Closing The U.S. Data Center Business Surplus Micro "Black Hole" Spread

There is no shortage of stories in capital markets.

In December 11th, 000670.SZ, the Limited by Share Ltd, has announced that it will close the INFOTM and INC. data center business in the US. As the main contribution to the performance of the company, the data center business accounted for 59.46% and 92.09% of the company's operating revenue in 2017 and 2018 respectively. The company expects that the closure of the data center will lead to a significant decline in the 2019 year's business performance.

It is not surprising that the business of data center has been closed to the troubled side. Since the development of data center business, Ying Fang micro customer is relatively single, and by the end of last year, the contract has expired, so far has not found new customers. What is more noteworthy is that the black swan event, which has been in operation and management in the series of operations and management due to the fact that the company's actual controllers are being detained, the company's shares are frozen all over, and the profit growth has been inflated, has already made the profit side microchip in a precarious position. Once a leading high-performance processor SoC chip company in China, in the current situation that the industry of the integrated circuit industry is developing vigorously, the trend of the "counter trend" is down, and the future is uncertain.

Closed data center

In the introduction of the company's official website, Ying Fang micro is an intelligent system operator based on integrated circuit design and development, optimizing intelligent terminals through supply chain integration, and providing system services based on big data operation. Based on R & D and application of intelligent processor SoC chip, the company launched the market segmentation chip according to the demand and provided a package of terminal product solutions. The company operates in Zhangjiang, Shanghai, and has branches in Shenzhen, Hongkong, Taipei, Houston, San Francisco and Israel Tel Aviv. In terms of architecture, this is a global layout of Chinese enterprises.

The main business of the company is divided into chip design business, data center business and Beidou business. Among them, the business mode of data center business is based on the basic business mode of asset leasing, that is, providing data room, cabinet rental, power broadband access and operation maintenance for large Internet companies or specific customers.

The carrier of this business originated in 2014. In July of that year, with the help of the reform of the split share structure of Shun Yuan industry, the surplus side was backdoor listing. In November of that year, Ying Fang invested 1 million US dollars, and set up INFOTM INC., a wholly owned R & D center in Houston, Texas, which is mainly engaged in chip and software design and development, cloud data services and market development. At that time, the company's external caliber is to integrate the company's intelligent hardware and software integration capabilities with the Internet, and build a cloud computing service center in Houston through a strategic alliance with Skybox, the leading data center contractor and operator.

But in November 2019, a China Securities Regulatory Commission's decision on administrative penalty revealed the problem of data center which made the market full of imagination.

According to the contents of the above punishment, the company started its data center service business in the United States in 2015, providing High Sharp Electronic Limited (hereinafter referred to as "Gao Rui Electronics") to provide venue leasing and data operation and maintenance services. The two sides signed the "field rent contract" to determine the duration of cooperation from July 10, 2015 to July 31, 2017. Of them, the operation and management fee was 600 thousand dollars in August 2015, and the operation and management fee was fixed at 2 million 200 thousand dollars per month since September 1, 2015.

According to the agreement, Ying Fang should build the facilities that meet the requirements on the land of ownership, and provide daily operation and maintenance services, but the profit side fails to complete the civil works on its own land as scheduled. In August 2015, the two sides signed a supplementary agreement, and the surplus side rent land for Gao Rui electronics to provide data center services.

However, in August 2015 and September, the profit side failed to fulfill the relevant contractual obligations, and the revenue stipulated in the contract was recorded in the financial statements, resulting in a total profit of 23 million 565 thousand and 700 yuan in the combined annual report of the 2015 annual report, accounting for 245.08% of the total profit disclosed in the current period. In response to the annual report, the same accounting firm (special general partnership) issued an unqualified audit report on its financial report. The SFC also punished the senior managers of the company and the company accordingly.

In cooperation with Gao Rui electronics, Ying Fang micro has not expanded new customers. After the expiry of the contract with Gao Rui electronics, after discussions, Ying Fang and Gao Rui electronics briefly renewed their contracts, but the problem of unsmooth cooperation was not resolved. In December of that year, the two sides terminated their cooperation.

At the same time, Ying Fang micro and new customers BMMTECH CANADA CORPORATION signed a new lease agreement, the lease is from January 1, 2018 to December 31, 2019.

In the early days, cooperation between new partners has been smooth. The information disclosed by Ying Fang disclosed that in 2018 1-7, the company's data center was in good operation. But in August of that year, due to intensified competition in the industry, the equipment maintenance cycle was longer, the sales revenue of customers was far less than expected, and its industry economic situation continued to deteriorate, and its lease agreement with the company could not continue to perform. After friendly consultations, in December 20, 2018, the two sides signed the "termination agreement".

"Black Swans" frequent

As a "cash cow", the data center business has a long way to go, and the market development of the chip design business and Beidou business has not reached the expectation.

In 2018, Chen Zhi was arrested by the public security organ for the crime of fraud on negotiable instruments. At present, the company is involved in up to 20 more lawsuits, and all the shares of listed companies held by Ying Fang are also waiting for the relevant departments to freeze.

"Up to now, INFOTM, INC. data center business has not yet returned to normal." Earnings side revealed that the company was also involved in a new lawsuit.

The company said that while carrying out the data center business, the company's energy supplier was Constellation NewEnergy, Inc, but because of the poor operation of the data center business, the two sides also had default situations such as arrears of contract amount and early termination of cooperation in the process of cooperation. In this regard, Constellation NewEnergy, Inc has formally filed a lawsuit against INFOTM and INC. in the District Court of Harris, Texas, USA. As of December 11th, INFOTM and INC. had not yet been charged, and the two sides were in the stage of exchange of materials.

Since BMMTECH CANADA CORPORATION terminated cooperation, so far, Ying Fang has not found a suitable customer. "As of today, the business has been suspended for nearly a year, and according to the industry development of the business, it is estimated that the data center business is still difficult to return to normal in the coming period. Therefore, the company will shut down the INFOTM and INC. data center leasing business". At this point, with the loss of both chip business and map business, the "break off" of data center will add to the 2019 performance of Ying Fang micro.

"As a leading chip design company in the past, the early profit side micro texture is not bad." A broker who pays close attention to Ying Fang micro pointed out that as one of the representatives of previous domestic chip enterprises, Ying Fang was once the main partner of Tencent's Ministation game console chip, and its Beidou business is also cooperating with the world's fourth largest and China's largest digital map provider, Beijing Siwei new Polytron Technologies Inc. Dressed in the aura of semiconductor star company, Ying Fang micro has turned from the chip design to a hot company with a series of "hot concepts" including data collection, VR, vehicle networking and Beidou navigation. However, in the capital market, the capital operation of conceptualization can not last long. It is more suitable for the long term development of enterprises to take root in industry and seize the favorable policies of the integrated circuit industry.