New Stock Preview | GoerTek's Second Submission: How will China's leading sensor company break through its dependence on large customers and global challenges?

Consumer electronics supply chain companies such as Lens Technology and Luxshare Precision Industry are rushing to the Hong Kong stock market or announcing plans to list on the Hong Kong stock market. Goertek Inc.'s holding subsidiary GoerTek Microelectronics Co., Ltd. (referred to as "GoerTek Micro") has also sounded the horn to go to Hong Kong once again. According to the disclosure by the Hong Kong Stock Exchange on July 21, GoerTek Micro has submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CICC, China Securities Co., Ltd. International, CMB International, and UBS Group as its joint sponsors. This is the company's second submission this year. It is widely believed that in the context of complex and changing global trade situations and increasing demand for localized services by customers, supply chain companies with advantages in global production layout, localized operations, and rapid response to customer needs will be more competitive in the market. Listing in Hong Kong is an important step for consumer electronics supply chain companies to deepen their global layout. Under the wave of listing in Hong Kong, will GoerTek Micro's global development pace deepen? Performance of sensor leader still volatile According to the prospectus, GoerTek Micro is a provider of intelligent sensing interaction solutions covering sensors, SiP, and sensor interaction modules, with a special focus on acoustic sensors. The company continues to explore market demand with global customers, complete product definitions, and provide intelligent sensing interaction experiences for consumer electronics, automotive electronics, smart homes, industrial applications, medical health, and other fields. The company has built UniSense, a platform with full-stack technological capabilities in material research and development, chip design, packaging and testing, algorithm software development, and system design. The company's platform allows it to provide high-performance intelligent sensor interaction solutions at the optimal cost according to customer needs. According to data from Zhishizixun, based on sales in 2024, the company is the fifth-largest global supplier of intelligent sensing interaction solutions with a market share of 2.2%, while the largest global supplier of intelligent sensing interaction solutions has a market share of 11.2%. The company is also the largest supplier of intelligent sensing interaction solutions in China. During the past performance period, the company's cumulative sensor shipments exceeded 5 billion units. According to data from Zhishizixun, based on sales in 2024, the company is the fourth largest sensor provider globally, with a market share of 4.3%. The largest sensor supplier has a market share of 16.6%. The company is also the largest acoustic sensor provider globally, with a market share of 43.0%. The company has a rich variety of solutions, with over 400 models available as of March 31, 2025, widely used in about 30 intelligent terminals such as smartphones, smart headphones, VR/AR devices, smart cars, and smart homes. According to data from Zhishizixun, the company is the largest provider of intelligent sensing interaction solution combinations in China. According to the roast festival, since its establishment, the company has received investments from Qingdao Microelectronics (local state-owned assets), China Securities Co., Ltd., Zhongjin Capital, Stone Capital, ICBC International, CMB Capital, and Fengqi Science and Technology, among others. With strong capital backing, the company has built a brand with international recognition, integrated upstream supply chain resources, and deeply linked downstream customer needs, empowering global customers in various application areas. According to data from Zhishizixun, during the past performance period, the company has served 126 direct customers globally, including the top nine mobile phone manufacturers globally (based on 2024 shipment volume) and leading manufacturers in various application scenarios. Although GoerTek Micro has accumulated a certain level of influence in the market, the company's overall performance in recent years has been volatile. In the fiscal years 2022, 2023, 2024, and the three months ended March 31, 2025 (referred to as the reporting period, the same below), the company achieved revenues of approximately RMB 3.121 billion, RMB 3.001 billion, RMB 4.536 billion, and RMB 1.120 billion, respectively. During the same period, net profits for the fiscal years were approximately RMB 326 million, RMB 289 million, RMB 309 million, and RMB 116 million, respectively. Among them, the sensor business is GoerTek Micro's core revenue source. In 2022, 2023, and 2024, sensor revenues were RMB 2.541 billion, RMB 2.092 billion, and RMB 3.558 billion, accounting for 81.4%, 69.7%, and 78.5% of total revenues, respectively. In terms of profit performance, the company's gross profit margins in 2022, 2023, and 2024 were 18.5%, 17.2%, and 19.0%, respectively. The gross profit in the first quarter of 2025 soared to RMB 230 million, a year-on-year increase of 43.6%, with a corresponding gross profit margin of 20.6%. The net profit margins during the same period were 10.4%, 9.6%, 6.8%, and 10.3%, showing significant fluctuations. However, the company is highly dependent on major customers. In 2022, 2023, and 2024, revenues from the top five customers accounted for 75.5%, 74.3%, and 79.7% of total revenues, with the sales revenue from the largest customer A (presumed to be Apple Inc.) accounting for 56.1%, 49.4%, and 62.3%, respectively. Any changes in the relationships with major customers could have a negative impact on the company's business, financial condition, and operating performance. In addition, customer