Cheap Chip Test: Leadyo Files for IPO on Shanghai Tech Board
The firm had a splendid 2019. Is it ready for a challenging 2020?
► On the wave of the local industry tide, Leadyo is heading to the Star Market.
► The company’s future largely depends on the big trends in the sector.
Guangdong province-based semiconductor testing maverick Leadyo (利扬芯片) filed a prospectus with the local capital market watchdog – the China Securities Regulatory Committee (CSRC) – on April 17, intending to go public on the Shanghai bourse’s Sci-Tech Innovation Board. It is currently trading on the National Equities Exchange and Quotations (NEEQ), China’s Over-The-Counter (OTC) market, under the ticker 833474.
Goaded on by the Middle Kingdom’s utterly ambitious economic development plans, the country’s regulators have lately been pushing ahead with a financial sector reform. On March 6, for instance, CSRC started (in Chinese) collecting public opinions on possible direct transfers of outstanding NEEQ listings to the Star Market. Leadyo can become a prime example – and, maybe, even a role model – for the OTC-listed small technology companies.
A ten-year-old firm, Leadyo is involved in Chip Probing (CP), which is the process of visual defect-detection on a wafer (normally, without function testing), and Final Test (FT), a pre-distribution process that helps to check whether microdevices have safely been bonded and packaged. The chipmaker’s most significant upstream partners include microelectronic components producers Goodix (汇顶科技, 603160:SH) and Nations Technologies (国民技术, 300077:SZ), mixed-signal System-on-a-Chip (SoC) designer Allwinner (全志科技, 300458:SZ) and wireless chip maker Beken (博通集成, 603068:SH), to name a few.
The fresh IPO candidate has something to boast of. In 2019, when the global semiconductor market retreated by over 12%, it boosted annual operating income by more than 67%, taking home CNY 232 million (USD 33 million). In the same year, the company made a profit of nearly CNY 61 million (USD 9 million), up almost 282% from 2018’s record. With plenty of new clients and somewhat weak competition in the segment, it managed to increase the gross profit margin from approximately 40% to 54% over the same period – mostly due to the economy of scale.
Obviously, Leadyo has benefited from the combination of China’s big semiconductor adventure, which aims to catch up with the world’s leaders within a short timeframe, following the planetwide two-decade-long industry trend of Integrated Circuit (IC) testing outsourcing.
While this bonanza might be hampered by the COVID-19 pandemic (check out our take on how the outbreak can affect the country’s semiconductor sphere in the mid-term), there are some positive signs, too. For one, Taiwanese cosmic foundry TSMC has recently shown that the crisis not only didn’t hit its financials but actually brought the manufacturer 91% more money in January – March 2020 than in the first quarter of the last year.