LED driver chip companies show impressive profit growth in the first three quarters, with net profit increasing up to 18 times

According to the third-quarter reports disclosed by A-share listed companies, LED driver chip companies have generally achieved record-high performance in the first three quarters of this year.

Impressive profit growth

As a leading enterprise in LED driver chips, Mingwei Microelectronics' Q3 financial report is representative.

According to Mingwei Microelectronics' Q3 2021 report released on the evening of October 24, the company's revenue for the first three quarters was RMB 1.071 billion, a Year-on-year (YoY) increase of 233.50%; Net profit attributable to shareholders of the Listed company was RMB 600 million, a Year-on-year (YoY) increase of 926.25%; basic earnings per share were RMB 8.07, a Year-on-year (YoY) increase of 669.69%.

Mingwei Microelectronics stated that the company's rapid performance growth in the first three quarters was mainly due to tight upstream wafer foundry and packaging & testing production capacity, leading to increased product costs; strong demand in downstream application areas prompted the company to actively adjust its product structure, prioritize new product delivery, and continuously improve its in-house packaging & testing production capacity, thereby enhancing supply guarantee capabilities. Sales volume across all product lines increased significantly, resulting in higher gross profit.

During the reporting period, total product sales volume increased by 1.253 billion units compared to the same period last year, a Year-on-year (YoY) growth of 67.96%; product sales revenue increased by RMB 743 million compared to the same period last year, a Year-on-year (YoY) growth of 234.71%. In short, both product volume and price rose. In addition, with the significant increase in sales volume, customer cash collections increased, and the net cash flow from operating activities also increased by approximately 18 times Year-on-year (YoY).

In the third quarter, Revenue reached RMB 450 million, a Year-on-year (YoY) increase of 228%; Net profit amounted to RMB 297 million, a Year-on-year (YoY) increase of 908.07%. Such growth is particularly impressive among semiconductor companies with strong performance.

Looking ahead to the fourth quarter of this year, Mingwei Microelectronics warns that macro factors such as the global COVID-19 pandemic and logistics constraints have slowed production and cargo delivery, while suppressing downstream market demand. This may lead to a slowdown in end-product demand, creating certain uncertainties in the company's future operating performance.

To address the tight production capacity of wafers and packaging/testing, as well as continuous price increases from suppliers, Mingwei Microelectronics has established long-term partnerships with large wafer manufacturers and packaging plants. At the same time, it has appropriately extended downstream by building some of its own packaging and testing production lines to ensure production capacity supply.

The global chip shortage began in the second half of 2020. Against the backdrop of rising chip prices, Mingwei Microelectronics has seen a significant improvement in profitability this year, with a gross profit margin of 67.19% in the first three quarters, a Year-on-year (YoY) increase of approximately 35 percentage points.

Actively address production capacity constraints

Another leading LED lighting driver chip company, BPS, also released its Q3 report. From January to September 2021, the company achieved revenue of RMB 1.825 billion, a Year-on-year (YoY) increase of 158.16%; net profit was RMB 573 million, a Year-on-year (YoY) increase of 1818.71%.

In the third quarter of 2021, revenue reached RMB 759 million, a Year-on-year (YoY) increase of 135.47%; net profit was RMB 238 million, a Year-on-year (YoY) increase of 1062.70%.

BPSemi pointed out that the growth in the aforementioned key accounting data and financial indicators was mainly due to several factors during the reporting period, including an increase in the sales volume of the company's products, an increase in unit prices, optimization of the product mix, and an increase in investment income from affiliated companies:

1. Increase in sales volume: From the beginning of the year to the end of the reporting period, strong downstream demand in the industry led to an increase in the company's total product sales volume from 3.85 billion units to 5.854 billion units, a year-on-year growth of 52.06%;

2. Increase in unit product price: Due to the continuous rise in upstream raw material prices, the company adjusted product prices to balance product costs and customer demand. The comprehensive gross profit margin of the company's products increased from 25.23% at the beginning of the previous year to 48.85% by the end of the reporting period, an increase of 23.62 percentage points;

3. Optimization of product structure: During the reporting period, upstream production capacity in the industry remained tight. To make fuller use of existing resources and align with the company's product strategy, the company continuously optimized its product structure. By the end of the reporting period, the proportion of smart LED power driver chip products in total sales revenue increased from 36.76% at the end of the same period last year to 45.17%, an increase of 8.41 percentage points;

4. Increase in investment income: From the beginning of the year to the end of the reporting period, the Company recognized a total fair value change gain of RMB 56.7679 million from its associate companies. The impact of major associate companies on income is as follows: Shanghai Analog Semiconductor Technology Co., Ltd. recognized a fair value change gain of RMB 23.9959 million due to valuation increase; Nanjing Lingou Chuangxin Electronics Co., Ltd. recognized a fair value change gain of RMB 17.6011 million due to valuation increase; Shanghai Yaohuo Microelectronics Co., Ltd. recognized a fair value change gain of RMB 13.3501 million due to valuation increase.

During institutional research visits, executives of BPS Semiconductor stated that, amid tight upstream supply in the industry, in addition to maintaining existing production capacity, new wafer suppliers added by the company have also begun contributing new production capacity. To better secure long-term production capacity, the company adopts a settlement method involving advance payments to certain suppliers. Meanwhile, the company adjusts its product structure by establishing product model and customer priority levels, adjusting customer settlement methods, and strictly prohibiting dealers from hoarding goods, thereby ensuring product delivery.

In addition, the company is currently planning to issue shares and pay in cash to acquire a 95.75% equity stake in Nanjing Lingou Chuangxin Electronics Co., Ltd.

BPS currently offers products such as LED lighting driver chips, motor driver chips, AC/DC power management chips, and DC/DC power management chips. Among these, LED lighting driver chips include general-purpose LED lighting driver chips and smart LED lighting driver chips; AC/DC power management chips include built-in AC/DC power chips and external AC/DC power chips.