Backed by Huawei: Shengyi Electronics Doubles Its Core Revenue, and Its 5G PCBs Have Mass-Production Capabilities.

According to a report by Jiwei.com, driven by the commercial deployment of 5G, demand for high-frequency, high-speed PCBs is surging. In multiple sectors—including telecommunications, consumer electronics, servers, automotive electronics, and industrial control & medical devices—5G... The industry benefits brought by technology are gradually becoming apparent.

Currently, Shengyi Electronics Co., Ltd. (referred to as “Shengyi Electronics”), which was spun off from Shengyi Technology, has become one of the few global companies capable of providing high-end 5G communication board products—positioning itself as the earliest beneficiary of 5G communication technology. With strong mass-production capabilities and robust customer support, Shengyi Electronics is accelerating its push to list on the STAR Market.

It is understood that Shengyi Electronics, with its strong competitive edge in the 5G PCB sector thanks to its partnerships with domestic and international manufacturers such as Huawei, ZTE, IBM, Inspur Information, FiberHome Communications, and Nokia, has seen rapid growth in its core business in recent years, with a significant increase in gross profit margin and a robust performance in the 5G PCB market. Strong mass-production capabilities have already become... Its “stepping stone” to opening the door to the STAR Market has also drawn considerable attention to its journey toward an IPO on the STAR Market.

Main business revenue from communication equipment boards doubled, and the gross profit margin steadily improved.

Currently, it has become increasingly common for listed companies to spin off their high-quality subsidiaries and list them independently to raise capital—Shengyi Electronics is one such example.

As a holding subsidiary of Shengyi Technology, Shengyi Electronics will leverage the STAR Market platform of the Shanghai Stock Exchange to raise funds independently, thereby promoting the development of its R&D, manufacturing, and sales businesses in printed circuit boards.

There is no doubt that, since its establishment in 1985, Shengyi Electronics’ primary application areas have included boards for communication equipment, network equipment, computers/servers, consumer electronics, industrial control and medical devices, and other types of boards. After decades of deep immersion in the industry, Shengyi Electronics has made significant strides in 5G. Driven by technological advancements and supported by clients such as Huawei and ZTE, its core business has been thriving, with gross profit margins rising steadily year after year and remaining at a relatively high level.

According to the prospectus, from 2017 to 2019, Shengyi Electronics’ main business revenue was RMB 167,538.75 respectively. Ten thousand yuan, 201,231.68 RMB 10,000 and RMB 30,442.33 million, with year-on-year growth rates of 20.11% and 51.28%, respectively; accounting for 97.90%, 97.99%, and 98.32% of the company’s total operating revenue, respectively, demonstrating exceptionally strong performance in the core business.

Shengyi Electronics stated that, driven by rapid growth in sales revenue from communication equipment boards and computer/server boards, coupled with the gradual mass production of printed circuit boards for applications in fields such as automotive electronics, aerospace, and high-speed rail, these factors have become the cornerstone of the company’s rapid growth in its core business over the past two years.

Meanwhile, driven by the commercial deployment of 5G, Shengyi Electronics’ established customers Huawei and ZTE saw a significant increase in revenue from communication equipment boards, growing by RMB 4,548.918 million and RMB 670.839 million respectively compared to the previous year. 10,000 yuan; meanwhile, demand for Huawei’s high-density boards has increased, driving the company’s sales revenue from network equipment boards to rise by 21,873.99% year-on-year. Ten thousand yuan.

In addition, according to a review by Jiwei.com of three peer companies—Shennan Circuit, HuaDian Shares, and Chongda Technology—as well as the industry average, Shengyi Electronics’ gross profit margins from its core business in 2017 and 2018 were moderately high, slightly below the average level of comparable listed companies. As for 2019... The company’s performance is now on par with, or even surpasses, the industry average.

According to the prospectus, Shengyi Electronics’ main business gross profit margins were 22.51%, 24.97%, and 28.89%, respectively. , an increase of 2.45 compared to the previous year. percentage points and 3.92 percentage points, showing a year-on-year growth trend. In response, Shengyi Electronics stated that the gross profit margin of communication equipment boards has been increasing year by year, and their share of sales has also risen, leading to a growing contribution to gross profit each year. During the reporting period, the gross profit contribution from communication equipment boards increased by 2.24 percentage points and 5.36 percentage points, respectively, compared to the previous year.

