On March 26th, the official website of the Hong Kong Stock Exchange (HKEX) showed that Horizon Robotics, a provider of intelligent driving solutions (hereinafter referred to as "Horizon"), officially submitted its prospectus to the HKEX, with Goldman Sachs, Morgan Stanley, and CITIC Construction Investment as its joint sponsors.

On March 27th, Dan Ji Zhang, the founder and CEO of Black Sesame Technologies Co., Ltd. (hereinafter referred to as "Black Sesame Intelligence"), revealed that Black Sesame Intelligence has completed multiple rounds of financing, with the total amount exceeding 4 billion yuan RMB, and has submitted its prospectus to the HKEX last year, actively preparing for a listing in Hong Kong in the near future.

On March 28th, Hubei C-SKY Technology Co., Ltd. (hereinafter referred to as "C-SKY Technology") announced that it has successfully completed hundreds of millions of yuan in Series B financing and plans to go public next year.

In the first quarter of 2024, three automotive chip companies successively announced their sprint to IPO, making automotive chips a hot topic of discussion. Coupled with the momentum of the Xiaomi SU7 launch, there is great anticipation for the domestic automotive chip market. Amidst the prosperity of "chip, chip", some issues have also been observed. In the prospectuses of these companies aiming for the capital market, there seems to be a bit of unease alongside the brightness.

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01

Ode to Domestic Automotive Chips

These three companies have all achieved mass production of their products in recent years and have established cooperative relationships with many mainstream car manufacturers.

Horizon is the earliest established company among the three, registered in the Cayman Islands on July 21, 2015.

In March 2016, it released its first generation of BPU (Brain Processing Unit). Its flagship series of processing hardware, the Journey series, was first launched in December 2017, with the second generation product, Journey 2, starting mass production in March 2020.In 2021, the Horizon Mono, equipped with the Journey 3 chip, was mass-produced for the first time, with the delivery of processing hardware reaching 1 million units. In 2022, the Roewe RX5, also equipped with the Journey 3 chip, was mass-produced for the first time, and in the same year, the Li Auto L8, equipped with the Journey 5 Horizon Pilot, was mass-produced for the first time.

In 2023, the delivery of processor hardware reached 4 million units; in the same year, Horizon announced that it had reached a cooperation intention with several top OEMs for advanced driver-assistance and high-level autonomous driving solutions based on the Journey 6.

In 2024, Horizon stated in its prospectus that the delivery volume of processing hardware reached 5 million units.

Horizon's latest round of financing occurred in November 2022, invested by Chery Automobile, and the funds will mainly be used for the research and development iteration and mass production application of vehicle intelligent chips. After completing this round of financing, Horizon's post-investment valuation soared to $8.71 billion, equivalent to about 63 billion yuan.

Black Sesame Technology was established in July 2016, and its first chip was launched in 2020.

In 2020, Black Sesame launched the Huashan A1000 and A1000L SoC, which began mass production in 2022. By the end of 2022, the shipment of the A1000 series SoC exceeded 25,000 units. The Huashan II A1000 chip is the first domestically developed and mass-produced vehicle-grade high-computing power autonomous driving chip, which has been mass-produced in several car manufacturers such as Geely, Dongfeng, GAC Aion, BYD, and Iveco. As of December 31, 2023, the total shipment of the A1000 series exceeded 152,000 units.

In April 2023, Black Sesame Technology released the industry's first intelligent vehicle cross-domain computing chip platform, the Wudang series. The first C1200 chip is the world's first "four-domain integration" computing chip platform, expected to be mass-produced by the end of 2024.

From 2020 to 2023, Black Sesame Technology's revenue was 530 million, 600 million, and 1.63 billion yuan, respectively, with net losses of 7.6 billion, 23.6 billion, and 27.5 billion yuan, respectively. On June 30, 2023, Black Sesame Technology submitted a prospectus to the Hong Kong Stock Exchange, intending to go public on the main board, with joint sponsors being CICC and Huatai International.

Both Horizon and Black Sesame's products are mainly aimed at autonomous driving and intelligent cockpits, while another company, XingTech, which was established later, focuses mainly on intelligent cockpits.

