From the vent to the cliff, where is the future of Goodix?

【Overview of Blue Technology】In the past ten years, more and more stories about the technology industry have been known to the public.

Among them, there are Electronic payments and takeaway express delivery that are closely related to people’s livelihood, such as Ali and Tencent, and many are involved in the game of major powers and the rise of countries, such as the suppressed Huawei and ZTE.

Especially since 2019, under the influence of the West, the capital market has paid special attention to the semiconductor, chip and other industries. Even during the epidemic and the overall stock market downturn, most semiconductor chip companies still bucked the trend and rose again, with revenue and stock prices reaching new highs.

Not all companies can enjoy this dividend. Among them is a well-known leading company, Shenzhen Goodix Technology, which faced the bull market in 2021, but was embarrassed in a situation where its market value was slashed.

Goodix, as the global leader in fingerprint identification chips, is the first semiconductor company with a market value of over 10 billion in China’s A-share market. At its best, it used to be the manufacturer with the highest market share of Android fingerprint recognition mobile phone chips by its own efforts, but it suffered a market value cut in just a few years.

Will the future Goodix Technology run aground on the shore or can it solve the dilemma and set sail again?

How did Goodix get through the first crisis?

The history of Goodix Technology’s family history is a bit of a wave of influence in the new era of reform and opening up.

Zhang Fan, the founder of the company, once worked for the Tenth Research Institute of the Ministry of Industry. As a national scientific researcher, Zhang Fan resigned and went to the sea. In 2002, he saw the hot development trend at that time and established Goodix Technology to develop IC chips for fixed telephones.

2000 was the stage of rapid development in China. Not only fixed telephone booths can be seen everywhere on the streets, but common people also take pride in entering their homes by telephone. Goodix Technology, which has a solid technological foundation and catches up with the trend of the times, has kept orders for a while, and has been in the limelight.

But the success is also the same, and the failure is also the same. By 2007 or so, small and convenient smart phones began to spread. For example, statistics from the Ministry of Information Industry in 2008 showed that the number of mobile users in China reached more than 500 million at that time, and the national mobile phone penetration rate had reached 41.6%, and This number is still growing.

On the contrary, the number of fixed-line telephone users continued to decrease. In January 2008 alone, the number of fixed-line telephone users decreased by 1.496 million. Fixed-line telephones have gradually become the tastelessness of “the food is tasteless, and it is a pity to discard”, and Goodix Technology, which is bound to it, has also suffered a big blow.

Seeing that revenue is about to fall precipitously, with the idea of ​​”defying one’s back”, Goodix has begun to abandon the original IC chip and move into the field of touch chips. For this reason, he did not hesitate to attract capital injection from the famous MediaTek, making it the company’s second largest shareholder.

In 2007, Apple has become popular in smartphones and has become the head benchmark for smartphones, while most domestic mobile phone brands are still limited to copycats or initial stages. The touch chip researched by Goodix Technology is the technology used in the first-generation iPhone screen.

Goodix Technology, which is a “back-to-back battle”, is the first to develop a 10-point touch chip in China. The domestic smartphones that are in urgent need of development quickly adopted Goodix’s technology. Not only did the smartphone industry usher in the spring, Goodix also successfully passed the first crisis and became a real “trendr” at the forefront of the times.

However, the biggest difference between the technology industry and other traditional industries is that the times are updated faster, and the second crisis of Goodix Technology was also caught off guard.

Since Apple has led consumers into the era of smartphones, smartphones have been changing rapidly: higher pixels, longer battery storage, more sensitive touch controls, safer systems… Every advancement is driving Goodix. Keep moving forward.

In 2013, Apple began to install fingerprint recognition on its new generation of iPhones to replace traditional password input. At this time, the fingerprint recognition is only the use of capacitive sensor technology, the price is not high, and all kinds of mobile phone screens can be perfectly compatible.

It can be said that this is both a crisis and an opportunity for Goodix. In 2015, Goodix, which has become familiar with the trend of technology, began its second transformation: from a 10-point touch chip to a fingerprint recognition chip.

