China's Securities Watchdog Greenlights VeriSilicon's Star Market IPO
VeriSilicon has accumulated a customer base comprising leading global chip manufacturers abroad, including Intel, NXP, Broadcom, Samsung and Facebook.
Founded in 2001, VeriSilicon provides platform-based one-stop chip customization and semiconductor Intellectual Property (IP) licensing services.
According to its newest prospectus, from 2017 to 2019, VeriSilicon earned CNY 1.08 billion, CNY 1.06 billion and CNY 1.34 billion. During the same period, over half of the revenues came from overseas business, the proportion of which was 67.65%, 73.75% and 54.64% for each respective year.
There are at least two concerns about the company:
1. Its profitability has not stabilized, even though the chipmaker reached the break-even point in 2019.
2. Its Hong Kong subsidiary was sued by one of its clients which found significant product quality defects, causing broad coverage in the local press. This might negatively impact the company’s reputation.
In general, with acceleration of technology due to Moore’s law, the cost and difficulty of IC design will continue to increase, requiring companies to have higher profits to support research and development. On the other side, market demand often has the upper hand, indirectly setting lower margins and pushing small chipmakers out of the global scene.