As the industry recovers, many leading companies in the integrated circuit packaging and testing industry are actively competing for technical personnel. However, at this stage, the industry is still in the process of restoring profitability.

Since the beginning of the year, the integrated circuit packaging and testing market has gradually shown signs of recovery, and these signs are now supported by the performance of listed companies.

According to statistics, in the first quarter of this year, integrated circuit packaging and testing companies as a whole achieved double-digit revenue growth and doubled performance, and the performance of individual leading companies increased by 20 times. Driven by the performance boost, the integrated circuit packaging and testing industry has started a personnel expansion mode. As of now, the total number of employees has increased by 1,567 compared with the same period last year, and the new personnel are mainly technical personnel.

01 Many companies compete for technical personnel

The packaging and testing industry ushered in a new stage of "bottoming out"

The integrated circuit packaging and testing industry is experiencing a "bottoming out" stage, and the industry's total revenue and total net profit in the first quarter of this year showed signs of turning points.

According to statistics, the 13 A-share companies in the Shenwan integrated circuit packaging and testing sector achieved a total operating income of 72.718 billion yuan in 2023, a year-on-year decrease of 3.24 billion yuan; the total net profit attributable to the parent company was 2.721 billion yuan, a year-on-year decrease of approximately 3 billion yuan. Specifically, at the level of 13 companies, 8 companies will achieve revenue growth in 2023, an increase of one year-on-year; 2 companies will achieve a loss of net profit attributable to the parent company, an increase of 1 year-on-year.

Entering the first quarter of this year, the 13 A-share companies in the integrated circuit packaging and testing sector achieved a total operating income of 17.656 billion yuan, a year-on-year increase of 20.55%; a total net profit attributable to the parent company was 399 million yuan, a year-on-year increase of 159%. At the company level, compared with last year, a total of 4 companies achieved year-on-year growth in performance. In the first quarter of this year, the number of companies achieving year-on-year growth increased to 8, doubling the number.

In terms of performance scale, integrated circuit packaging and testing companies generally have small profits. In the first quarter of this year, only Changdian Technology had a net profit attributable to its parent company of over 100 million yuan, with a net profit attributable to its parent company of 135 million yuan. There are three companies that have doubled their net profit attributable to the parent company, namely Tongfu Microelectronics, Qizhong Technology, and Huatian Technology, with year-on-year increases of 2064.01%, 150.51%, and 153.62% respectively.

In line with the recovery in overall industry performance, the overall number of employees in the industry has also shown signs of increasing. According to statistics, as of May 12, the total number of employees in 13 integrated circuit packaging and testing companies was 81,823, an increase of 1,567 people year-on-year. Among the employees, the number of industry technicians reached 23,063, an increase of 1,585 year-on-year.

Specifically at the company level, the number of employees at Yongsi Electronics has increased significantly, with an increase of 1,808 people, and Tongfu Microelectronics has increased by 807 people. Huatian Technology and Qizhong Technology saw a significant increase in technical personnel, reaching 552 and 473 respectively.

02 Profitability continues to recover

With the industry showing signs of recovery, investors' expectations for listed companies are increasing. An investor asked the board secretary of Changdian Technology on the Shanghai Stock Exchange e-interactive platform: "Changdian reported revenue of 9.2 billion yuan in the fourth quarter of 2023, deducting non-profit of 570 million yuan, while in the first quarter of 2024, it reported revenue of 6.8 billion yuan and profit of 135 million yuan. Yuan. These are two consecutive quarters. Factory production should be consistent. Why are there such huge differences in revenue and profits in these two consecutive quarters? "

In response to investors' questions, Changdian Technology responded on May 10: "The company's business has obvious seasonal characteristics. The second half of the year is the peak season of the company's business, and the revenue and profit are generally significantly higher than the off-season in the first half of the year. Although in the first quarter, the company Revenue and profit have declined month-on-month, but year-on-year, the company's revenue and profit have both achieved double-digit growth.”

Similarly, when the 2023 annual report was released, an investor asked Tongfu Microelectronics on the Shenzhen Stock Exchange Interactive Platform: "The company's integrated circuit packaging and testing business, the gross profit margin from 2021 to 2023 will increase from 16.97%, 13.58%, and 11.50%." There is a sharp downward trend year by year. What is the specific reason for the decline in gross profit margin year by year?”

Tongfu Microelectronics responded: "As the semiconductor market has experienced ups and downs in 2023, the company's traditional business has encountered greater challenges, resulting in a decline in the company's capacity utilization and gross profit margin."

The profitability of listed companies is still being repaired. At the same time, asset impairment losses in the packaging and testing industry are also showing a steady but declining trend. According to statistics, the asset impairment losses of the packaging and testing industry in 2022 (losses are listed with a "-" sign) will be -489 million yuan, which will shrink to -197 million yuan in 2023. Among them, the asset impairment losses of Changdian Technology were -257 million yuan and -72.6755 million yuan respectively, accounting for 52.56% and 36.82% respectively that year. As of the first quarter of this year, Changdian Technology’s asset impairment loss was -17.7499 million yuan, accounting for 56% of the industry’s total asset impairment.

Regarding the significant year-on-year decrease in asset impairment losses in 2023, Changdian Technology pointed out in the explanation of the reasons for the change: "Mainly due to strengthening material procurement management, the provision for inventory depreciation decreased." Changdian Technology's 2023 annual report shows that the company's inventory depreciation losses - 56.5833 million yuan, a decrease of 21.0865 million yuan compared with 2022.

