Amid a merger and bankruptcy in the West, lidar maker Hesai nails a $190 million IPO • TechCrunch

Amid a merger and bankruptcy in the West, lidar maker Hesai nails a $190 million IPO • TechCrunch

Amid a merger and bankruptcy in the West, lidar maker Hesai nails a $190 million IPO • TechCrunch

>>> DOWNLOAD MP3 <<<

Last week, Chinese lidar maker Hesai launched an IPO in the United States at a time when the industry is reeling from layoffs, bankruptcy and consolidation. The Shanghai and California-based company, which makes sensing technology essential to increasingly advanced autonomous driving and driver assistance systems, raised $190 million through its public offering on the Nasdaq.


As my colleague Kirsten wrote in January, lidar makers face a “decisive” year as they enter 2023. The handful of players who have been seeking special-purpose acquisition mergers don’t has not received the magnitude of the promised capital. Of the nine lidar companies that went public via SPAC, Quanergy filed for bankruptcy protection and Ouster merged with Velodyne. Shares of Ouster have been trading under $2 since last June, and shares of Innoviz are trading at around $4 each.

Founded in 2013, Hesai originally planned to go public two years ago. Its application to join the Nasdaq-style STAR board in China was approved in January 2021 when it planned to raise more than 200 million yuan ($30 million) at a valuation of 10 billion yuan. But the IPO project was withdrawn two months later.

Hesai went ahead with an IPO in the United States amid the industry gloom. Defying concerns, its shares jumped nearly 11% to $21 on their first day of trading last Thursday. Its IPO also marked the biggest Chinese IPO in the United States since Didi’s in 2021, which then sparked a Chinese crackdown on overseas listings over data security concerns.

A number of Chinese tech companies have pulled from the U.S. listing or applied for secondary listings in Hong Kong as they become caught up in rising tensions between the two major economies. Hesai is not immune to the impact of geopolitics. Despite its rosy IPO, the company faces hurdles, as noted in its IPO prospectus. The document is also a useful lens to understand the state of China’s lidar industry and how it finds itself caught between two superpowers.

caught in the middle

For Hesai, the challenges of operating in the midst of a US-China tech war obviously manifest in the stability of its supply chain. Last year, the US government introduced a new round of export restrictions on sales of high-end chips to China. “These sanctions and export controls could adversely affect us and/or our supply chain, our business partners or our customers,” Hesai warned in the prospectus.

While Hesai is working on its own application-specific ICs, its in-house ASICS development is “early” and the company remains “dependent on third-party chips” for its lidar products.

A global chip shortage, which has affected industries ranging from automotive to consumer electronics, is further compounding the lidar maker’s supply chain problems. “We have experienced difficulty in securing sufficient and rapid chip supplies, including automotive-grade receivers and FPGA (field programmable gate array) chips, due to global chip shortages, and our business operations and our financial performance suffered as a result,” the company noted.

Chinese companies seeking to hold international stock deals are also facing new pressure from Beijing, which has stepped up scrutiny of data-rich tech giants that could pose a national security threat. Didi came under pressure to drop from New York’s list after China determined it lacked a robust data security infrastructure. The government has since instituted a set of rules to curb overseas registrations, such as requiring companies to seek China’s approval if they have more than 1 million personal details of Chinese users. . Nevertheless, Hesai said it received confirmation from the competent authority that it does not need such a review for its IPO.

Customer pressure

Estimates from Frost & Sullivan suggest that Hesai was the largest lidar manufacturer by shipment in 2022. Between 2017 and 2022, the company shipped over 100,000 units, with 2022 alone surpassing 80,000 pieces. But sales are not synonymous with profitability. The company has a history of substantial losses – 120 million yuan ($17 million) in 2019, 107 million yuan in 2020, 245 million yuan in 2021 and 165 million yuan in the first nine months of 2022.

A few factors could explain his losing streak. In recent years, Chinese lidar makers have entered a price war to make once-exorbitant hardware more affordable for mass adoption. That, in part, is a response to the nation’s rush by electric vehicle brands to tout smart driving as a key selling point. To win orders from major automakers, lidar companies are often forced to sell at competitive prices, even at a loss.

As Hesai admits in its prospectus, “Cost reduction initiatives adopted by our customers often lead to increased downward pressure on prices. In addition, many of our customers, particularly automotive OEMs, have significant influence over their suppliers, including us, as they are large multinational companies with significant bargaining power and the the supply of automotive components is inherently very competitive, serves a limited number of customers and has a high fixed cost base.

It doesn’t help that Hesai’s revenue relies on “a limited number of customers and products.” The company’s gross margin fell from 57.5% in 2020, 53.0% in 2021 to 44% in the first nine months of 2022.

Lidar’s application goes beyond automated driving, but many players in China jumped on the electric vehicle boom as the government disbursed large subsidies to companies leading the electric transition. This means lidar manufacturers are increasing but also decreasing with cycles in EV space. As Hesai wrote:

“Many of our customers in China focus on the development and production of NEV [new energy vehicles] and have been entitled to certain government incentives or subsidies… However, the central and local governments of China have begun to phase out such incentives and subsidies… Our Chinese NEV customers’ business may suffer, which may have a material effect and negative. impact on us as a LiDAR provider.


Do you find AfroNaija useful? Click here to give us five stars rating!

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button