IPO Case | Summary of Cases on Provision for Inventory Obsolescence Based on Inventory Age

1. Zhenbao Technology (STAR Market, submitted for registration)

(1) Company Overview

The company focuses on providing manufacturing equipment components and surface treatment solutions for vacuum chambers involved in process reactions for customers in the integrated circuit and display panel industries. Its main products include equipment parts made of silicon, quartz, silicon carbide, and aluminum oxide ceramics, as well as surface treatment services such as flame spraying regeneration, anodizing, and precision cleaning. The company’s parts and surface treatments are mainly used in semiconductor equipment for plasma etching, thin film deposition, and display panel manufacturing equipment for plasma etching, film deposition, and evaporation processes. The company has mass-produced large-diameter single-crystal silicon rods, polycrystalline silicon rods, ultra-thick high-purity silicon carbide materials via chemical vapor deposition, and ceramic granulated powders, forming an integrated “raw materials + parts + surface treatment” business platform. It continuously advances key semiconductor material preparation and surface treatment technologies, expands core component product categories, and provides customers with comprehensive solutions for manufacturing equipment with multi-category parts inside vacuum chambers.

(2) Inventory Write-down Statements

The company’s inventory management system is effectively implemented, with annual checks on all inventory items. As of the balance sheet date, the company assesses inventory based on the type and characteristics, using a combined approach of cost minus net realizable value and aging analysis. For inventory with less than one year of age, valuation is based on the lower of cost or net realizable value, and a provision for inventory write-down is made for the difference when cost exceeds net realizable value. For inventory over one year old, provisions are made considering aging, storage conditions, expected future sales, and other factors, in conjunction with net realizable value. At each reporting period end, the company has made sufficient provisions for inventory write-downs.

The company’s specific methods for different aging and types of inventory regarding net realizable value and provisions are as follows:

2. Shenghe Jingwei (STAR Market, submitted for registration)

(1) Company Overview

Shenghe Jingwei is a leading global advanced wafer-level packaging (WLP) and chip multi-chip module (MCM) testing and packaging enterprise. It started with processing of 12-inch mid-range silicon wafers and further provides full-process wafer-level packaging and advanced packaging services, supporting various high-performance chips, especially GPUs, CPUs, and AI chips, through heterogeneous integration beyond Moore’s Law to achieve high computing power, high bandwidth, and low power consumption.

The complete advanced packaging industry chain includes mid-range wafer processing and backend advanced packaging. Mid-range wafer processing is a critical link in the IC manufacturing chain, including bumping and wafer testing (CP). Bumping involves creating microstructures like bumps and redistribution layers on entire wafers produced by front-end wafer fabs, enabling high-density electrical connections and high-bandwidth data transfer between chips and external circuits. CP tests the functionality and electrical performance of entire wafers to pre-screen defective chips, optimizing the efficiency and cost of backend packaging and guiding process optimization and yield control in front-end wafer fabrication. Backend advanced packaging is a key part of the IC manufacturing chain, providing protection, nesting, connection, and enhancing chip interconnect performance and functional density.

(2) Inventory Write-down Statements

As of the balance sheet date, inventory is measured at the lower of cost and net realizable value. Net realizable value refers to the estimated selling price in the ordinary course of business minus estimated costs of completion, sales expenses, and related taxes. Under this measurement, assets are valued at the amount of cash or cash equivalents expected to be received from normal sales, minus estimated costs to complete, sales expenses, and taxes. The specific reasons and main calculation processes are as follows:

The issuer conducts impairment testing on spare parts and other materials at each period end. For objectively evidenced impairments, individual provisions are made. For materials without objective evidence of impairment, the issuer considers usage plans and classifies spare parts and materials into aging groups, then estimates provisions based on aging and consumption experience. The provisioning ratios for different aging groups are determined based on the expected lifespan and past consumption. During the reporting period, the use and consumption of spare parts mainly occurred within two years. In 2022 and 2023, approximately 38% of newly acquired spare parts are used within one year, and about 60% within two years. Considering lifespan and past experience, provisions for spare parts and materials with less than two years of age are set at 0%, while those aged 2-3 years, 3-4 years, and over 4 years are provisioned at 30%, 60%, and 100%, respectively.

3. Hafeiman (Beijing Stock Exchange, registered)

(1) Company Overview

Hafeiman is one of the few domestic high-end electroacoustic brands with global influence. It mainly designs, develops, manufactures, and sells its own brand “HIFIMAN” audio products, including over-ear headphones, true wireless earbuds, wired in-ear headphones, and playback devices.

(2) Inventory Write-down Statements

The company adopts a cautious approach to inventory provisions based on its business model and product nature, with specific methods as follows:

4. Guoyi Quantum (STAR Market, in inquiry)

(1) Company Overview

The company adheres to the philosophy of “Making Instruments for the Nation” and has been dedicated to high-end scientific instrument R&D since its founding. It serves fields such as quantum technology, materials science, chemistry and chemical engineering, biomedicine, and advanced manufacturing, providing high-end scientific instruments, core components like enhanced quantum sensors, and solutions to global universities, research institutes, and enterprises to support frontier scientific exploration and address “bottleneck” issues. Starting from quantum information technology, the company has made breakthroughs in related fields, forming four core business areas: quantum information technology, spin resonance, electron microscopy, gas adsorption analysis, and logging-while-drilling (LWD).

(2) Inventory Write-down Statements

During the reporting period, the company’s inventory categories are assessed for net realizable value and provisions as follows:

5. Desuo Technology (Beijing Stock Exchange, approved)

(1) Company Overview

The company specializes in R&D, production, and sales of handheld electric tools such as electric hammers and chisels, and related accessories. Major clients include ADEO, Kingfisher Group, LIDL, and other leading global hardware retail chains, as well as domestic and international tool manufacturers like Suzhou Yingweilai and its affiliates, Bostitch Group, Bulls Tools, and Deli Technology. It ranks among the top global producers of electric hammers and chisels. According to data from Qianzhan Industry Research Institute, in 2024, the company’s output share of electric hammers and chisels will be 10%, ranking second globally and first domestically. Since its founding, the company has focused on the power tools sector, continuously innovating and optimizing management to provide various power tool solutions for construction, roadwork, and interior renovation customers.

(2) Inventory Write-down Statements

Based on prudence, the company analyzes and provisions for inventory considering ODM products, own brands, usage status, aging, and order support, as detailed below:

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