While asset impairment losses have decreased, Changdian Technology's credit impairment losses have also seen new changes. The company's credit impairment loss in 2023 was -4.9359 million yuan, a change of -114.43% compared to 2022's 34.2153 million yuan. In this regard, the company explained: "It was mainly due to the recovery of overdue payments from customers last year." In this year's first quarter report, the company's credit impairment loss was 6.8225 million yuan, compared with 5.1718 million yuan in the first quarter of 2023.

03 National large funds "position adjustment"

Changdian Technology will welcome its controlling shareholder

Up to now, the national large funds - National Integrated Circuit Industry Investment Fund Co., Ltd. and National Integrated Circuit Industry Investment Fund Phase II Co., Ltd. have settled in three companies in the packaging and testing industry, namely Changdian Technology, Huatian Technology, Tongfu Microelectronics.

The National Integrated Circuit Industry Investment Fund’s shareholding ratios in Changdian Technology and Tongfu Microelectronics are 13.24% and 11.26% respectively; the second phase of the National Integrated Circuit Industry Investment Fund’s shareholding ratios in Huatian Technology and Tongfu Microelectronics are respectively At 3.21% and 1.35%, the shareholding ratios of large funds were both the same as at the end of the previous quarter.

First quarter report data shows that Changdian Technology achieved operating income of 6.842 billion yuan, a year-on-year increase of 16.75%; net profit attributable to the parent company was 135 million yuan, a year-on-year increase of 23.01%; net cash flow generated from operating activities was 1.373 billion yuan, a year-on-year increase of 11.26% ;Basic earnings per share were 0.08 yuan, a year-on-year increase of 33.33%. Tongfu Microelectronics achieved operating income of 5.282 billion yuan, a year-on-year increase of 13.79%; net profit was 98.4924 million yuan, a year-on-year increase of 2064.01%. Huatian Technology achieved operating income of 3.106 billion yuan, a year-on-year increase of 38.72%; realized net profit attributable to the parent company of 57.034 million yuan, turning losses into profits year-on-year; and realized net cash flow generated from operating activities of 554 million yuan, a year-on-year increase of over 229.09%.

The shareholding style of large national funds is biased towards the long term. According to statistics, the National Integrated Circuit Industry Investment reported in the mid-term of 2017 that it has entered Changdian Technology, with an initial shareholding ratio of 9.54%. It has held shares for 9 years so far. During the period, the shareholding ratio The highest is 19%; in the first quarter report of 2018, a new member became the top ten shareholders of Tongfu Microelectronics, with an initial shareholding ratio of 15.70%. The shareholding period has been as long as 6 years, and the highest shareholding ratio during the period was 21.72%. After the National Integrated Circuit Industry Investment Fund Phase II added Huatian Technology in the 2021 annual report and Tongfu Microelectronics in the 2022 annual report, the number of shares held has not changed.

Different from the "holding unchanged" strategy of large funds, there is also a phenomenon of cross-investment among leaders in the packaging and testing industry. In the first quarter, Huatian Technology made a large purchase of Changdian Technology shares. According to the announcement of Changdian Technology, in the first quarter, Huatian Technology became the company's top ten shareholders, with a shareholding ratio of 1.25% and a shareholding of 22.3075 million shares.

According to Huatian Technology's 2023 annual report, as of the end of last year, the company's securities investments included a total of 3 stocks, all of which were equity investments obtained before the IPOs of these companies. According to data on the top ten shareholders of these stocks, Huatian Technology ranks among the top ten shareholders in only one of the companies, holding 3.2576 million shares. Looking only at the comparison of the number of shares held, the number of Changdian Technology shares held by Huatian Technology exceeds the holdings of the above three stocks, ranking first.

According to Huatian Technology's first quarter report, during the reporting period, the company's "investment income was 55.8377 million yuan, an increase of 408247.99% from -13680.74 yuan in the same period last year, which was mainly the investment income obtained by the company from securities investments during the reporting period." This means that Huatian Technology's investment in Changdian Technology has achieved a large floating profit. It is understood that the stock price performance of Changdian Technology in the first quarter showed a V-shaped trend, with an amplitude of 37.27% and a maximum increase of more than 40%.

An investor asked Huatian Technology on the interactive platform of the Shenzhen Stock Exchange: "Why do you increase your holdings of your own stocks without buying Changdian Duo? What are your considerations for buying a large amount of Changdian?" The company replied, "The company's securities investment Behavior."

It is worth mentioning that in terms of corporate governance, Changdian Technology will change the situation without a controlling shareholder. Changdian Technology disclosed in its first quarter report that "the company received a notice on March 26, 2024 that the company's shareholders National Integrated Circuit Industry Investment and Core Semiconductor signed a "Share Transfer Agreement" with Panshi Hong Kong respectively. According to the "Share Transfer Agreement" 》After the completion of the share delivery of Changdian Technology and the reorganization of the board of directors of Changdian Technology, Panshi Hong Kong or its related parties will hold 403.1229 million shares of the company, accounting for 22.54% of the company's total share capital, and will become the company's controlling shareholder.”

An investor asked this matter on the Shanghai Stock Exchange e-Interactive, "What is the progress of the equity transfer of the first and second shareholders of Changdian Technology?" The company replied on May 9: "This change in the company's shareholders' equity is still in progress. The company will Fulfill information disclosure obligations in a timely manner based on the progress of the matter.”

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