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What changed in Intchains Group Ltd's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Intchains Group Ltd's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+487 added−415 removedSource: 20-F (2024-03-18) vs 20-F (2022-12-31)

Top changes in Intchains Group Ltd's 2023 20-F

487 paragraphs added · 415 removed · 338 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

149 edited+57 added−30 removed469 unchanged
Biggest changeThe HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading market in the U.S. 28 Table of Contents Our auditor, the independent registered public accounting firm that issued the audit report included in this annual report, as auditor of companies that are traded publicly in the United States and as a firm registered with the PCAOB is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Biggest changeThe HFCA Act states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.
This notice reiterates that cryptocurrencies do not have the same legal status as legal currencies, and emphasizes that cryptocurrency-related businesses are illegal financing activities such as conducting exchanges between legal currencies and cryptocurrencies, exchanges among different cryptocurrencies, trading cryptocurrencies as a central counterparty, matching and pricing services for cryptocurrency transactions, token issuance and financing, and cryptocurrencies derivatives transactions.
This notice reiterates that cryptocurrencies do not have the same legal status as legal currencies, and emphasizes that cryptocurrency-related businesses are illegal financing activities such as conducting exchanges between legal currencies and cryptocurrencies, exchanges among different cryptocurrencies, trading cryptocurrencies as a central counterparty, matching and pricing services for cryptocurrency transactions, token issuance and financing, and cryptocurrencies derivatives transactions.
On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC authorities in those jurisdictions.
On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC authorities in those jurisdictions.
Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges.
Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges.
The availability and cost of electricity will restrict the geographic locations of mining activities, thereby restricting the geographic locations of miners and sales of our products. • Failure at tape-out or failure to achieve the expected final test yields for our ASIC chips could negatively impact our operating results. • Any failure of our products to meet the necessary quality standards could adversely affect our reputation, business and results of operation. • We may be unable to make the substantial investments in research and development that are required to remain competitive in our business. • Failure to maintain inventory levels in line with the approximate level of demand for our products could cause us to lose sales, expose us to increased inventory risks and subject us to increases in holding costs, risk of inventory obsolescence, increases in markdown allowances and write-offs, any of which could have a material adverse effect on our business, financial condition and results of operations. • The average selling prices of our products may decrease from time to time due to technological advancement and we may not be able to pass such decreases onto our suppliers, which may in turn adversely affect our profitability. • If we are unable to effectively execute our growth strategies, maintain our rapid growth trends and manage risks associated with expanding the scale of our operations, our ability to grow our business and establish our overseas market may be negatively affected. • Our limited operating history and rapid revenue growth may make it difficult for us to forecast our customer demand and our business development, or to assess the seasonality and volatility in our business. • We rely on a limited number of third parties to package and test our products. • Our prepayments to suppliers may subject us to counterparty risk associated with such suppliers and negatively affect our liquidity and cash position.
The availability and cost of electricity will restrict the geographic locations of mining activities, thereby restricting the geographic locations of miners and sales of our products. • Failure at tape-out or failure to achieve the expected final test yields for our ASIC chips could negatively impact our operating results. • Any failure of our products to meet the necessary quality standards could adversely affect our reputation, business and results of operation. • We may be unable to make the substantial investments in research and development that are required to remain competitive in our business. • Failure to maintain inventory levels in line with the approximate level of demand for our products could cause us to lose sales, expose us to increased inventory risks and subject us to increases in holding costs, risk of inventory obsolescence, increases in markdown allowances and write-offs, any of which could have a material adverse effect on our business, financial condition and results of operations. 9 Table of Contents • The average selling prices of our products may decrease from time to time due to technological advancement and we may not be able to pass such decreases onto our suppliers, which may in turn adversely affect our profitability. • If we are unable to effectively execute our growth strategies, maintain our rapid growth trends and manage risks associated with expanding the scale of our operations, our ability to grow our business and establish our overseas market may be negatively affected. • Our limited operating history and rapid revenue growth may make it difficult for us to forecast our customer demand and our business development, or to assess the seasonality and volatility in our business. • We rely on a limited number of third parties to package and test our products. • Our prepayments to suppliers may subject us to counterparty risk associated with such suppliers and negatively affect our liquidity and cash position.
Given the fast pace with which blockchain technologies have been and will continue to be developed, we may not be able to timely upgrade our technologies in an efficient and cost-effective manner, or at all. In addition, new developments in deep learning, IoT, computer vision, blockchain and cryptocurrency could render our products obsolete or unattractive.
Given the fast pace with which blockchain technologies have been and will continue to be developed, we may not be able to timely upgrade our technologies in an efficient and cost-effective manner, or at all. In addition, new developments in deep learning, computer vision, blockchain and cryptocurrency could render our products obsolete or unattractive.
