The five-year-old chipmaker, Bluetooth chip provider for Google, broke even in 2018.
Image credit: Bestechnic official website
► The company benefited from the recent shifts in the consumer electronics market.
► While its financial indicators have been skyrocketing since 2016, Bestechnic’s core business is facing considerable systematic risks in 2020.
Bestechnic (恒玄科技), which develops audio chips for smartphones and hearables, has filed a prospectus with China’s financial regulator, applying for a listing on the Shanghai bourse’s technology board – the Star Market. (Check out EqualOcean’s latest quarterly overview of the venue.)
With this application, the semiconductor company reported record financial results: in 2019, its annual revenue almost doubled year-over-year, reaching nearly CNY 649 million; the net profit rallied from 2018’s meager CNY 1.77 million to over CNY 67 million.
Shanghai-based, Bestechnic mainly markets three types of System-on-a-Chip (SoC) products: USB-C audio microdevices (BES3001, BES 3100), standard (BES2000) and ‘smart’ (BES2300) audio Bluetooth chips. The latter is the company’s latest project, designed to enable multichannel Internet-of-Things (IoT) connectivity.
Stirred by a combination of the firm’s lavish investment in research and development – CNY 45 million, CNY 87 million and CNY 132 million in 2017, 2018 and 2019 respectively – and unprecedented demand for various wireless technology-powered devices worldwide, sales of this category went through the roof in 2019, bringing Bestechnic more than CNY 232 million in revenue. By comparison, it was only CNY 19 million a year earlier.
An impressive client pool is another reason for such stellar results. There are many big names in the chipmaker’s downstream, including American connected vehicles evangelist Harman, Chinese electronics giants Huawei, OPPO and Xiaomi (1810:HKEX) and Japanese conglomerate Sony (SNE:NYSE). Moreover, tech behemoth Google (GOOGL:NASDAQ) has embedded Bestechnic’s BES3000 into its latest earbuds that are widely regarded as a potential competitor of Apple’s AirPods.
In fact, the firm’s rivals are truly imposing. The likes of Qualcomm (QCOM:NASDAQ), MediaTek (2454:TW) and Realtek (2379:TW) have been dominating the Bluetooth audio chip space for quite a long while. Moreover, many young startups are pouring into the field these days. Wireless hardware design is one of the semiconductor industry’s most ‘newcomer-friendly’ segments, with comparatively low entry barriers and almost no economic moat.
Another challenge that Bestechnic is very likely to encounter in the short term (and, quite possibly, in the mid-term, too) has a lot to do with the macro risks the whole industry is facing (check out our analysis of how Chinese microelectronic sector is doing amid the COVID-19 pandemic). If further demand-side shocks happen, the chipmaker’s rapid business expansion will be hampered severely.