Produced by Leiding Finance | Written by Xiao Sa | Edited by Shen Hai

Another consolidation event has emerged in the chip industry, with fingerprint chip leader Goodix Technology announcing the acquisition of a display chip unicorn.

Recently, Goodix Technology announced its intention to acquire the controlling stake in CloudSilicon Technologies Inc. (hereinafter referred to as "CloudSilicon") and issue shares to raise matching funds. The company's shares have been suspended from trading since the market opening on November 25, 2024, with an expected suspension period of no more than 10 trading days.

Founded in 2012, CloudSilicon is no small player; it is a unicorn in display chips, valued at RMB 8.5 billion on the 2024 Hurun Global Unicorn Index and has received investments from Huawei, Xiaomi, and others. Early last year, the China Securities Regulatory Commission disclosed the Tutoring filing report on CloudSilicon's initial public offering (IPO) Tutoring Tutoring Tutoring , but there has been no further progress on the IPO since then.

Li Jiu, an analyst at Northeast Securities, believes that Goodix Technology's acquisition of CloudSilicon will integrate OLED display drivers, essential for OLED screens, into the company's product matrix, further aligning with the trend of OLED screen development and leveraging synergies and competitive capabilities in niche markets.

Goodix Technology was founded and is chaired by Zhang Fan, a technology professional who established the company in 2002. Starting as a fixed-line telephone business, the company rapidly expanded with the popularity of smartphones, becoming a leading domestic fingerprint chip manufacturer within a few years and achieving a peak market capitalization of over RMB 170 billion.

However, as Apple phased out fingerprint unlocking in favor of facial recognition and smartphone growth decelerated, Goodix Technology's market value plummeted, now standing at approximately RMB 37.5 billion. As this transaction progresses, it remains to be seen whether the company can enhance its profitability through the synergistic development of touch and display technologies.

Planned acquisition of a Hurun unicorn

Due to plans to acquire CloudSilicon, Goodix Technology's shares have been suspended since November 25, with an expected suspension period of no more than 10 trading days.

Preliminary estimates suggest that this transaction is not expected to constitute a major asset reorganization or related-party transaction. The transaction will not result in a change in the company's actual controller and will not constitute a backdoor listing.

The announcement indicates that the primary counterparties to this transaction are Gu Jing, Shenzhen Yishi No.1 Enterprise Management Center (Limited Partnership), Shenzhen Yisheng No.1 Enterprise Management Center (Limited Partnership), and Shenzhen Yisheng No.2 Enterprise Management Center (Limited Partnership). As negotiations are ongoing, the final counterparties will be determined based on subsequent company announcements.

According to its official website, CloudSilicon is a company focused on the research, development, and sales of OLED display driver chips, with display technology R&D at its core.

Operating under a fabless model, CloudSilicon's main products include AMOLED display driver chips and Micro OLED silicon-based display driver backplane chips. AMOLED display driver chips are primarily used in smartphones, while Micro OLED silicon-based display driver backplane chips are primarily used in VR/AR and other smart wearable devices.

Gu Jing, one of the aforementioned counterparties, is the founder of CloudSilicon. Public records show that Gu Jing graduated from Tsinghua University with a bachelor's and master's degree and received a Ph.D. from Harvard University in 2010 before founding CloudSilicon in China in 2012.

In an interview five years ago, Gu Jing revealed that in the early days of CloudSilicon, the company primarily licensed its developed display technology IPs to panel manufacturers such as BOE, Tianma, and Sharp, while also developing algorithm technologies integrated into driver chips for mass production in mobile phones. In 2016, as panel manufacturers began investing heavily in AMOLED production lines, CloudSilicon started developing AMOLED driver chips.

According to the Tianyancha App, CloudSilicon has completed 12 funding rounds since its establishment 12 years ago, attracting investors such as Sequoia Capital, Xiaomi Group, Qiming Venture Partners, and Huawei Haibo Investment, among others, including several from the IC industry chain.

The latest funding round occurred in September this year, with the company's official website indicating that the capital increase was jointly invested by Vertex Ventures and Chengdu Ceyuan. Following this round of funding, CloudSilicon has over RMB 1 billion in capital reserves to support rapid growth and industry cycles, with the company expecting to ship 55-60 million OLED driver chips to branded mobile phones in 2024.

Capital investment has rapidly increased the company's valuation. In April 2024, CloudSilicon was included in the 2024 Hurun Global Unicorn Index, ranked 976th, with a valuation of RMB 8.5 billion.

Well-backed by numerous investment institutions, CloudSilicon had prepared for a capital market debut. On January 6, 2023, the company signed a Tutoring Agreement with China International Capital Corporation Limited and released a Tutoring filing report on its IPO Tutoring Tutoring Tutoring , but there has been no further progress on the IPO since then.

Now that CloudSilicon, which has made no progress towards an IPO, has caught the eye of Goodix Technology, Northeast Securities analyst Li Jiu believes that on the one hand, the company's strong technical prowess is a factor. In 2023, CloudSilicon ranked fifth globally and first among mainland Chinese suppliers in AMOLED display driver chip sales.

On the other hand, there are synergies between the two parties. Goodix Technology's product matrix, including fingerprint sensors, ambient light sensors, touch chips, etc., is closely related to the development of OLED screens. By acquiring CloudSilicon, Goodix Technology integrates OLED display drivers, essential for OLED screens, into its product matrix, further aligning with the trend of OLED screen development.