Investors, and Restrictions and Limitations on Our Ability to Distribute Earnings from Our Businesses We face various restrictions and limitations that impact our ability to transfer cash between our entities, across borders and to U.S. investors, and our ability to distribute earnings from our business, including our subsidiaries, to the Company and U.S. investors. • We are not a Chinese operating company but a Cayman Islands holding company with operations conducted through our PRC subsidiaries.
Investors, and Restrictions and Limitations on Our Ability to Distribute Earnings from Our Businesses We face various restrictions and limitations that impact our ability to transfer cash between our entities, across borders and to U.S. investors, and our ability to distribute earnings from our business, including our subsidiaries, to the Company and U.S. investors. • We are not a Chinese operating company but a Cayman Islands holding company with operations conducted primarily through our PRC subsidiaries.
The expansion exposes us to a number of risks, including: • difficulty in managing multinational operations; • we may face competitors in the overseas markets who are more dominant and have stronger ties with customers and greater financial and other resources; • fluctuations in currency exchange rates; • challenges in providing customer services and support in these markets; • challenges in managing our international sales channels effectively; • unexpected transportation delays or interruptions or increases in international transportation costs; • difficulties in and costs of exporting products overseas while complying with the different commercial, legal and regulatory requirements of the overseas markets in which we offer our products; • difficulty in ensuring that our customers comply with the sanctions imposed by the Office of Foreign Assets Control of the U.S., or OFAC, on various foreign states, organizations and individuals; • inability to obtain, maintain or enforce intellectual property rights; • inability to effectively enforce contractual or legal rights or intellectual property rights in certain jurisdictions under which we operate; • changes in a specific country or region’s political or economic conditions or policies; • unanticipated changes in prevailing economic conditions and regulatory requirements; and • governmental policies favoring domestic companies in certain foreign markets or trade barriers including export requirements, tariffs, taxes and other restrictions and charges.
The expansion exposes us to a number of risks, including: • difficulty in managing multinational operations; • we may face competitors in the overseas markets who are more dominant and have stronger ties with customers and greater financial and other resources; • fluctuations in currency exchange rates; • challenges in providing customer services and support in these markets; • challenges in managing our international sales channels effectively; • unexpected transportation delays or interruptions or increases in international transportation costs; • difficulties in and costs of exporting products overseas while complying with the different commercial, legal and regulatory requirements of the overseas markets in which we offer our products; 17 Table of Contents • difficulty in ensuring that our customers comply with the sanctions imposed by the Office of Foreign Assets Control of the U.S., or OFAC, on various foreign states, organizations and individuals; • inability to obtain, maintain or enforce intellectual property rights; • inability to effectively enforce contractual or legal rights or intellectual property rights in certain jurisdictions under which we operate; • changes in a specific country or region’s political or economic conditions or policies; • unanticipated changes in prevailing economic conditions and regulatory requirements; and • governmental policies favoring domestic companies in certain foreign markets or trade barriers including export requirements, tariffs, taxes and other restrictions and charges.
If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. 27 Table of Contents On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. 28 Table of Contents On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
On March 12, 2022, the National Development and Reform Commission of the PRC (NDRC) published the Market Access Negative List (2022 Edition) , which lists the virtual currency mining activities as the “backward production processes and equipment” under the eliminated item in the Catalogue for Guiding Industrial Restructuring.
On March 12, 2022, the National Development and Reform Commission of the PRC, or NDRC, published the Market Access Negative List (2022 Edition), which lists the virtual currency mining activities as the “backward production processes and equipment” under the eliminated item in the Catalogue for Guiding Industrial Restructuring.
Risks Relating to the ADSs • Recent litigation and negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ADSs. • The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. • Because we do not expect to pay dividends in the foreseeable future after our initial public offering, you must rely on price appreciation of the ADSs for a return on your investment. • Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial • The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. • Our amended and restated memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs.
Risks Relating to the ADSs • Recent litigation and negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ADSs. • The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. 10 Table of Contents • Because we do not expect to pay dividends in the foreseeable future after our initial public offering, you must rely on price appreciation of the ADSs for a return on your investment. • Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial • The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. • Our amended and restated memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs.
Risks Relating to Doing Business in the PRC • Changes in the political and economic policies of the Chinese government or in relations between China and the United States may materially and adversely affect our business, financial condition, results of operations and the market price of our ADSs. • The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs. • Changes in U.S. and Chinese regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our ADSs. • The approval of the CSRC, CAC or other Chinese regulatory agencies may be required in connection with our offshore offerings under Chinese law. and, if required, we cannot predict whether we will be able to obtain such approval or complete such filing. • Recent negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ADSs. 10 Table of Contents • Changes to and uncertainties in the legal system of the PRC may have a material adverse impact on our business, financial condition and results of operations.
