Directly hitting the shareholders' meeting| the proportion of packaging substrate revenue increased, and Shennan Circuit launched the data center PCB business

Jiwei Network reported that on April 7, Shennan Circuit held the 2021 annual general meeting of shareholders, and the company deliberated on 11 proposals such as the "2021 Annual Report and Its Summary", "2021 Annual Financial Final Account Report" and "2022 Annual Financial Budget Report".

As its institutional shareholders, Aijiwei attended the shareholders' meeting and voted in favor of many of the above proposals. After the meeting, as the entrusted agent of Aiji Micro, the author exchanged views with Yang Zhicheng, chairman of Shennan Circuit, on the current situation and development expectations of the company's PCB and packaging substrate business.

Power data center, PCB business throughout the year to improve

Not long ago, Shennan Circuit released its 2021 financial report, and the company achieved operating income of 13.943 billion yuan in 2021, an increase of 20.19% year-on-year; net profit attributable to shareholders of listed companies was 1.481 billion yuan, an increase of 3.53% year-on-year; basic earnings per share was 3.02 yuan. The Company intends to distribute a cash dividend of RMB9.50 (including tax) to all shareholders for every 10 shares.

In terms of sub-business, the revenue of PCB business was 8.737 billion yuan, an increase of 5.13% year-on-year, accounting for 62.66% of the company's total operating income; the gross profit margin was 25.28%. The proportion of the top two customers fell from 36% in 2020 to 19% in 2021.

China Merchants Securities said that the above two major customers are the top two communication equipment manufacturers in China, and it is estimated that the proportion of the company's base station-related orders in the overall revenue has dropped to less than 20%, and the company has actively strengthened business diversification, and the proportion of orders for servers, automobiles, and medical care has increased.

As of the end of February this year, the number of new 5G base stations in the first two months of China was 81,000, and with the number of previous constructions, the total number of 5G base stations exceeded 1.5 million for the first time, totaling 1.506 million. Not long ago, the Ministry of Industry and Information Technology said that more than 600,000 new 5G base stations will be built this year, and the total number of base stations will reach 2 million at the end of this year.

The data shows that more than 650,000 new 5G base stations will be built in 2021. In contrast, the number of base stations built last year was about 50,000 less than last year, in this case, how will Shennan Circuit respond?

"From the overall situation in China, the difference between the total amount and last year is not too big, and the international demand is slightly better than before, so from the perspective of the international market, this year can be bullish." Yang Zhicheng, chairman of Shennan Circuit, told the author.

It is reported that in the PCB business, Shennan Circuit was previously highly dependent on communications, but the proportion of base station revenue has gradually declined, at the same time, with the rapid growth of data center market demand, the company's orders in the data center field of PCB business last year increased by 45% year-on-year.

While the proportion of PCB revenue in the field of communications declined, the gross profit margin also declined, and the annual report of Shennan Circuit showed that the gross profit margin of pcB business fell by 3.14% year-on-year. In this regard, the company previously said in an institutional survey that due to the slowdown in the demand in the communication market in 2021, the overall capacity utilization rate of the company's PCB business decreased compared with the same period in 2020, and the unit fixed cost sharing increased; the structural adjustment of communication PCB products, and the low gross profit PCB products increased year-on-year. At the same time, due to the price increase of some major raw materials and the climbing of the new PCB factory in Nantong, the gross profit margin of the company's PCB business decreased year-on-year.

Yang Zhicheng introduced that the data center has benefited from home work in the past two years, and the impact of the epidemic and other impacts in the world has developed rapidly, and on the whole, it is still optimistic this year.

In addition, before the base station and data center, Shennan Circuit's PCB business is also making continuous efforts in the field of automotive electronics, and has become one of the key areas for the company's PCB business to expand.

According to the author's understanding, in the automotive electronics business, Shennan Circuit takes new energy and ADAS as the main focus direction, but at present, the automotive electronics business accounts for a relatively small proportion, mainly producing high frequency, HDI, rigid scratch, thick copper and other products. Compared with traditional automotive electronic products, the design requirements of PCBs in the fields of new energy and ADAS are higher, and the difficulty of process technology is improved. In the future, with the emergence of terminal applications such as the Internet of Vehicles, automobiles may also become new types of mobile terminals, and the company's technological advantages in the field of communications can be further extended.

The proportion of package substrates has gradually increased

According to the financial report of Shennan Circuit, the company's packaging substrate business achieved a main business income of 2.415 billion yuan, an increase of 56.35% year-on-year, accounting for 17.32% of the company's total operating income, an increase of 4 percentage points, and a gross profit margin of 29.09%, an increase of 1 percentage point year-on-year.

Shennan Circuit said that the company's packaging substrate business continued to grow at a high speed, the production and supply of module packaging substrates remained stable; storage packaging substrates have made significant breakthroughs in technical capabilities, customer development and capacity release, storage products annual orders increased by 140% year-on-year, Wuxi substrate factory smoothly climbed the slope, has entered a stable mass production stage.

In addition, Shennan Circuit's customer introduction in the FC-CSP field has been smooth, the technical ability has been steadily improved, and mass production has been realized, laying a solid foundation for the company's subsequent long-term development.

It is reported that Shennan circuit storage, application processor, silicon wheat, radio frequency, fingerprint and other types of orders have grown synchronously, and the new production capacity has climbed smoothly.

In the face of the continuous high demand for packaging substrates, Shennan Circuit invested in the construction of packaging substrate factories in Guangzhou and Wuxi last year. Among them, the Guangzhou packaging substrate project plans to invest 6 billion yuan, mainly for FC-BGA, RF and FC-CSP and other packaging substrates, the project is currently in the preliminary preparatory stage; Wuxi high-end flip chip IC carrier board product manufacturing project plans to invest 2.016 billion yuan, mainly for high-end storage and FC-CSP and other packaging substrates, is expected to be put into production in the fourth quarter of 2022.

According to the author's understanding, from the demand side, in addition to traditional electronic products, the rise of application terminals such as automotive electronics, AI, VR/AR and the Internet of Things has continuously improved the requirements for advanced packaging processes and materials, which has promoted the strong growth of packaging substrate demand.

In the context of the rapid growth of demand for innovative applications, the semiconductor industry continues to usher in a boom, and the demand for large-area FCBGA packaging for high-performance computing, SiP/module packaging, and the application of advanced packaging technology are also driving the growth of packaging substrate demand.

From the current situation, the packaging substrate is the fastest compound growth business of Shennan Circuit in the future, after all these projects are put into production, the company's global market share and customer level will be further improved, and the trend of high-end IC carrier board supply is expected to continue, and the company's overall gross profit margin is also expected to increase after its proportion is increased.

(Proofreader/Li Zhengcao)