Goodix Technology is helmed by semiconductor tycoon Zhang Fan

Radar Finance notes that Goodix Technology's third-quarter report, which initiated the merger and acquisition, shows that Zhang Fan directly holds 206 million shares, representing a 45.02% stake and making him the company's controlling shareholder. Zhang Fan's wealth has risen to RMB 17 billion on the latest Hurun Rich List.

Public records show that Zhang Fan, born in 1965, was admitted to Chengdu Institute of Telecommunications Engineering (later renamed University of Electronic Science and Technology of China) in 1982, majoring in radar countermeasures.

During his university years, Zhang Fan enjoyed playing football, an activity that kept him passionate and energetic in life. He once said, "If I had to do it all over again, I would still choose to play football."

After graduating, Zhang Fan joined the 10th Research Institute of the Ministry of Electronic Industry and participated in the development of the BeiDou Navigation Satellite System for six years until 1993, when he resigned to venture to Shenzhen, at the forefront of China's reform and opening-up.

In Shenzhen, Zhang Fan initially worked at the Shenzhen office of Hokuriku Electric Industry Co., Ltd., transitioning from an engineer to selling electronic technology products, starting as a salesperson.

Despite his outstanding performance, Zhang Fan resigned due to disagreements with his boss regarding product improvements and embarked on his entrepreneurial journey.

Unexpectedly, his former boss was confident in him and provided him with a million yuan in startup funds. With this support, Zhang Fan founded his first company, Shenzhen Chengdian New Electronic Technology Co., Ltd., entering the IC chip field for civilian fixed-line telephones.

In 2002, Zhang Fan established his second company, Goodix Technology, which later listed on the A-share market. It is reported that technologies such as caller ID chips and telephone line power supply technology originated from the efforts of Zhang Fan and his team.

However, the glory of the fixed-line era was difficult to sustain in the wireless communication field. In 2005, domestic fixed-line business began to decline significantly, prompting Zhang Fan and Goodix Technology to seek transformation by providing chip support for the touch panels of small appliances, but this was insufficient to support the company's growth.

It was not until 2007, when Apple released the first-generation iPhone, featuring multi-touch capacitive technology, that Zhang Fan saw hope. Goodix Technology began to establish a presence in the capacitive touch chip field.

The popularity of the iPhone spurred many mobile phone manufacturers to adopt capacitive screens with multi-touch technology. Against this backdrop, Goodix Technology collaborated with MediaTek in 2010, experiencing a business explosion and turning a profit the following year.

"Seize opportunities and follow the trend" is Zhang Fan's growth secret. "Following historical trends is crucial," he believes. "As long as it represents the future development trend, it will definitely facilitate your life path."

In 2013, Apple introduced screen fingerprint recognition technology in the iPhone 5s. Goodix Technology promptly followed suit, officially launching a fingerprint touch prototype in May 2014.

Through continuous product iterations, Goodix Technology achieved great success in the fingerprint chip field, listing on the A-share market in 2016. After listing, the company's share price experienced consecutive daily limits, and Zhang Fan's wealth reached RMB 20.5 billion on the 2017 Hurun Rich List.

Third-quarter performance decline

After listing, Goodix Technology enjoyed a period of high performance.

According to iFinD, in 2019, Goodix Technology achieved operating revenue of RMB 6.473 billion, a year-on-year increase of 73.95%, with a net profit attributable to shareholders of listed companies of RMB 2.317 billion, a year-on-year increase of 212.10%.

As performance soared, Goodix Technology's share price also surged, starting in February 2019 and peaking at over RMB 380 per share a year later, with a market capitalization exceeding RMB 170 billion.

This was due to the official commercial launch of 5G in 2019, leading to increased demand for under-display fingerprint technology in 5G smartphones. Leading mobile phone brands, including Huawei, Xiaomi, OPPO, and vivo, adopted Goodix Technology's optical fingerprint chips.

However, good times did not last long, and the company's profits began to decline in 2020. In 2022, the company recorded its first loss since listing, with annual operating revenue of RMB 3.384 billion, a year-on-year decrease of 40.77%, and a net loss attributable to shareholders of listed companies of RMB 748 million, a turnaround from profit to loss.

Goodix Technology attributed this to weak overall demand in the consumer electronics market and decreased demand from end customers. At the same time, increased competition for the company's main products led to pressure on shipment volumes and sales prices, impacting performance.

Fortunately, benefiting from the recovery of the consumer electronics market, the company's performance began to rebound in 2023 and the first three quarters of 2024. Goodix Technology's third-quarter report showed that the company achieved operating revenue of RMB 3.223 billion in the first three quarters, a year-on-year increase of 0.82%, and a net profit of RMB 448 million, a year-on-year increase of 3499.3%.

However, on a quarterly basis, Goodix Technology showed a decline in performance in the third quarter. Data indicates that the company achieved operating revenue of RMB 967 million and net profit attributable to shareholders of RMB 131 million in the quarter, representing year-on-year decreases of 17.71% and 11.82%, respectively, and quarter-on-quarter decreases of 6.84% and 15.47%, respectively.

Goodix Technology did not provide a reason for the third-quarter performance decline. Some believe that as Apple phased out fingerprint unlocking in favor of facial recognition and smartphone growth decelerated, profitability in the fingerprint chip industry declined.

However, ultrasonic fingerprint chip technology, with its unique advantages, is expected to become a new growth driver for Goodix Technology in the future. Recently, several well-known brands have released new smartphones, many of which incorporate Goodix Technology's ultrasonic fingerprint solution.

In addition, Goodix Technology's downstream customers have gradually expanded from mobile phones to new markets such as wearables, smart homes, and automobiles. However, it remains to be seen whether these will become new growth points for the company.