Risks Relating to Doing Business in the PRC • Changes in the political and economic policies of the Chinese government or in relations between China and the United States may materially and adversely affect our business, financial condition, results of operations and the market price of our ADSs. • The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs. • Changes in U.S. and Chinese regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our ADSs. • The approval of the CSRC, CAC or other Chinese regulatory agencies may be required in connection with our offshore offerings under Chinese law. and, if required, we cannot predict whether we will be able to obtain such approval or complete such filing. • Recent negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of our ADSs. • Changes to and uncertainties in the legal system of the PRC may have a material adverse impact on our business, financial condition and results of operations.
If we fail to innovate or to provide products that meet the expectations of our customers, we may be unable to attract new customers or retain existing customers, and as a result our business and results of operations may be adversely affected. • We are subject to risks associated with legal, political or other conditions or developments regarding holding, using or mining of cryptocurrencies and related products and services, which could negatively affect our business, financial condition, and results of operations. • We derive a significant portion of our revenue from our ASIC chips.
If we fail to innovate or to provide products that meet the expectations of our customers, we may be unable to attract new customers or retain existing customers, and as a result our business and results of operations may be adversely affected. • We are subject to risks associated with legal, political or other conditions or developments regarding holding, using or mining of cryptocurrencies and related products and services, which could negatively affect our business, financial condition, and results of operations. • We derive a significant portion of our revenue from our ASIC chip products.
In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2020 and 2021, we and our independent registered public accounting firm identified two material weaknesses in our internal controls.
In connection with the audit of our consolidated financial statements as of and for the years ended December 31, 2021, we and our independent registered public accounting firm identified two material weaknesses in our internal controls.
Pursuant to the Announcement on Prevention of Risks from Offering and Financing of Cryptocurrencies promulgated by seven PRC governmental authorities including the PBOC on September 4, 2017, and Guarding against the Speculative Risks of Cryptocurrency Trading promulgated by the National Internet Finance Association of China, the China Banking Association; and the Payment & Clearing Association of China on May 18, 2021, illegal activities in offering and financing of cryptocurrencies, including initial coin offerings (ICOs), are forbidden in the PRC because such activities may be considered to constitute illegal offering of securities or illegal fundraising.
Pursuant to the Announcement on Prevention of Risks from Offering and Financing of Cryptocurrencies promulgated by seven PRC governmental authorities including the People’s Bank of China, or the PBOC, on September 4, 2017, and Guarding against the Speculative Risks of Cryptocurrency Trading promulgated by the National Internet Finance Association of China, the China Banking Association; and the Payment & Clearing Association of China on May 18, 2021, illegal activities in offering and financing of cryptocurrencies, including initial coin offerings (ICOs), are forbidden in the PRC because such activities may be considered to constitute illegal offering of securities or illegal fundraising.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. 35 Table of Contents Fluctuations in the exchange rate between the RMB and the U.S. dollar could result in foreign currency exchange losses and could materially reduce the value of your investment.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. 36 Table of Contents Fluctuations in the exchange rate between the RMB and the U.S. dollar could result in foreign currency exchange losses and could materially reduce the value of your investment.
If any pending or future proceedings result in an adverse outcome, we could be required to: • cease the manufacturing, use or sale of the infringing products, processes or technologies; • stop shipment to certain geographic areas; • pay substantial damages for infringement; • expend significant resources to develop non-infringing processes, technologies or products; • license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; • cross-license our technology to a competitor in order to resolve an infringement claim, which could weaken our ability to compete with that competitor; or • pay substantial damages to our customers to discontinue their use of or replace infringing products sold to them with non-infringing products.
If any pending or future proceedings result in an adverse outcome, we could be required to: • cease the manufacturing, use or sale of the infringing products, processes or technologies; • stop shipment to certain geographic areas; • pay substantial damages for infringement; • expend significant resources to develop non-infringing processes, technologies or products; • license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; 20 Table of Contents • cross-license our technology to a competitor in order to resolve an infringement claim, which could weaken our ability to compete with that competitor; or • pay substantial damages to our customers to discontinue their use of or replace infringing products sold to them with non-infringing products.
In addition, as cryptocurrency mining employs sophisticated and high computing power devices that need to consume a lot of electricity to operate, future developments in the regulation of energy consumption, including possible restrictions on energy usage in the jurisdictions where we sell our products, may also affect our business operations and the demand for our current ASIC chips.
In addition, as cryptocurrency mining employs sophisticated and high computing power devices that need to consume a lot of electricity to operate, future developments in the regulation of energy consumption, including possible restrictions on energy usage in the jurisdictions where we sell our products, may also affect our business operations and the demand for our current ASIC chip products.
Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our ADSs. 34 Table of Contents Our amended and restated memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs.
Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our ADSs. 35 Table of Contents Our amended and restated memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs.
See “Item 3. Key Information—D. Risk Factors — Risks Relating to Doing Business in the PRC.” Our Corporate Structure We are not a Chinese operating company but a Cayman Islands holding company with operations conducted through our subsidiaries based in China. The “Company” and “our Company” refer to Intchains Group Limited, a Cayman Islands company.
