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Three smartphone supply chain companies in China sold assets to improve cash flow, indicating worsening market conditions
Chinese article by 闫莉
English Editor 张未名
07-08 14:16

By Li Panpan

Three Chinese smartphone supply chain manufacturers have sold assets in recent months to improve cash flow, indicating the continuing market downturn and shrinking demand in the smartphone market, JW Insights learned from industry insiders. 

The three companies are FRD Technology(飞荣达), Xinlun New Materials(新纶新材), and Zowee Technology(卓翼科技). 

On May 24, FRD, an electromagnetic shielding material provider, said it sold its 15% stake in Letcon(信为兴电子) at RMB60 million ($8.95 million), which it acquired at RMB21 million ($3.13 million) in 2020. 

In the first quarter of 2022, FRD achieved an operating income of RMB753 million ($112.36 million), a year-on-year increase of 20.29% but with net profits of RMB-17.8987 million ($2.67 million).

Industry insiders said FRD’s loss resulted from rising prices of upstream materials and demand declines of downstream consumer electronics manufacturers. Although it has performed well in the automotive market, the gap is too large to compensate in a short period.

The profit of RMB39 million ($5.82 million) brought by the deal addressed FRD’s urgent needs. What’s more, Letcon’s business also focuses on consumer electronics markets, such as mobile phones, laptops, and wearables, with uncertain future development trends. 

On June 22, Xinlun New Materials sold its Xinlun Science and Technology Industry Park in Shenzhen at RMB280 million ($41.78 million) to reduce interest-bearing liabilities and overdue loans and relieve its short-term financial pressure to optimize its asset structure.  

On June 26, Zowee Technology announced that to optimize its company structure, reduce management costs, and improve operational efficiency, it planned to sell 100% of the equity of its subsidiary in Xiamen. 

An analyst said that companies with rapid expansion in the early stage or with more investment outside the industry tend to sell assets more. The divesting trend may continue as measures to control cash flow and liabilities this year. 

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