Recently, Black Sesame Technologies experienced a surge in share prices on the Hong Kong stock market, spurred by news that BYD's intelligent driving systems had adopted the company's smart chips. Despite a slight pullback since then, the company has garnered significant attention from both industry insiders and investors.

As a pioneering force in automotive-grade autonomous driving computing chips, vision processing chips, and holistic autonomous driving solutions, Black Sesame Technologies has navigated the dynamic intersection of technology and commerce since its inception. Amidst the vast, untapped potential of the autonomous driving market, the company contends with stiff competition from automakers, international Tier 1 suppliers, and domestic peers.

Amidst the ongoing capital winter in the autonomous driving industry and a flurry of IPOs, will Black Sesame Technologies capitalize on the burgeoning "advanced driver assistance systems" trend, or will it succumb to the pitfalls of mounting losses and customer churn in a fiercely competitive market?

Black Sesame Technologies' business strategy is intrinsically linked to the electrification and intellectualization trends sweeping through the domestic automotive industry.

Over the past few years, the rapid increase in the penetration of new energy vehicles globally has fueled a surge in demand for autonomous driving chips from automakers. The shift from distributed ECUs to centralized domain-controlled electronic and electrical architectures presents a new and vast opportunity for high-performance SoC chips. Black Sesame Technologies entered this burgeoning market, aiming squarely at the premium segment of the intelligent driving chip market.

Reflecting on its journey, Black Sesame Technologies has secured ten rounds of financing in a short span, gaining the backing of multiple automakers and international component giants. While this narrative of a "startup catching the wind of change" might seem typical, it also underscores the fragility inherent in such rapid ascents. Early market entry can indeed reap early dividends, but sustaining a competitive edge necessitates continuous and substantial investments in R&D.

Black Sesame Technologies' core products, from the initial Huashan A1000 to the recently launched high-performance chip platform, the Huashan A2000 family, consistently pursue higher computing power, lower power consumption, and enhanced adaptability. Today's advanced driver assistance systems demand more than just highway scenarios; they are evolving towards urban NOA and full-scenario intelligent driving. This evolution necessitates chips with flexible NPU architectures and ample memory bandwidth to support the iteration of massive algorithm models, the upgrade of sensor architectures, and the enhancement of real-time decision-making capabilities.

The Huashan A2000 family embodies Black Sesame Technologies' latest advancements, featuring the self-developed "Jiushao" architecture and dual-chiplet interconnection technology, BLink, among others, all designed to seamlessly integrate with automakers' autonomous driving functionalities.

However, technological advancements and computing power upgrades are merely the entry ticket to automakers' consideration. Whether through rumored adoption by BYD Denza, partnerships with FAW Group, or alliances with international Tier 1 suppliers, Black Sesame Technologies must prove its mettle through actual mass production and consistent performance.

The industry has long grappled with chip supply constraints, and new players aim to capitalize on the domestic substitution trend. While NVIDIA still leads in shipments of high-performance autonomous driving SoCs in China, Black Sesame Technologies ranks third with a 5.2% market share, indicating its presence in the market. Yet, success is not merely about market share; it's about scaling up in mainstream models. Many automakers now adopt a "multi-supplier" strategy to mitigate supply chain risks. Black Sesame Technologies' long-term viability hinges on maintaining technological leadership, swiftly adapting to functional upgrades, and consistently supporting mass production needs.

According to the prospectus, Black Sesame Technologies heavily relied on a "major customer A," accounting for over 40% of its revenue in 2021 and 2022. However, in 2023, purchases from this customer drastically declined, disappearing from the top five customer list. The company attributed this to "customers upgrading intelligent driving solutions" and "operational difficulties faced by downstream commercial vehicle customers." Furthermore, the frequent turnover among the top five customers, with only one customer consistently appearing on the list, underscores concerns about revenue stability.

Why is this happening?

Firstly, if Black Sesame Technologies has traditionally focused more on the commercial vehicle sector, where the demand volume and iteration speed for intelligent driving are relatively slower than in passenger vehicles, coupled with financial pressures faced by commercial vehicle customers, it could lead to significant order fluctuations. Secondly, the competitive landscape is intense, especially as the autonomous driving chip industry undergoes rapid restructuring. Vendors like Horizon Robotics, Mobileye, and NVIDIA are all vying for OEM resources. Automakers' multi-supplier strategy means Black Sesame Technologies must not only compete with international giants but also with other domestic players for limited opportunities.

Even after securing design wins, Black Sesame Technologies faces challenges in ramping up mass production and market acceptance. Models equipped with its A1000 chips, such as the Lynk & Co 08, Dongfeng Yipai eπ008, and Hozon Auto V09, have yet to achieve sales volumes comparable to popular models that often exceed 10,000 units per month. This hinders the iteration speed of chip development, problem feedback, and the formation of scale effects. In other words, without sufficient ties to mainstream best-selling models, Black Sesame Technologies' mass production scale and actual revenue will remain limited, making it challenging to cover the substantial R&D, tape-out, and operating costs.

Moreover, the company faces dual pressures at both the technical and commercial levels. Autonomous driving chips are not standalone products; they demand high adaptability within supporting software ecosystems and algorithm toolchains. Automakers often prioritize whether chip vendors can offer a one-stop solution and long-term technical support, especially as advanced driver assistance systems become prevalent and urban NOA gains focus, necessitating deeper integration of advanced algorithms and large models.

If Black Sesame Technologies positions itself merely as a "low-cost alternative to NVIDIA," it might temporarily penetrate segments of the second-tier passenger vehicle and commercial vehicle markets. However, from a long-term industry perspective, cost advantages might not fully counteract competitors' scale effects and technological iterations. This intensifies the pressure on Black Sesame Technologies in an environment of tightening funding, where it must immediately confront the dual challenges of profitability and valuation post-IPO.

In conclusion, Black Sesame Technologies has transcended the initial phase of capital and industry trend capture during its startup years. Now, it faces the crucial test of weathering the winter, securing more OEM design wins, and achieving tangible mass production. The window of opportunity will not remain open indefinitely. Without swiftly emerging popular models and achieving scale effects, the company risks being marginalized by more established international giants with deeper pockets and rapidly rising local competitors.

Autonomous driving chips are currently in a new round of accelerated competition, with rapid evolution occurring at every node, from full-scenario applications of advanced intelligent driving to deep collaboration between the cloud and OEMs. Black Sesame Technologies' recent share price surge has garnered attention but has also exposed vulnerabilities. Can it successfully establish a genuine brand and technological moat amidst widening net losses and frequent customer turnover? It requires robust capital support and must find stable and scalable market footholds.