See “Item 3. Key Information—D. Risk Factors — Risks Relating to Doing Business in the PRC.” Our Corporate Structure We are not a Chinese operating company but a Cayman Islands holding company with operations primarily conducted through our operating subsidiaries based in mainland China. The “Company” and “our Company” refer to Intchains Group Limited, a Cayman Islands company.
Except for the business licenses issued by the local branch of the State Administration for Market Regulation, which our PRC subsidiaries have obtained and are in full force and effect as of the date of this annual report, Intchains Group Limited and our PRC subsidiaries are not required to obtain other licenses, approvals or permits to conduct our IC design business operations in mainland China.
Except for the business licenses issued by the local branch of the State Administration for Market Regulation, which our PRC subsidiaries have obtained and are in full force and effect as of the date of this annual report, Intchains Group Limited and our PRC subsidiaries are not required to obtain other licenses, approvals or permits to conduct our business operations in mainland China.
Our limited operating history and rapid revenue growth may make it difficult for us to forecast our customer demand and our business development, or to assess the seasonality and volatility in our business. As the markets for ASIC chips are relatively young and still developing, we cannot forecast longer-term demand or order patterns for our products.
Our limited operating history and rapid revenue growth may make it difficult for us to forecast our customer demand and our business development, or to assess the seasonality and volatility in our business. As the markets for ASIC chip products are relatively young and still developing, we cannot forecast longer-term demand or order patterns for our products.
We have begun and will continue to implement measures to address the material weaknesses and significant deficiencies. For details of these remedial measures, see “Item 15. Controls and Procedures—Remediation of the Material Weakness in Internal Control.” However, the implementation of those measures may not fully remediate these material weaknesses and significant deficiencies in a timely manner.
We have begun and will continue to implement measures to address the material weaknesses. For details of these remedial measures, see “Item 15. Controls and Procedures—Remediation of the Material Weakness in Internal Control.” However, the implementation of those measures may not fully remediate these material weaknesses in a timely manner.
As a result, strong growth in sales of our ASIC chips can contribute to further growth in the total computing power in the network, thereby driving up the difficulty of cryptocurrency mining and resulting in downward pressure on the expected economic return of cryptocurrency mining and the demand for, and pricing of, our products.
As a result, strong growth in sales of our ASIC chip products can contribute to further growth in the total computing power in the network, thereby driving up the difficulty of cryptocurrency mining and resulting in downward pressure on the expected economic return of cryptocurrency mining and the demand for, and pricing of, our products.
See “—D. Risk Factors—Risks Relating to Regulations of Our Business—We may be classified as a “resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders.” and “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation.” Dividends or Distributions Made to the U.S.
See “—D. Risk Factors—Risks Relating to Regulations of Our Business—We may be classified as a “resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders.” and “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation.” 5 Table of Contents Dividends or Distributions Made to the U.S.
For more information regarding the relevant laws of the Cayman Islands and the PRC, see “Enforceability of Civil Liabilities.” 30 Table of Contents PRC regulations relating to the establishment of offshore special purpose vehicles by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to make capital contributions into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us, or otherwise adversely affect our financial position.
For more information regarding the relevant laws of the Cayman Islands and the PRC, see “Enforceability of Civil Liabilities.” PRC regulations relating to the establishment of offshore special purpose vehicles by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to make capital contributions into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us, or otherwise adversely affect our financial position.
According to such list, market entities are prohibited from investing in eliminated items. The above regulations and policies may result in no customers in the PRC buying our products. We derive a significant portion of our revenue from our ASIC chips.
According to such list, market entities are prohibited from investing in eliminated items. The above regulations and policies may result in no customers in the PRC buying our products. We derive a significant portion of our revenue from our ASIC chip products.
Our failure to correct these material weakness and significant deficiencies or our failure to discover and address any other material weakness or significant deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with the applicable financial reporting requirements and related regulatory filings on a timely basis.
Our failure to correct these material weakness or our failure to discover and address any other material weakness could result in inaccuracies in our financial statements and impair our ability to comply with the applicable financial reporting requirements and related regulatory filings on a timely basis.
Furthermore, excess inventories, inventory markdowns, brand image deterioration and margin squeeze caused by declining economic returns for miners or pricing competition for our ASIC chips could all have a material and adverse impact on our business, financial condition and results of operations. 13 Table of Contents We generate all of our revenue from sales to customers in the PRC.
Furthermore, excess inventories, inventory markdowns, brand image deterioration and margin squeeze caused by declining economic returns for miners or pricing competition for our ASIC chip products could all have a material and adverse impact on our business, financial condition and results of operations. 13 Table of Contents We generate all of our revenue from sales to customers in the PRC.
These government policies or trade barriers could increase the prices of our products and make us less competitive in such countries. 17 Table of Contents If we are unable to effectively manage these risks, our ability to expand our business abroad will be impaired, which could have a material and adverse effect on our business, financial condition, results of operations and prospects.
