Advertisements
The world of global tech has its stars, and within that galaxy, GoerTek Inc. shines brightly as a key player in the so-called "Apple supply chain." This role has granted the company high visibility, and its latest announcement has drawn even more eyes to its trajectoryRecently, GoerTek revealed its performance forecast for 2024, projecting a staggering net profit of approximately 25.57 billion to 27.75 billion yuanThis represents an astonishing growth of 135 to 155 percent from the previous year’s profit of 10.88 billion yuanThe adjusted net profit, excluding non-recurring items, is expected to range from 23.22 billion to 24.94 billion yuan, showcasing an anticipated jump of 170 to 190 percent.
The recent spotlight on GoerTek isn’t solely due to its strong performanceOn January 20, the company announced its plan to spin off its subsidiary, GoerTek Microelectronics Co., Ltd. (commonly known as GoerTek Micro), to list on the main board of the Hong Kong stock exchangeThis strategic pivot raises questions regarding its financial direction and corporate strategy, especially following the halt of its previous listing attempt.
GoerTek had initially proclaimed its intention for an internal restructuring dubbed "A-share spinoff" back in November 2020. By the end of 2021, GoerTek Micro’s application for an initial public offering (IPO) was accepted by the Shenzhen Stock ExchangeHowever, after enduring two rounds of inquiries, the company later announced in May 2024 that due to market conditions and other strategic concerns, it decided to withdraw its application for listing on the Shenzhen Stock Exchange.
Now, poised to breathe new life into its IPO plans, GoerTek Micro faces a vastly changed landscape, with market uncertainties weighing heavily on its prospectsAs it attempts this second push into public markets, GoerTek Micro's performance shows inconsistencies that could hinder its success.
On January 20, GoerTek Micro submitted its application for an overseas listing of H-shares on the Hong Kong Stock Exchange, shifting its tactic from "A to H" shares
Advertisements
This spinoff is intended to establish a financing platform via the Hong Kong capital market, enhancing GoerTek Micro's position in the realms of micro-electromechanical systems (MEMS) devices and microsystem modulesThe hope is that this maneuver will bolster its market clout and drive growth, proving pivotal in maintaining a competitive edge.
As of 2023, GoerTek Micro's primary business segments include precision components, intelligent acoustics, and smart hardwareIn a strategic move back in 2019, GoerTek spun off all its MEMS microelectronics-related business to GoerTek Micro, cementing it as the sole entity focused on MEMS technologies within the GoerTek organization, thus carrying on the legacy of GoerTek’s influence in the global MEMS sensor market.
Revenue data shows a deep-rooted partnership between GoerTek and GoerTek MicroIn 2022 and 2023, GoerTek emerged as GoerTek Micro’s second-largest client, with sales figures from GoerTek constituting approximately 11.7% and 12.7% of GoerTek Micro's total revenueThis dependency underscores the symbiotic relationship between the two companies but also highlights the potential risks of having such concentrated client relationships.
While GoerTek Micro has historically benefitted from operating within the GoerTek ecosystem, it has not been immune to market fluctuationsThe figures from 2019 to 2024 indicate a rollercoaster ride for the company’s revenue and profits, with overall revenue moving from approximately 25.66 billion yuan in 2019 to just about 30.01 billion yuan in 2023, highlighting a two-year decline following what was a peak performance in 2021. This declining trend raises concerns regarding the sustainability and adaptability of GoerTek Micro's business model.
Another alarming issue is the reliance on externally sourced chipsThe data from 2019 to 2022 reveals that the volume of MEMS devices equipped with self-developed chips showcased a decline, which poses a risk to the company’s margins
Advertisements
When compared to industry peers across the same timeframe, GoerTek Micro's gross margins were considerably lower, indicating a troubling vulnerability in its operational strategy.
GoerTek Micro's heavy reliance on a single supplier, Infineon, contributes to its precarious supply chain dependenceOver the years, the amounts purchased from Infineon have represented a significant portion of its total procurement, underscoring the inherent risks tied to such supplier dependencyAs of the third quarter of 2024, GoerTek Micro completed just 29.7% of its total shipments with self-developed products, showcasing a significant room for improvement.
Another challenge comes from the competitive landscape in which GoerTek Micro operatesThe company finds itself competing against formidable players such as Knowles Electronics and Infineon, which not only serves as the largest supplier but also a rival in a fiercely contested marketThe Chinese market also presents competition from companies like AAC Technologies and Sensing Microelectronics, each vying for a piece of the lucrative MEMS chip market.
Despite GoerTek Micro’s claims of being the leading MEMS sensor enterprise in China, its performance has seen a notable decline since its high point in 2021. This raises questions about why the firm is choosing to list during such a turbulent market period—an inquiry that begs further exploration.
Governance and financial health come to the fore as additional challengesWhile GoerTek has been lauded for its strong focus on R&D, evidenced by the establishment of 12 R&D centers and a significant investment of near 52 billion yuan in 2022, it has been facing cutbacks in its budgetThe reported decrease in R&D spending in 2023 and the following year reflects the struggles within the company, showcasing a potential shift in their innovation strategy.
GoerTek's financial report for the first three quarters of 2024 indicates total revenue of 696.46 billion yuan, representing a decrease of 5.82 percent year-on-year
Advertisements
Advertisements
Advertisements
Leave a Comment