Not long ago, Cambricon Technologies, one of China's most valuable AI chip firms, reported a sharp decline in its 2019 results as disclosed in its prospectus, prompting inquiries from the Shanghai Stock Exchange.
Of the more than 20 questions Cambricon responded to, the specific reasons for the sharp decline in its main business and issues such as Major Account Company A raised industry concerns.
Previously, Cambricon's prospectus disclosed that its terminal smart processor IP products are primarily in the 1A, 1H, and 1M series.
During the reporting period, the company's IP licensing business revenue accounted for 98.95%, 99.69% and 15.49% of its main business revenue, respectively, with a significant downward trend in 2019, with revenue mainly coming from two products, Cambricon 1A and 1H, with Company A as a major customer.
In response, the Shanghai Stock Exchange asked whether the issuer was facing any technical difficulties or barriers to product development as a result of the significant decline in IP licensing revenue in 2019; and whether Company A's failure to continue purchasing the issuer's products was due to its inability to meet customer requirements.
In response, Cambricon said that during the reporting period, Cambricon's sales to Company A amounted to $77.127 million, $114.2564 million and $63.658 million, accounting for 100.00%, 97.94% and 92.56% of the Company's terminal smart processor IP licensing business sales revenue and that Company A's purchase of Cambricon IP had a significant impact on the Company's revenue from this type of business.
During the reporting period, Cambricon signed four Technology License Agreements with Company A, including processor IP, software, etc.
In addition to the above contracts, Cambricon did not enter into any other cooperation with Company A during the reporting period, mainly because Company A chose to develop its own smart processor and did not continue to purchase Cambricon IP products.
Cambricon's 2019 sales to Company A declined as these contracts were phased out over the reporting period and Cambricon did not enter into a new contract with Company A.
In addition, other than Company A, Cambricon's other terminal smart processor IP business customers during the reporting period were mainly Hangzhou-based Grand Vision, SigmaStar, Spreadtrum Communications.
As the business related to artificial intelligence chips of these customers is still in the development stage, the purchase amount for the company's IP products is small, the average purchase amount for each year is about 1 million yuan to 2 million yuan, which contributes less to the company's terminal intelligent processor IP licensing business revenue.
Notably, in explaining Company A, Cambricon stated that Company A is a well-known domestic integrated circuit design company whose parent company is a global technology conglomerate and a leading global provider of ICT (information and communication) infrastructure and smart terminals.
In addition, the parent company of Company A, a globally renowned technology group, ranks first among domestic smartphone brands in terms of smartphone product shipments.
According to public information, its smartphone shipments exceeded 200 million units in both 2018 and 2019. The company received a significant amount of commission fee income from Company A during the reporting period.
Not only that but at the end of the interrogatory, the Shanghai Stock Exchange also challenged the disclosure exemption.
The issuer failed to describe the composition of the employee stock ownership plan in the disclosure exemption application. At the same time, the company applied for a partial exemption from disclosure of the client's name in lieu of the code name, in accordance with the confidentiality clause in the business contract signed with the client.
However, the company's official website published an article on "Cambricon 1H with Huawei Kirin 980 brings stronger end-side AI computing power", and CSI.com published an article on " Sugon: Strategic Cooperation with Cambricon, Launching Joint R&D Products".
As of this point, judging from the above reply, Company A should be pointing to Huawei HiSilicon, and its parent company is Huawei.
