Impact on ＂the first chip of intelligent driving＂, Black Sesame Intelligent lost 10 billion yuan in three years to go to Hong Kong for blood transfusion.

Black sesame intelligence launched an impact on the "first share of autonomous driving chips".

On March 22nd, official website of the Hong Kong Stock Exchange showed that Black Sesame International Holding Limited (hereinafter referred to as "Black Sesame Intelligence"), an autonomous driving research and development enterprise, submitted its application for listing on the main board again, with CICC, Huatai International and CCB International as its co-sponsors.

Black Sesame Intelligence had previously submitted the form on June 30, 2023. Due to its failure to pass the hearing within 6 months, its listing application expired in early January 2024. After a lapse of three months, I handed in the form again. Can Black Sesame Intelligence, which is in urgent need of listing and financing, successfully open the door of the Hong Kong Stock Exchange this time?

Lose 10 billion yuan in three years, and grasp the new dividend of Hong Kong stocks.

According to the prospectus, Black Sesame Intelligence was established in 2016. According to the shipment of high-computing SoC in 2022, Black Sesame Intelligence is the third largest provider of SoC and SoC-based solutions for smart cars in the world. The largest shareholder is the founder Shan Zhangzhang, with about 55.99% of the voting rights.

It is reported that about 80% of the funds raised by Black Sesame Intelligence will be used for research and development; About 10% will be used to improve commercialization ability; And about 10% will be used for working capital and general corporate purposes.

Although the revenue of Black Sesame Smart keeps increasing year by year, the loss is also expanding year by year, with a loss of nearly 10 billion yuan in three years. From 2021 to 2023, the operating income of Black Sesame Intelligence was 61 million yuan, 165 million yuan and 312 million yuan respectively; The net losses were 2.357 billion yuan, 2.754 billion yuan and 4.855 billion yuan respectively.

By the end of 2023, the cash and cash equivalents of Black Sesame Intelligence were 1.298 billion yuan, and the total current liabilities were 334 million yuan. The short-term debt repayment looks good, but due to the company’s low operating income and the need to maintain the company’s daily operations, in 2023, Black Sesame Intelligent’s operating cash flow was a net outflow of 1.058 billion yuan, which was not much different from the value of cash and cash equivalents at the end of the year, and the company continued to flow in funds.

Black Sesame Intelligence said that the huge loss was mainly caused by the company’s excessive R&D investment, and R&D expenditure was the main expenditure part of Black Sesame Intelligence. From 2021 to 2023, the R&D expenditure of Black Sesame Intelligence was 595 million yuan, 764 million yuan and 1.363 billion yuan respectively, accounting for 78.7%, 69.4% and 74.0% of the total operating expenditure and 984.0%, 461.8% and 436.2% of the income in the same year.

Financing has become a "life-saving straw" for black sesame to intelligently supplement its own capital reserves.

Since its establishment in 2016, Black Sesame Intelligence has been invested by well-known VC and industrial capital such as Northern Lights Venture Capital, SAIC, China Merchants Venture Capital, Haisong Capital, Tencent, Boyuan Capital and Dongfeng Motor Group. The total amount of financing in 10 rounds is about 695 million US dollars, about 5 billion yuan. After the last round of financing, the valuation of Black Sesame Intelligence reached 2.218 billion US dollars, about 16 billion yuan.

However, since the signing of the C+ round financing agreement in December 2021, Black Sesame Intelligence has not conducted external financing. This IPO in Hong Kong or Black Sesame Intelligence is an important opportunity under the new dividend of Hong Kong stocks.

On March 31st, 2023, HKEx added Chapter 18C to the Main Board Listing Rules, and introduced the listing mechanism of specialized technology companies, allowing technology companies with no income and no profit to come to Hong Kong for listing. The new rules are applicable to companies in five specialized technology industries: new generation information technology, advanced hardware, advanced materials, new energy and energy conservation and environmental protection, new food and agricultural technology.

