China Micro Semicon (Shenzhen) (688380.SH) plans to invest 160 million yuan to increase capital in the chip design company Zhuhai Boya to strengthen cooperation.

Announcement from China Micro Semicon (Shenzhen) (688380.SH): The company plans to use its own funds of 160 million yuan to increase its stake in Zhuhai Boya, with the company holding 20.00% of Zhuhai Boya's shares after the transaction is completed. The announcement states that Zhuhai Boya is a chip design company founded by returnees with a Ph.D., established in 2014. It is a national high-tech enterprise focused on R&D of storage chips such as NORFlash, a national specialized new giant enterprise, a doctoral workstation in Guangdong Province, an engineering center in Guangdong Province, and an industrial design center in Guangdong Province. Zhuhai Boya conducts R&D and design on two different NOR Flash process structures, ETOX and SONOS. Its products are produced in 65, 55, 50, and 40 nanometer processes, covering a full range of 512Kb-2Gb capacities and multiple categories. The products have advantages such as high speed, low power consumption, high reliability, wide temperature/wide voltage range, full compatibility with international brands, and outstanding cost performance. They are widely used in consumer electronics, industrial control, communication equipment, automotive electronics, and other fields, mainly for storing boot codes and firmware. Its representative customers include Renesas, THine, and Leaguer (Shenzhen) Microelectronics Corp. The announcement points out that the target company's three-year revenue from 2023 to 2025 is only 180 million yuan, 170 million yuan, and 197 million yuan respectively, with gross profit margins of -14.24%, 4.10%, and 12.39% respectively. The scale is relatively small, and the gross profit margins are all below the industry average and have been in a loss-making state for three consecutive years. The announcement states that the company's business has strong synergy and complementarity with the target company. The company's core product MCU is the main control chip required for intelligent control. With the increasing demand for computing power in automatic intelligence and other areas, controllers and MCUs require larger storage space. MCUs are often used in conjunction with storage chips, so the company's strategic layout involves the R&D, design, and sales of storage chips as part of its "MCU+ strategy." However, the company's involvement in the storage chip field is relatively recent, with limited technological accumulation and production experience. On the other hand, the target company has over 10 years of experience in the operation of storage chip design, R&D, and sales, with a team that has experience in developing, designing, mass producing, and marketing products with different ETOX and SONOS architectures from 65 nanometers to 40 nanometers. They have collaborated with multiple wafer fabs for mass production and have a certain customer base in the storage chip market. MCUs and storage share a common customer base. Investing in the target company will facilitate closer cooperation between the two companies, effectively integrating the industrial resources of both parties, accelerating the effective implementation of the company's "MCU+ strategy," and speeding up the process of verifying, introducing, and expanding the market for related customers.