XGIMI’s IPO application for STAR board may be blocked after accusation from competitors; this would exert a negative impact on its profitability and reputation.
► XGIMI drew in large investors in the early stages, and raised about USD 5.72 million in total.
► XGIMI does not own core technology for products – this might be the main threat to its further expansion.
APPOTRONICS has accused XGIMI of infringing its key patent, asking for a compensation of around USD 657,000. APPOTRONICS focuses on laser display systems, and its main products are laser TV and projectors. In this case, XGIMI’s Z6 projectors apparently utilized APPOTRONICS’s technology without permission.
XGIMI concentrates on smart projectors, and its primary services include sales, relevant accessories and value-added services. It aims to provide customers with a new kind of experience, via innovations such as its giant screens. Because of the efforts XGIMI put into design, it was the winner of ‘Red dot’ design awards from 2017 to 2019.
The firm attracted many investors from the get-go. For instance, it raised USD 1.43 million in a series A funding from CDF-Capital, and USD 4.29 million in pre-B investment from Mango Media. Moreover, the projector-maker filed for an IPO in May 2020, which should further help it to raise funding. Specifically, it intends to raise about USD 1.71 million.
Although XGIMI aims to promote technological innovation, it does not own the core technology in its products. According to its prospectus, most of its smart projectors use ‘Digital Light Procession’ (DLP) to realize digital processing, and the core patent is with Texas Instruments. If there are more trade conflicts in future between China and the US, XGIMI’s operation will suffer.
Compared with APPOTRONICS, the firm has a comparatively low ratio of R&D expenditure to operating income – this ratio shows how firms attach importance to innovation. On average, APPOTRONICS’s rates were three-times larger than XGIMI from 2017 to 2019. Even if XGIMI’s ratio showed a slight increase of 15.71% during these years, there would still be a long way to go to catch up with APPOTRONICS. Specifically, APPOTRONICS has applied for 1450 patents globally.
Regarding XGIMI’s profitability, it presents an upward trend for the last three years. With the firm’s prices increased and the costs of raw materials decreased, the projector-maker’s profitability ought to have more room to grow. However, with its ‘Z6 projectors’ now involved in patent infringement, it should be noted that these occupy 30% of the overall operating income over the last three years. If the infringement will be set up, XGIMI’s profits and reputations would be affected adversely.
In conclusion, there was a vast development space evident for XGIMI before this patent infringement, as it kept increasing production capability and expanding its business scale. Nevertheless, customers started suspecting its profitability and technology after the situation took shape. The IPO application for STAR board was under review from this May, but the suspicion of patent infringement might cause the listing committee of STAR board to rethink it. Looking forward, XGIMI should concentrate more on its core technology and try to regain trust from the public and investors.