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Product Attributes

The sales expense ratio is relatively stable, while the R&D expense ratio and management expense ratio are decreasing. 2021 sales expense ratio, management expense ratio, and finance expense ratio are 6.66%, 4.35%, and -0.05% respectively, with the management expense ratio decreasing 1.7 percentage points and the R&D expense ratio decreasing 2.2 percentage points compared with 2020.

Shanghai Fudan’s R&D expense ratio is higher than the average level of the industry. Although the company’s R&D expense ratio has decreased in the past two years, the company has maintained a high level of R&D expenditure and is in the top tier of the industry. The continuous and stable R&D investment is conducive to improving the company’s core competitiveness and securing its market leadership position in the niche area. The R&D expense rate of Shanghai Fudan is significantly higher than that of other manufacturers in the industry, except for the small revenue scale of Anlu Technology, which is still in the initial stage of marketization of high-end products and has a higher R&D expense rate than the company. In the field of IC design, which has high technical barriers, the company’s broad range of semiconductor products is expected to remain up-to-date and iterative, and can continuously meet the diversified needs of the market.

Shanghai Fudan’s R&D team is relatively stable. In 2020 and 2021, the company’s R&D staff will be more than half of the total number of employees; in 2021, there will be a slight decrease in R&D staff, which is mainly due to the loss of R&D staff due to the relatively higher salaries of some peer companies. Among the peer companies, the number of R&D staff of Zigong SMiT and OnLu Technology will increase by 19.5% and 24.9% year-on-year in 2021. Considering that Advan Technology focuses on FPGA chips, Shanghai Fudan is expected to face competitive pressure from Ziguang SMiT and Advan Technology in the field of FPGA and other high-technology barrier products in the future.

Shanghai Fudan’s sales expense ratio is in the leading position in the industry, but there is still a difference in sales expense compared to other vendors such as Ziguang SMi. The 2021 sales expense ratio is 6.66%, which is at least 2 percentage points higher than the industry. However, the sales expense amount is 172 million RMB, which is still a certain gap compared to the 244 million RMB of ZTE and 221 million RMB of ZTE. As of the end of 2021, Shanghai Fudan had 270 sales staff, accounting for 17.64% of the company’s workforce, a larger team than its Chinese peers.

2. Strong market demand for China-made FPGAs, and the company has a technological leadership advantage

FPGA (Field-Programmable Gate Array) chips are one of the important branches of logic chips, which are based on programmable devices (PAL, GAL) and have taken a place in the chip boom in recent years with their unique attributes of semi-customization and programmability, and are called “universal chips”. “FPGAs have the advantages of field programmability, short time-to-market, lower cost than fully customized ASICs, and greater parallelism than general-purpose products (e.g., CPUs). In application scenarios such as 5G communication and artificial intelligence, where the technology path is not yet fully defined and rapid iterative upgrades are required, FPGAs can complement CPUs to provide ideal system solutions.

(1) Compared with CPU, FPGA chip has an obvious parallel computing advantage, and the image processing speed is better than CPU, and compared with GPU, FPGA can be reprogrammed and has an obvious advantage in energy consumption. (2) Compared with ASICs, FPGA chips have shorter development cycles and shorter chip flow cycles, which can help companies shorten their time-to-market; ASIC solutions have fixed costs while FPGAs have almost none, but as usage increases, ASIC solutions have more cost advantages due to economies of scale. In addition, the logic blocks and connections within FPGAs can be designed multiple times to perform different logic functions, and the reprogrammable nature helps developers flexibly adjust chip functions to enable rapid product change and better adapt to 5G, AI, and other application requirements. According to Frost & Sullivan data, the China FPGA market will grow from $6.56 billion in 2016 to $15.03 billion in 2020, at a CAGR of 23.1%. China’s FPGA market is expected to reach $33.22 billion by 2025, with a CAGR of about 17% from 2020 to 2025.