Moreover, judging from the gross profit margins of the four PCB manufacturers mentioned above, their similarities and differences in terms of product application areas, product types, and key customers also contribute to fluctuations in their gross profit margins.

Among them, Shenzhen Nan Circuit’s packaging substrate business boasts a relatively high gross margin; however, its electronic assembly business has dragged down the overall gross-margin level. As for Huadian Shares, its capacity utilization rate remains insufficient, yet its gross margin has improved thanks to optimization of its product mix. Meanwhile, Chongda Technology, relying on personalized services, enjoys strong bargaining power over its downstream customers and thus maintains a relatively high gross margin.

Looking at Shengyi Electronics, its communication equipment boards and network equipment boards have made significant contributions to its core business and gross profit margin, driven by Huawei. However, it’s important not to overlook the fact that, amid escalating U.S.-China trade tensions and the U.S.’s maximum pressure on China, Huawei’s changing circumstances are closely interconnected with those of its key suppliers.

Huawei is the largest customer, and Huawei boasts strong capabilities in 5G PCBs.

Backed by Huawei, Shengyi Electronics reached its peak growth period in 2019.

According to the prospectus, Shengyi Electronics’ customers include domestic and international manufacturers such as Huawei, ZTE, IBM, Inspur Information, FiberHome Communications, and Nokia. Among them, from 2017 to 2019... In the year, Shengyi Electronics' sales to Huawei amounted to 62,174.60. RMB 10,000, RMB 64,447.54 million, and RMB 138,104.56 million—these are the company’s largest customers.

Shengyi Electronics believes that, as U.S.-China trade tensions intensify, the U.S. government has added leading Chinese advanced manufacturing companies such as Huawei to the U.S. export control “Entity List.” If the U.S. continues to tighten restrictions on the “Entity List,” it could, in the short term, have certain negative impacts on companies like Huawei. Through supply chain transmission, this could also potentially harm Shengyi Electronics’ production, operations, and profitability.

In addition to the relatively high concentration risk among its core customers, Shengyi Electronics is somewhat weaker in the patent arena, but it is catching up rapidly in the 5G sector.

According to a query of the Wisdom Tooth patent database, we have compiled the number of patents held by four manufacturers: Shengyi Electronics, Deep South Circuit, Huadian Shares, and Chongda Technology. As shown in the chart below, Deep South Circuit leads by a significant margin in total patent count, while Chongda Technology also far surpasses Shengyi Electronics and Huadian Shares with over a thousand patents.

Moreover, at the level of key patents, in addition to Shennan Circuit, Shengyi Electronics and HuaDian Shares remain in a blank zone, and Chongda Technology has only 3 patents, further highlighting their relatively limited patent strength.

(Note: A key patent refers to a patent with an extended family size greater than 5.)

At the level of invention patents, Shengyi Electronics has surpassed HuaDian Shares but still lags behind Chongda Technology and Shenzhen Nan Circuit. According to industry insiders, invention patents are the core indicator of a company's R&D strength in patent development. While new utility patents serve as a complement to invention patents, they also carry certain patent value.

In summary, from a 5G perspective, backed by Shengyi Technology, Shengyi Electronics’ technological strength is undoubtedly on par with its peers. However, it’s worth noting that Shengyi Electronics is one of the few manufacturers capable of mass-producing high-end 5G communication boards—and is actively involved in the “5G”... Multi-module heterogeneous high-frequency, high-speed PCB Significant R&D achievements have been made in projects such as “Key Technologies and Industrialization” and “Key Technologies and Industrialization for High-Speed, Large-Size PCBs Used in 5G Baseband Processing Units.” However, under the impact of the Sino-U.S. trade tensions and the continued strengthening of U.S. restrictions on Huawei, Huawei’s supply chain will also be affected—particularly Shengyi Electronics, which relies heavily on Huawei and whose core business is communication equipment boards. Whether Shengyi Electronics can maintain stable growth in its performance now faces considerable uncertainty.