The highly compatible capacitive fingerprint recognition technology, a large amount of low-cost domestic labor, and the industrial support of local governments have enabled Goodix Technology to be the number one in the world in less than a year: Goodix has been on the throne in less than a year. The net profit of science and technology reached 800 million yuan, and it was successfully listed.

Goodix has continued to keep up with the trend of the times with Apple’s upgrading in the field of smart phones. In less than two years, Goodix has launched an optical solution that specializes in under-screen fingerprint recognition technology.

It was also during the same period that many domestic smart phone brands began to stand on the mainstream stage together with Apple, and Goodix’s optical under-screen fingerprint recognition business has become the undisputed big brother in the market.

The number of domestic mobile phone manufacturers that can be named, whether it is Xiaomi or Oppo, are all of Goodix’s customers. This fingerprint recognition business has contributed to Goodix becoming the first domestic semiconductor chip technology company with a market value of 100 billion in 2020.

How far is it from the vent to the cliff?

It should be said that the success of Goodix Technology is not entirely a dividend of the times, but more of its own assessment of the technology industry. Several transformations have been extremely decisive.

However, from the 100 billion enterprises in 2020 to 2021, in less than two years, Goodix’s revenue and profits have begun to decline sharply, and the stock market has also shown a rare downturn.

According to the financial report for the first half of 2021, Goodix Technology only achieved operating income of 2.91 billion yuan, a year-on-year decrease of 4.78%, and both net profit and revenue experienced a rare negative year-on-year growth.

And the capital market is even more disappointing. When Goodix Technology was listed on the Lu Stock Exchange in 2016, its market value was 12.4 billion yuan. By February 2020, it had once reached the top and surpassed 177 billion yuan. However, it has shrunk all the way in just one year, and only 51 billion yuan is left.

What has actually happened? With so many honors, coupled with domestic support for the chip technology industry, how did Goodix Technology reach the bottom in less than two years?

The success of Goodix Technology is brought about by the decisiveness of previous technological transformations. Goodix’s independent innovation capability can quickly fit the current technology trends during each transformation, and thus stand on the cusp of the times. However, there are inevitably the disadvantages of weak anti-risk ability.

From the perspective of the capital market, even if Goodix’s previous transformations have been extremely successful, it is difficult to fully believe that Goodix will continue its journey as the “son of the heaven” next time. What if the technology after the transformation does not fit the era? What if there is a new generation of technology soon after R&D? The uncertainty of technological upgrading will make capital somewhat “daunting.”

Although Goodix has a technical threshold, it is ultimately only a subdivision of semiconductor chips. Goodix relies too much on current fingerprint technology. From the perspective of the market, it is extremely easy to directly collapse due to the replacement of mainstream technology in the industry.

This is why Alipay, WeChat, Apple and other products are increasingly turning themselves into an “ecology” rather than a single chat or payment product. You can make mobile payments on Alipay. You can also scan codes for rides, pay utility bills, recharge phone bills… The more ecological services, the higher the consumer’s dependence, and the less likely to be “replaced.”

In addition, fierce competition is also one of the reasons why Goodix has gradually stepped down from the “sacred altar”. The penetration rate of smart phones is very high. Unless there are more disruptive products, the competition will be more intense when smart phones enter the “stock market.”

In contrast, there are constantly emerging competitors. The law of economics: high industry profits will inevitably attract more people to enter the market. After several price wars, Huike’s gross profit margin has plummeted from 60% in 2019 to 48%.

It seems that, although Goodix Technology is still the leader in the field of chip segmentation, it seems to be standing on the side of an embarrassing cliff. It’s not far from the wind vent to the edge of the cliff.

Concluding remarks

From the trend of the times to the current market value, Goodix has had countless brilliances and lows. At every step of the technology industry, it is possible to win star companies, or it may eliminate the former “leading”. Goodix is ​​now facing such a “step”. We will wait and see whether it will strand the beach since then or return to the peak to ride the wind and waves.

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