Hubei XingTech Technology Co., Ltd. was established in 2018 in the Wuhan Economic and Technological Development Zone.In 2023, Xinqing Technology's intelligent cockpit SoC "Dragon Eagle No.1" based on 7nm process technology was mass-produced and delivered. According to the company's official website, by the end of 2023, the shipment of "Dragon Eagle No.1" has reached 200,000 units, with models already delivered including Lynk & Co 06 EM-P, Rui Lan 7, among others. Xinqing Technology has stated that it has collaborated with several mainstream car manufacturers on over 20 key models.

Xinqing Technology has established multiple cooperative projects with first-tier suppliers both domestically and internationally, and the market penetration of high-end "Chinese Core" is continuously increasing. It is expected that in 2024, the shipment of "Dragon Eagle No.1" will reach the million-unit level. However, Xinqing Technology has not yet entered the capital market, so we will not discuss its business in the following text.

02

Confidence in Going Public

In terms of the progress of going public, Horizon Robotics was also one of the first companies to attempt it.

In 2021, Horizon Robotics was rumored to be advancing its plans to go public. Since its establishment, it has been a favorite of the automotive industry and the capital market, having completed 11 rounds of financing, totaling $2.362 billion, equivalent to about 17 billion RMB, with a smooth development trajectory. Horizon Robotics' integrated software and hardware solutions have been adopted by 24 OEMs and 31 OEM brands, equipping over 230 models. In 2023, Horizon Robotics secured more than 100 new model orders, with all top ten Chinese OEMs choosing its solutions for mass production of their passenger car models. Moreover, mainstream car manufacturers such as Volkswagen, SAIC, BYD, Geely, as well as component brands like Aptiv, Bosch, have established cooperative relationships with Horizon Robotics. In addition, Horizon Robotics has also reached strategic cooperation with upstream and downstream enterprises like AutoNavi, Sony, Zhongke Chuangda, and Sunny Optical Technology.

According to data from the National Financial Regulatory Administration and Zhuoshi Consulting, based on the 2023 installation volume, Horizon Robotics is the second-largest provider of advanced driver assistance solutions in China, with a market share of over 20%; in the high-level autonomous driving (NOA) computing solution market, Horizon Robotics' market share in 2023 was 35.5%, second only to NVIDIA.

This time, Heishumao's re-attempt to list on the Hong Kong Stock Exchange is the second time it has submitted a listing application after the application expired in June 2023. On January 5, 2024, the Hong Kong Stock Exchange disclosed that Heishumao's listing application materials were "expired." Heishumao needs to supplement the latest financial data within three months to further advance the listing process.

As of March 13, 2024, Heishumao Intelligence has obtained 23 model intention orders from 16 automotive OEMs and first-tier suppliers. As of March 13, 2024, the company has cooperated with more than 49 automotive OEMs and first-tier suppliers, including FAW Group, Dongfeng Group, Jianghuai Group, etc.

It is not difficult to see that the confidence of both companies in going public largely comes from the cooperative ecosystem that has been developed. In addition to customers, the "sponsors" behind the two companies are also quite powerful. In the investment lineup of Horizon Robotics, it is not hard to find well-known investment institutions such as Hillhouse Capital, CICC Capital, Sequoia China, as well as industry leaders like FAW, GAC, SAIC, and CATL. That is to say, Horizon Robotics has not only reached cooperation with many mainstream car manufacturers but has also obtained the injection of their capital.Analysis indicates that Horizon's recent move towards an initial public offering (IPO) has been partly facilitated by adjustments to the listing rules of the Hong Kong Stock Exchange (HKEX). According to Chapter 18C, which was newly added to the "Main Board Listing Rules" by HKEX in March 2023, it allows technology companies without revenue or profits to list in Hong Kong. The new rules apply to companies in five specialized technology sectors: next-generation information technology, advanced hardware, advanced materials, new energy and energy conservation and environmental protection, and new food and agricultural technology. Additionally, the new regulations have lowered the market value threshold requirements for listing. The rules explicitly state that the market value of companies that have not yet commercialized is reduced from no less than 15 billion Hong Kong dollars to 10 billion Hong Kong dollars, and the market value threshold for commercialized companies is reduced from 8 billion Hong Kong dollars to 6 billion Hong Kong dollars. Similarly, Black Sesame's listing move is also related to this policy. Black Sesame is the first specialized technology enterprise in Hong Kong to plan and apply for listing under "Chapter 18C."