These government policies or trade barriers could increase the prices of our products and make us less competitive in such countries. If we are unable to effectively manage these risks, our ability to expand our business abroad will be impaired, which could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Chaohua Sheng, will beneficially own 100% of our issued and outstanding Class B ordinary shares, representing approximately 92.2% of the aggregate voting power of our issued and outstanding share capital. The interests of our co-founders may differ from the interests of other shareholders.
Chaohua Sheng, will beneficially own 100% of our issued and outstanding Class B ordinary shares, representing approximately 92.0% of the aggregate voting power of our issued and outstanding share capital. The interests of our co-founders may differ from the interests of other shareholders.
We cannot assure you that there will not be a failure in detecting money laundering or other illegal or improper activities which may adversely affect our reputation, business, financial condition and results of operations. With advances in technology, cryptocurrencies are likely to undergo significant changes in the future.
We cannot assure you that there will not be a failure in detecting money laundering or other illegal or improper activities which may adversely affect our reputation, business, financial condition and results of operations. 12 Table of Contents With advances in technology, cryptocurrencies are likely to undergo significant changes in the future.
The two material weaknesses identified relate to the following: (a) during its audit, our independent registered public accounting firm noted that our internal 20 Table of Contents control over financial reporting was not effective due to (i) inadequate segregation of duties and effective risk assessment; (ii) lack of personnel adequately trained in U.S.
The two material weaknesses identified relate to the following: (a) during its audit, our independent registered public accounting firm noted that our internal control over financial reporting was not effective due to (i) inadequate segregation of duties and effective risk assessment; (ii) lack of personnel adequately trained in U.S.
We have been advised by Jingtian & Gongcheng, our PRC legal adviser, that we have obtained all necessary permissions or approvals and authorizations in mainland China in all material aspects in relation to conducting our IC design business operations in mainland China.
We have been advised by Jingtian & Gongcheng, our PRC legal adviser, that we have obtained all necessary permissions or approvals and authorizations in mainland China in all material aspects in relation to conducting our business operations in mainland China.
We cannot predict the number, timing or size of future acquisitions, or the effect that any such acquisitions might have on our operating results. Cyber-security incidents, including data security breaches or computer viruses, could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.
We cannot predict the number, timing or size of future acquisitions, or the effect that any such acquisitions might have on our operating results. 22 Table of Contents Cyber-security incidents, including data security breaches or computer viruses, could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.
We may be involved in other proceedings or disputes in the future that may have a material adverse effect on our business, financial condition, results of operations or cash flows. Our insurance coverage is limited and may not be adequate to cover potential losses and liabilities.
We may be involved in other proceedings or disputes in the future that may have a material adverse effect on our business, financial condition, results of operations or cash flows. 23 Table of Contents Our insurance coverage is limited and may not be adequate to cover potential losses and liabilities.
Accordingly, we may not be able to effectively protect our intellectual property rights in those countries. Many companies have encountered substantial intellectual property infringement in the PRC as well as in many of the countries where we may sell our products in the future. 19 Table of Contents Monitoring unauthorized use of our intellectual property is difficult and costly.
Accordingly, we may not be able to effectively protect our intellectual property rights in those countries. Many companies have encountered substantial intellectual property infringement in the PRC as well as in many of the countries where we may sell our products in the future. Monitoring unauthorized use of our intellectual property is difficult and costly.
There have also been concerns over the United Kingdom leaving the European Union as well as the significant potential changes to United States trade policies, treaties and tariffs, including trade policies and tariffs regarding the PRC. 24 Table of Contents There have also been concerns about the economic effect of the tensions in the relationship between the PRC and surrounding Asian countries.
There have also been concerns over the United Kingdom leaving the European Union as well as the significant potential changes to United States trade policies, treaties and tariffs, including trade policies and tariffs regarding the PRC. There have also been concerns about the economic effect of the tensions in the relationship between the PRC and surrounding Asian countries.
In general, we will be a PFIC for any taxable year in which: 39 Table of Contents • at least 75% of our gross income is passive income, or • at least 50% of the value (determined based on a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income.
In general, we will be a PFIC for any taxable year in which: • at least 75% of our gross income is passive income, or • at least 50% of the value (determined based on a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income.
Dividends or Distributions Made to the Company and Tax Consequences Thereof Our subsidiaries did not make any dividends or distributions to us for years ended December 31, 2020, 2021 and 2022.
Dividends or Distributions Made to the Company and Tax Consequences Thereof Our subsidiaries did not make any dividends or distributions to us for years ended December 31, 2021, 2022 and 2023.
The prices of cryptocurrencies may also be impacted by evolving and uncertain regulatory environment and the development of blockchain technology. As a result of the foregoing, the prices of cryptocurrencies have been quite volatile during its limited history. 11 Table of Contents Our business and financial condition highly correlate with market prices of cryptocurrencies.