dependency has led to a significant increase in trade receivables, amounting to RMB 386 million, RMB 565 million, RMB 844 million, and RMB 594 million during the periods, respectively. This has also resulted in a continuous decline in operating cash flow, which stood at RMB 693 million, RMB 600 million, RMB 435 million, and RMB 224 million during the same periods, respectively. Fortunately, the company's cash reserves are relatively abundant, amounting to RMB 2.40 billion as of May 31, 2025. Additionally, the company has a low level of debt, with total current liabilities of RMB 1.36 billion and net current assets of RMB 2.98 billion during the same period. Furthermore, the company faces concentration risks at the supplier level. In 2022, 2023, and 2024, purchases from the top five suppliers accounted for 71.1%, 69.2%, and 70.9% of total purchases, with purchases from the largest supplier accounting for 52.7%, 47.2%, and 53.3%, respectively. The stability of the major suppliers supplies, product quality, and price fluctuations could potentially impact GoerTek's production and operating costs. Intensified competition in intelligent sensor interaction Plans to expand into emerging application fields Whether in the field of intelligent consumer electronics or other emerging industries, providers of intelligent sensing interaction solutions play a crucial role. For example, in the field of intelligent consumer electronics, terminal manufacturers tend to collaborate directly with key component suppliers to jointly define intelligent sensing interaction solutions and customize development, in order to shorten product launch cycles and provide a better experience for end users. Similarly, in other emerging fields such as automotive electronics, smart homes, industrial applications, and medical sectors, the importance of intelligent sensing interaction solutions is also evident. The diverse coverage in various fields has clearly led to rapid growth in the market for intelligent sensing interaction solutions. In 2023, the global market for intelligent sensing interaction solutions reached RMB 186.0 billion. Due to the increase in single-machine value brought about by AI-enabled terminal penetration rate improvement, this market is expected to grow to RMB 151.7 billion by 2028, with a compound annual growth rate of 9.6%. Currently, sensors dominate the global market for intelligent sensing interaction solutions, with a share of 41.7% in 2023. The importance of SiP and sensor interaction modules in the market for intelligent sensing interaction solutions will continue to rise, with their shares increasing from 23.9% and 34.4% in 2023 to 24.1% and 40.4% in 2028, respectively. However, while the market for intelligent sensing interaction solutions shows high growth potential, the intense competition in this area likely puts pressure on GoerTek Micro. According to data from Zhishizixun, the competition in the global market for intelligent sensing interaction solutions remained fierce in 2023. Based on sales in 2023, the company is the eighth-largest in the world and the largest in China in terms of providing intelligent sensing interaction solutions. However, the competitive environment remains quite intense, particularly with major participants from the United States, Europe, Japan, and Korea dominating the global market with their superior technological expertise, advanced design capabilities, and extensive customer relationships. As a core part of the landing of intelligent terminal AI applications, the performance of sensing interaction solutions directly affects the quality of data collection, thereby influencing AI training optimization efficiency and end-user experience. The increasing quantity and performance requirements of sensing interaction components in intelligent terminals have further intensified the competition in the industry of intelligent sensing interaction solutions, with mature players and new entrants vying for market share in a rapidly evolving landscape. Moreover, the trend towards more diversified and smaller-sized intelligent terminals that integrate multimodal interaction poses new challenges of diversification, miniaturization, lightness, integration, and cost control for sensing interaction solutions. GoerTek Micro plans to continue developing high-performance sensors, expand the variety of solutions, continuously launch lightweight, miniature, intelligent SiP, accelerate the commercial landing of diversified sensing interaction modules, aiming to consolidate its first-mover advantage in the field of consumer electronics and actively expand into emerging application fields such as automotive electronics, smart homes, industrial applications, and healthcare. GoerTek Micro's listing in Hong Kong this time is not only an important step in deepening its global layout but also a key measure to cope with industry competition and performance fluctuations. As a leading company in China's intelligent sensing interaction solutions, GoerTek Micro's technological advantages and market share in the field of acoustic sensors have laid a solid foundation, but issues such as dependency on major customers, concentrated supply chains, and intensified industry competition still need to be watched closely. In the future, whether the company can achieve steady growth in performance through continuous technological innovation and expansion into new emerging application fields (such as automotive electronics, smart homes, etc.) will be the core of winning recognition in the capital market. Against the backdrop of the rapid expansion of the global market for intelligent sensing interaction solutions, GoerTek Micro's journey to the Hong Kong stock market may open up new growth opportunities for the company, but challenges and opportunities coexist, and investors need to closely monitor the balance between its globalization process and profitability.