03

Why Remain Calm?

However, there are still issues to be faced behind the scenes of these companies' listings. The unresolved challenges in the development of domestic intelligent driving chip enterprises are not easily solved in the short term. Difficulties in technological breakthroughs and commercial implementation, combined with changes in supply and demand relationships and increasing price pressures, are issues faced by all players.

Cash flow tension is one of the common problems. Although Horizon has just completed its Series D financing round with an overall valuation of 62 billion yuan, in the fiercely competitive intelligent driving market, Horizon needs to fight for more survival space. Wanting to take the lead means technological leadership. Continuous R&D investment devours profits. From 2021 to 2023, Horizon's R&D expenditures were 1.144 billion yuan, 1.88 billion yuan, and 2.366 billion yuan, respectively, accounting for 245%, 207.6%, and 152.5% of the annual revenue. As of 2023, the full-time R&D team consists of 1,478 people, accounting for 71.5% of the total number of employees, and 60% of the R&D investment is used to retain this R&D team.

Horizon's founder, Yu Kai, has publicly stated that technology companies must always maintain a technological lead, as falling behind could mean being overturned by the waves of the times, and the ecosystem can act as a moat for the enterprise. In its prospectus, Horizon stated that it expects the company's R&D expenses to remain at a high level in the future, planning to achieve a balance of income and expenditure and profitability by expanding the scale of revenue and maintaining the gross margin level.

Looking at Black Sesame, as of December 31, 2022, Black Sesame's cash and cash equivalents were 982 million yuan, and the cash and cash equivalents for the same period in 2022 were 1.553 billion yuan, with a cumulative decrease of 684 million yuan in cash and cash equivalents within one year. Black Sesame's losses have been increasing year by year, with net losses of 760 million, 2.357 billion, and 2.754 billion yuan for 2020-2022, respectively. The adjusted net losses were 273 million, 614 million, and 700 million yuan, respectively, with a total loss of 1.587 billion yuan.

Over-reliance on major customers is another common risk, especially a single large customer. The revenue from Black Sesame's largest customer accounted for 47.7%, 40.7%, and 43.5% of its total revenue, respectively. At the same time, the revenue from the top five customers accounted for 88.5%, 77.7%, and 75.4% of the total revenue, respectively. However, Horizon's customer concentration remains high. From 2021 to 2023, the total revenue generated by Horizon's top five customers was 283 million yuan, 482 million yuan, and 1.067 billion yuan, respectively, accounting for 60.7%, 53.2%, and 68.8% of the revenue. Among them, the joint venture with Volkswagen CARIAD, Core Program, is its largest customer, contributing 24.7%, 16.0%, and 40.4% of the total revenue, respectively. Excluding the revenue contributed by Core Program, Horizon's revenue in 2023 was basically the same as the previous year.

Stable major customers can provide a relatively stable source of income; more importantly, it helps to concentrate resources to serve key customers and improve cooperation with car manufacturers. However, the risks are also obvious. The performance of these companies is closely tied to the changes in their customers' businesses, which may limit the company's market expansion and diversified development in the complex changes of the intelligent driving car market.Where will the IPO of automotive-grade chip companies eventually head?

In the current automotive market, intelligent driving has become a very important competitive edge for car manufacturers, and the intelligent driving chip industry has long been a fiercely competitive field.

The global market size for autonomous driving solutions is expected to reach 61.9 billion yuan in 2023 and is projected to exceed 1 trillion yuan by 2030, with a compound annual growth rate close to 50% from 2023 to 2030. Moreover, by 2030, the scale of China's intelligent vehicle market is expected to approach 30 million units, and the penetration rate of intelligent driving functions is expected to rise from 57.1% in 2023 to 99.7%.

The value of technology to users can be divided into three stages: usable, good to use, and love to use. At present, autonomous driving has not become the primary consideration for consumers when purchasing a car. There must be long-term patience for revolutionary autonomous driving technology, and regardless of which company is mentioned in today's article, they are all facing strong market competitors (NVIDIA) and striving to catch up. We calmly sing their praises!