The prices of cryptocurrencies may also be impacted by evolving and uncertain regulatory environment and the development of blockchain technology. As a result of the foregoing, the prices of cryptocurrencies have been quite volatile during its limited history. Our business and financial condition highly correlate with market prices of cryptocurrencies.
Any wild fluctuations in the market price of cryptocurrencies may have a material adverse impact on our business, financial condition and results of operations. In addition, if there is a steep increase in the market price of cryptocurrencies, market demand for our ASIC chips is also likely to surge.
Any wild fluctuations in the market price of cryptocurrencies may have a material adverse impact on our business, financial condition and results of operations. In addition, if there is a steep increase in the market price of cryptocurrencies, market demand for our ASIC chip products is also likely to surge.
As our current ASIC chips are mainly designed for cryptocurrency mining, any limitation on the usage and adaptation of cryptocurrency and any actual or perceived adverse development in the cryptocurrency market, which is rapidly and continuously evolving, can adversely affect our results of operations.
As our current ASIC chip products are mainly designed for cryptocurrency mining, any limitation on the usage and adaptation of cryptocurrency and any actual or perceived adverse development in the cryptocurrency market, which is rapidly and continuously evolving, can adversely affect our results of operations.
Investors and Tax Consequences Thereof We did not make any dividends or distributions to our shareholders for years ended December 31, 2020, 2021 and 2022.
Investors and Tax Consequences Thereof We did not make any dividends or distributions to our shareholders for years ended December 31, 2021, 2022 and 2023.
The PRC economy differs from the economies of most developed countries in many aspects, including: • political structure; • level of government involvement and control; • growth rate and level of development; • level and control of capital investment and reinvestment; • control of foreign exchange; • allocation of resources; and • legal systems.
The PRC economy differs from the economies of most developed countries in many aspects, including: • political structure; • level of government involvement and control; • growth rate and level of development; • level and control of capital investment and reinvestment; • control of foreign exchange; 30 Table of Contents • allocation of resources; and • legal systems.
Any adverse development in the regulatory environment in the PRC could have a negative impact on our business, financial condition and results of operations. 9 Table of Contents • Our ASIC chips business depends mainly on supplies from a single third-party foundry, and any failure to obtain sufficient foundry capacity from this foundry would significantly delay the shipment of our products. • Mining difficulty for any reason would negatively affect the economic returns of cryptocurrency mining activities, which in turn would decrease the demand for and/or pricing of our products. • Cryptocurrency exchanges and wallets, and to a lesser extent, the cryptocurrency network itself, may suffer from hacking and fraud risks, which may erode user confidence in cryptocurrency which would in turn decrease the demand for our ASIC chips that are used in cryptocurrency mining machines. • Cryptocurrency mining activities are energy-intensive.
Any adverse development in the regulatory environment in the PRC could have a negative impact on our business, financial condition and results of operations. • Our ASIC chips business depends mainly on supplies from a single third-party foundry, and any failure to obtain sufficient foundry capacity from this foundry would significantly delay the shipment of our products. • Mining difficulty for any reason would negatively affect the economic returns of cryptocurrency mining activities, which in turn would decrease the demand for and/or pricing of our products. • Cryptocurrency exchanges and wallets, and to a lesser extent, the cryptocurrency network itself, may suffer from hacking and fraud risks, which may erode user confidence in cryptocurrency which would in turn decrease the demand for our ASIC chip products. • Cryptocurrency mining activities are energy-intensive.
Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. 38 Table of Contents You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary.
Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary.
While we have historically achieved high final test yields, such as 99% between 2020 and 2022, we cannot assure you that we will be able to maintain such high final test yields in the future. Low final test yields can result from either a product design deficiency or a process technology failure or a combination of both.
While we have historically achieved high final test yields, such as 99% between 2021 and 2023, we cannot assure you that we will be able to maintain such high final test yields in the future. Low final test yields can result from either a product design deficiency or a process technology failure or a combination of both.
As there is no wide consensus with respect to the value and application of cryptocurrency, any future development may continue to affect the price of cryptocurrency and as a result affect the demand for our current ASIC chips.
As there is no wide consensus with respect to the value and application of cryptocurrency, any future development may continue to affect the price of cryptocurrency and as a result affect the demand for our current ASIC chip products.
The difficulty of cryptocurrency mining, or the amount of computational resources required for a set amount of reward for recording a new block, directly affects the expected economic returns for cryptocurrency miners, which in turn affects the demand for our ASIC chips.
The difficulty of cryptocurrency mining, or the amount of computational resources required for a set amount of reward for recording a new block, directly affects the expected economic returns for cryptocurrency miners, which in turn affects the demand for our ASIC chip products.
“We,” “us,” and “our” refer to Intchains Group Limited and its subsidiaries. We currently conduct our business through Jerryken Intelligent Technology (Shanghai) Co., Ltd., or Jerryken Shanghai, and Shanghai Intchains Technology Co., Ltd., or Shanghai Intchains, each an indirect wholly owned subsidiary of the Company, and two operating subsidiaries wholly owned by Shanghai Intchains.