It is reported that Black Sesame Smart is the first company to formally submit the A-1 listing documents under the 18C rule of the Hong Kong Stock Exchange since it came into effect.

Competition is worrying about external troubles and internal troubles, and the pressure to reduce costs is great.

In 2022, self-driving passenger cars became popular all over the world, with a global penetration rate of 60.6% and a China penetration rate of 64.4%. According to Jost Sullivan, the global sales volume of self-driving passenger cars is expected to reach 71.6 million by 2028, with a penetration rate of 94.4%, and the sales volume of China is expected to reach 25.3 million by 2028, with a penetration rate of 97.2%.

With the development of automotive industry towards intelligence, SoC has become the mainstream trend in the design and application of automotive chips with many advantages such as improved computing power and high data transmission efficiency. According to Jost Sullivan, in 2028, the global market size of SoC is expected to reach 179.2 billion yuan, and the market size of China is expected to reach 83.5 billion yuan.

However, the current smart driving chip track is still dominated by foreign brands, and domestic smart driving chip manufacturers are facing fierce competition.

According to the prospectus, in 2022, the market share of Black Sesame Intelligence in China and the global high-computing SoC field will be 5.2% and 4.8% respectively, while the market share of the No.1 company A in the global market and China market will be 82.5% and 81.6% respectively.

According to the statistics of Geshi Automobile Research Institute, the top four smart driving domain control chips in 2023 were Tesla FSD chip, NVIDIA Orin, Mobileye EyeQ4H and Mobileye EyeQ5H, and their installed capacity in the field of smart driving domain control was 1.2 million, 1.14 million, 200,000 and 170,000 respectively, with corresponding market shares of 34.4%, 32.6% and 5.7 respectively.

Whether it’s cockpit chips in Qualcomm or smart driving chips in NVIDIA, the products of overseas manufacturers are generally faced with the problem of high cost. In this respect, domestic chip manufacturers have relative advantages in cost control. This has once become an important factor for domestic manufacturers to "roll in" in terms of price.

Since 2023, the growth rate of the new energy automobile market has slowed down, and the "price war" in the domestic automobile market has intensified, and the pressure has been transmitted to the chip manufacturers in the upstream of the industrial chain. According to Morgan Stanley’s report, some car manufacturers are cutting orders for chips such as power management IC, metal oxide semiconductor field effect transistor (MOSFET) and microcontroller (MCU), and asking suppliers to reduce prices.

Yang Yuxin, chief marketing officer of Black Sesame Intelligence, once publicly stated, "The automobile market in China is developing rapidly now. While ensuring the functional performance of (chips), there is also great pressure on the cost. Under the premise that the traditional cost reduction method can’t meet (demand), we can only find a way from the architectural way to put the functions of the original four chips into one chip, and the chip cost will be greatly reduced. "

At present, Black Sesame Intelligence has two series of products, Huashan and Wudang. Among them, A1000 chip helps customers reduce costs by reducing the use of devices. Wudang series chips integrate four sets of functions into one architecture from the way of architecture, so as to reduce the chip cost.

According to the prospectus, as of March 13, 2024, Black Sesame Intelligence has received 23 models of intentional orders from 16 automobile OEMs and first-tier suppliers. As of March 13, 2024, the company has cooperated with more than 49 automobile OEMs and first-class suppliers, including FAW Group, Dongfeng Group and Jiangqi Group.

In addition, in recent two years, BYD, Weilai, Tucki and other major car manufacturers are also actively deploying self-developed chips to improve the efficiency of the combination of software and chips. In this regard, Yang Yuxin said that the self-developed chips of car companies and the chips developed by third-party companies are essentially a game process in terms of cost, differentiation and technological leadership.

Yang Yuxin believes that Weilai’s chips are mainly used in high-end models, and other models will choose other suppliers. After all, car companies should consider a value accounting. He said that the black sesame smart body is relatively large, so it will also gain an advantage through scale.