin has also been seriously affected. From 2020 to the first half of 2023, the comprehensive gross profit margin of Goertek’s micro products was 29.69%, 22.85%, 22.38%, and 24.30% respectively. Gross profit margin has been on a downward trend in recent years.
Finally, there is the key market regulatory factor.
Relevant information shows that in April this year, the new “Nine Articles of the People’s Republic of China” explicitly proposed “strictly regulating spin-offs and listings” in the “strict control of issuance and listing access”, which is very important for IPO companies planning to obtain financing opportunities through spin-offs and listings. said it would face stricter supervision and scrutiny.
According to incomplete statistics from a reporter from the Associated Press, more than 8 A-share companies including Han’s Laser, Keda Manufacturing, Wall Nuclear Materials, and Weichai Power have successively stated that they will terminate the spin-off and listing of their subsidiaries this year.
Judging from the current increasingly stringent market environment, the chances of obtaining large amounts of financing through the spin-off of subsidiaries and listings have become slim. Therefore, it is reasonable for Goertek to terminate the spin-off of Goertek Micro.
This paper is from Ulink Media, Shenzhen, China, the organizer of IOTE EXPO (IoT Expo in China)
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