“We,” “us,” and “our” refer to Intchains Group Limited and its subsidiaries. In mainland China, we conduct our business through Jerryken Intelligent Technology (Shanghai) Co., Ltd., or Jerryken Shanghai, and Shanghai Intchains Technology Co., Ltd., or Shanghai Intchains, each an indirect wholly owned subsidiary of the Company, and two operating subsidiaries wholly owned by Shanghai Intchains.
The SEC and the Public Company Accounting Oversight Board (PCAOB) also issued a joint statement on April 21, 2020 reiterating the disclosure, financial reporting and other risks involved in investments in companies that are based in emerging markets, as well as the limited remedies available to investors who might take legal action against such companies.
The SEC and the PCAOB also issued a joint statement on April 21, 2020 reiterating the disclosure, financial reporting and other risks involved in investments in companies that are based in emerging markets, as well as the limited remedies available to investors who might take legal action against such companies.
Despite the security measures we have implemented, our facilities, systems and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events which may disrupt our delivery of services or expose the confidential information of our customers and others.
Our facilities, systems and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events which may disrupt our delivery of services or expose the confidential information of our customers and others.
Cash Flow and Assets Transfer within Our Organization 4 Table of Contents Intchains Group Limited is a Cayman Islands holding company with no material operations of its own. We conduct our operations through our PRC subsidiaries.
Cash Flow and Assets Transfer within Our Organization Intchains Group Limited is a Cayman Islands holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiaries.
Risks Relating to Our Business and Industry There is no assurance that a cryptocurrency will maintain its long-term value, and volatility in the market prices of cryptocurrencies may adversely affect our business and results of operations.
There is no assurance that a cryptocurrency will maintain its long-term value, and volatility in the market prices of cryptocurrencies may adversely affect our business and results of operations.
Conway Kong-Wai Lee, Mr. Qingyang Gu, Mr. Weiping Ma and Mr. Chaowei Yan, are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States.
Chaohua Sheng, Mr. Conway Kong-Wai Lee, Mr. Qingyang Gu and Mr. Chaowei Yan, are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States.
In the future, we may determine that we have additional material weakness and significant deficiencies or other deficiencies, or our independent registered public accounting firm may disagree with our management’s assessment of the effectiveness of our internal controls.
In the future, we may determine that we have additional material weakness, or our independent registered public accounting firm may disagree with our management’s assessment of the effectiveness of our internal controls.
Any shortage of electricity supply or increase in electricity cost in a jurisdiction may negatively impact the viability and the expected economic return for cryptocurrency mining activities in that jurisdiction, which may in turn decrease the sales of our ASIC chips in that jurisdiction.
Any shortage of electricity supply or increase in electricity cost in a jurisdiction may negatively impact the viability and the expected economic return for cryptocurrency mining activities in that jurisdiction, which may in turn cause the sales of our ASIC chip products in that jurisdiction to decrease.
Furthermore, mining equipment production and mining pool locations are becoming centralized. The suspicion about the decentralized nature of cryptocurrency may cause our customers to lose confidence in the prospects of the cryptocurrency industry. This in turn could adversely affect the market demand for our ASIC chips and our business.
Furthermore, the production of computing equipment for blockchain applications and mining pool locations are becoming centralized. The suspicion about the decentralized nature of cryptocurrency may cause our customers to lose confidence in the prospects of the cryptocurrency industry. This in turn could adversely affect the market demand for our ASIC chip products and our business.
Our memorandum and articles of association provide that in respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to 10 votes at general meetings of our shareholders. As of March 31, 2023, our co-founders Mr. Qiang Ding and Mr.
Our memorandum and articles of association provide that in respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to 10 votes at general meetings of our shareholders. As of February 29, 2024, our co-founders Mr. Qiang Ding and Mr.
On December 28, 2021, the Cyberspace Administration of China, or the CAC, together with other PRC governmental authorities, promulgated the Measures for Cybersecurity Review, or Cybersecurity Measures, which took effect on February 15, 2022.
On December 28, 2021, the CAC together with other PRC governmental authorities, promulgated the Measures for Cybersecurity Review, or Cybersecurity Measures, which took effect on February 15, 2022.
We face intense competition and our competitors may employ aggressive pricing strategies, which can lead to a price reduction of our products and material adverse effect on our results of operations. We operate in highly competitive industries for ASIC chips used in cryptocurrency mining solutions, and we may look to enter into markets with very competitive landscapes.
We face intense competition and our competitors may employ aggressive pricing strategies, which can lead to a price reduction of our products and material adverse effect on our results of operations. We operate in highly competitive industries for our ASIC chip products , and we may continue to look to enter into markets with very competitive landscapes.
We expect that competition in our markets will continue to be intense, as we compete not only with existing players that have been focusing on the design of ASIC chips, but also new entrants that include well-established players in the semiconductor industry, or players that have not been predisposed to this industry in the past.
