Such high manpower investment also brings higher returns to Broadcom's integrated shareholders. However, on the other hand, Broadcom's integration is also facing a situation of declining gross margins. Products have always faced fierce price competition from rival companies. 'Competition, how to maintain the level of gross margin through the research and development of new products is a problem faced by Broadcom's integration; Broadcom's integrated receivables and inventory levels are relatively high, and it also forms a certain financial pressure on Broadcom's integration.
Per capita annual salary is over 400,000 yuan
'The company is a leading integrated circuit chip design company in China.' The main business of Broadcom Integration is the R&D and sales of radio communication integrated circuit chips. The specific types are divided into wireless data transmission chips and wireless audio chips. The company's current product application categories mainly include 5.8G products, WIFI products, Bluetooth data transmission, universal wireless, walkie-talkie, radio transceiver, Bluetooth audio, wireless microphone, etc. The above products are widely used in Bluetooth speakers, wireless keyboard and mouse, game controllers, wireless microphones, vehicle ETC units and other terminals.
'The main reason is that the average salary level of the company's industry is relatively high.' In the prospectus, Broadcom integration explained the reason why its employees have higher salaries, which is significantly higher than the local average wage.
The company stated that 'we established a sound scientific promotion mechanism and incentive mechanism that closely integrates corporate culture, values and work environment, career development opportunities, and competitive compensation and benefits to attract talent, retain talent, and realize the company and its employees. The company's common growth and development. The company implements differentiated remuneration. Employee salaries and benefits are mainly composed of basic salary and bonuses. The basic salary is determined within each pre-determined remuneration range of each rank and determined according to each employee's experience, skills and performance.'
In 2016, the average salary of Broadcom employees was RMB 425,800, which was more than five times the average salary of Shanghai's employees of RMB 78,000, and was also far higher than the national average of RMB 57,400. This was even higher than the salary level of a considerable number of financial companies. This is also more than 10% higher than the company’s 2015 average of 380,400 yuan.
According to the company, 'In the future, we will continue to adhere to the principle of comprehensive compensation management. We will dynamically adjust employees' compensation systems and pay levels according to the needs of the talented people, the reference market average, and the compensation level of the same industry companies. Taking into account inflation, society With the general increase in labor costs, it is expected that the overall pay level of employees will gradually increase in the future.
Perhaps integrated circuit design does require higher pay and attract enough top talents to really catch up.
According to Broadcom Integration, the chip as the brain of the machine plays a decisive role. The chip design as the core of the realization function has high added value and high technical content in the entire integrated circuit industry. Its gross profit rate is relative to manufacturing and packaging testing manufacturers. Relatively high, the impact on the environment, workplaces, etc. is relatively small, and it is also one of the main channels for developed countries to achieve technological monopoly. In the world, the output value of integrated circuit design accounts for as high as 56%, and the integrated circuit packaging test link Its share accounted for only 19%.
At present, China's mainland integrated circuit industry is still heavily concentrated in the manufacturing and packaging areas with low added value and low technological content. In 2016, the proportion of the design industry was only 37.9%. The integrated circuit industry in China is facing a transition as a whole. In addition, the structure of integrated circuit companies in China is relatively Decentralized, low market concentration.
In terms of integrated circuit design, the top ten integrated circuit design companies in China accounted for 42.15% of the market share in 2016; and in the global market, the top ten IC design companies had a market share of 76.42% in 2016. From an industry standpoint, integrated circuits The industry has a technology-intensive and capital-intensive nature, and the development trend of the industry is conducive to the strong and permanent.
Although per capita salary is high, such high labor cost also brings high returns to Broadcom's integrated investors. From 2015 to 2017, Broadcom's integrated weighted return on equity has reached 40.1%, 30.44% and 32.83%.
The gross profit rate has decreased significantly
In addition to this company, there are no other companies that specialize in the design and development of wireless communication integrated circuit chips. 'At present, among domestic A-share listed companies, there is no business model with the company. Are completely comparable competitors', the prospectus said.
Nevertheless, apart from the need for breakthroughs in R&D for Broadcom integration, how existing products maintain profitability is also a problem. Gross profit margins have been declining year after year, accounts receivable and inventory accounted for a relatively high proportion, and people have integrated Broadcom's future. The development hit a question mark.
'Integrated circuit industry is characterized by its product price and gross profit rate will show a downward trend as the popularity of products and market competition intensify, but the company's development of new products and product replacement, can make a higher gross margin To maintain; The company's market expansion in the application of high gross margin products, also contribute to the company's gross profit margin to maintain a higher level.
Broadcom integration makes such a statement in the prospectus, but in fact, Broadcom's integrated gross margin has been declining. As stated in the above prospectus, 'Gross interest rate remains at a high level', there seems to be some contradiction between the prospectus and the prospectus. The decline in gross profit margin is hampered by the intense 'price war' of related products.
In 2015, 2016 and 2017, the company's gross profit margin was 42.58%, 36.47%, and 34.03% respectively. The company's gross profit margin declined in 2016 and 2017, mainly due to the upgrading of various products; including The company selected price reduction sales strategies for some products in order to digest inventory; In the Bluetooth chip market competition has intensified, the agents of major competitors have seized market share by driving down the gross profit of products, and the company has adopted a pricing mechanism based on the prices of major competitors. .
Despite facing such a fierce 'price war', Broadcom Integration did not disclose the details of competitors in the industry in the prospectus; Compared to other listed companies with more than five or six hundred pages of prospectus, Broadcom has only 322 pages of prospectus as a sponsor. People's CITIC Securities did a 'pity ink like gold'.
However, in the prospectus 'industry business model', the related situation was still disclosed. The Fabless model is a fabless IC design company. It does not have its own factory. The chip manufacturing and packaging tests are completed by the industrial chain corresponding outsourcing factories. Companies include Qualcomm, Tsinghua Unisplendour, etc., 'Broadcom integration also adopts this model.'
Regarding the method of maintaining the gross margin level, Broadcom Integration stated that 'the company is currently actively expanding its WIFI data transmission chip market. With the development and popularization of the Internet of Things, the WIFI data transmission chip designed based on the needs of wireless intelligent terminals will have a wide range of applications. Scenes, including aerial photography, smart home, DV digital camera, television and industrial control. At the same time, the company's raised capital investment projects include smart port products and satellite positioning products.
In addition, Broadcom's integrated accounts receivable amounted to RMB 147 million in 2017, which accounted for 25.96% of the operating revenue, which was far higher than the ratios of 15.13% and 18.55% in 2017 and 2016; With the gradual expansion of the company's operating scale and increase in operating income, the balance of accounts receivable of the company increased accordingly. 'Inventories at the end of 2017 reached 767.874 million yuan, which accounted for 19.89% of total assets. These figures all make it possible for Botong integrated sales receipts. Ability to worry about.