By Li Panpan
China’s listed leading fingerprint identification chip producer Goodix Technology(汇顶科技), has suffered from a performance decline and even losses in 2021 and 2022 as it over depends on the weakened smartphone market, according to a JW Insights report. Although the company tried to expand businesses to other areas like PC, wearables, IoT, and automobiles, it is still unclear whether it will gain a comeback.
Goodix Technology is China’s leading fingerprint identification chip producer, with the largest product shipments in the world. It was founded in May 2002 and listed on the Shanghai Stock Exchange in October 2016.
Since last year, mobile phone manufacturers and their supply chains have faced major uncertainties affected by the pandemic and global geopolitical changes. With a sharp reduction in downstream market demand, supply companies with more capacity and larger scales would be more severely impacted. Goodix Technology, with a long dominance in fingerprint identification chips, is such a case.
Its recent performance reports show that its revenue and net profit declined in 2021, and it even suffered losses in the first quarter of 2022. Its market value dropped from RMB170 billion ($25.3 billion) in February 2020 to the recent RMB27 billion ($4.02 billion).
Shortly after the outbreak of the COVID-19 pandemic, there was a surge in demand for more smartphones and other electronic devices. Mobile phone producers tried to book more chips in advance, resulting in a large number of orders for Goodix Technology and other supply chain producers.
However, the prolonged pandemic and changes in the international economic situation have hurt the smartphone market. In 2021, the decline in consumer purchasing power and the lack of product innovation led to a fall in sales, which immediately affected Goodix and other supply chain producers.
Goodix Technology’s primary business income is over-reliant on the smartphone market. Its net profit performance was the best in 2017 and 2019, almost the same period as Android phones are added with fingerprint and the higher-level off-screen fingerprint recognition function.
However, there is not much room to improve the fingerprint identification module on mobile phones compared to screens, cameras, and other large modules. Since 2022, the mobile phone market continued to weaken, leading to Goodix Technology’s first loss in the first quarter in the past five years.
The industry seems to be more pessimistic for Goodix in the second quarter. A fingerprint identification chip industry executive said that it is tough for the supply chain to guarantee product profits now, and they all aim at shipping out their inventories. Whoever clears the inventory quickly enough can stop the loss in time. The companies that responded slowly had to cut their prices in half.
Goodix Technology has tried to expand its business into new market areas such as PC, wearables, IoT, and automobiles to improve its performance. But with flattening PC market demand and slowing automobile market demand because of logistic problems caused by the pandemic control, it remains to see whether Goodix Technology can gain significant growth.
Luckily, the company maintains a relatively considerable gross profit margin in its core business. The revenue proportion of fingerprint identification chips, touch-screen chips, and other chips and other business in 2021 was 62.35%, 19.86%, 15.94%, w1.85%, with gross profit margins being 45.06%, 55.00%, and 47.24%, and 88.64%.