We expect that competition in our markets will continue to be intense, as we compete not only with existing players that have been focusing on the design of ASIC chips and assembly of computing equipment for blockchain applications, but also new entrants that include well-established players in the semiconductor industry, or players that have not been predisposed to this industry in the past.
On September 15, 2021, ten PRC governmental authorities including the People’s Bank of China, or the PBOC, issued the Notice on Further Preventing and Disposing of Risks in Cryptocurrency Trading and Speculation.
On September 15, 2021, ten PRC governmental authorities including the PBOC issued the Notice on Further Preventing and Disposing of Risks in Cryptocurrency Trading and Speculation.
In addition, Our business highly correlate with market prices of cryptocurrencies as our ASIC chip is the core component of the cryptocurrency mining machine. The market prices of cryptocurrencies are highly volatile and exhibit no material season-related pattern of fluctuations. We rely on a limited number of third parties to package and test our products.
In addition, our business highly correlate with market prices of cryptocurrencies as our ASIC chip products are primarily used in cryptocurrency mining activities. The market prices of cryptocurrencies are highly volatile and exhibit no material season-related pattern of fluctuations. We rely on a limited number of third parties to package and test our products.
ITEM 3. KEY INFORMATION Overview We are a provider of integrated solutions consisting of high-performance computing ASIC chips and ancillary software and hardware for blockchain applications. We have a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain.
ITEM 3. KEY INFORMATION Overview We are a provider of integrated solutions of high-performance computing ASIC chip products for blockchain applications. We have a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain.
Reliance on these third parties for the testing and packaging of our ASIC chips presents significant risks to us, including the following: • limited control over delivery schedules, quality assurance, final test yields and production costs; • potential failure to obtain, or delay in obtaining, key process technologies; • failure by us to find an alternative supplier; • capacity shortages during periods of high demand; • shortages of materials; • unauthorized use of our intellectual property; • limited warranties on ICs or products supplied to us; and • potential increases in prices.
Reliance on these third parties for the testing and packaging of our ASIC chips presents significant risks to us, including the following: • limited control over delivery schedules, quality assurance, final test yields and production costs; • potential failure to obtain, or delay in obtaining, key process technologies; • failure by us to find an alternative supplier; • capacity shortages during periods of high demand; • shortages of materials; • unauthorized use of our intellectual property; • limited warranties on ICs or products supplied to us; and • potential increases in prices. 18 Table of Contents The ability and willingness of our production partners to adequately and timely perform is largely beyond our control.
Historically, we provided integrated solutions consisting of high-performance computing ASIC chips and ancillary software and hardware for blockchain applications only. While it does not appear that the Rule is directly applicable to us, we cannot assure you that regulatory authorities will not reach a different conclusion.
We provided integrated solutions of high-performance computing ASIC chips products for blockchain applications only. While it does not appear that the Rule is directly applicable to us, we cannot assure you that regulatory authorities will not reach a different conclusion.
Aggressive pricing strategies by our competitors and an abundant supply of ASIC chips in the market may cause us to reduce the prices of our products and also negatively affect the demand for our products or harm our profitability.
Aggressive pricing strategies by our competitors and an abundant supply of ASIC chips and/or computing equipment for blockchain application similar to ours in the market may cause us to reduce the prices of our products and also negatively affect the demand for our products or harm our profitability.
Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company and all of our assets are located outside of the United States. All of our current operations are conducted in China. In addition, all of our current directors and executive officers, including Mr. Qiang Ding, Mr. Chaohua Sheng, Mr.
Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company and all of our assets are located outside of the United States. Our operations are primarily conducted in China. In addition, except for Dr. Weiping Ma, all of our current directors and executive officers, including Mr. Qiang Ding, Mr.
The occurrence of any of the foregoing or other natural or man-made disasters could cause damage or disruption to us, our employees, operations, markets and customers, which could result in significant delays in deliveries or substantial shortages of our products and could adversely affect our business, financial condition, results of operations or prospects.
The occurrence of any of the foregoing or other natural or man-made disasters could cause damage or disruption to us, our employees, operations, markets and customers, which could result in significant delays in deliveries or substantial shortages of our products and could adversely affect our business, financial condition, results of operations or prospects. 24 Table of Contents Any global systemic economic and financial crisis could negatively affect our business, results of operations, and financial condition.
If we are unable to effectively execute our growth strategies, maintain our rapid growth trends and manage risks associated with expanding the scale of our operations, our ability to grow our business and establish our overseas market may be negatively affected. We have experienced rapid growth and significantly expanded our business in recent years.
If we are unable to effectively execute our growth strategies, maintain our rapid growth trends and manage risks associated with expanding the scale of our operations, our ability to grow our business and establish our overseas market may be negatively affected.
The production of our ASIC chips is dependent on adequate supplies of power and labor. If our production partner experiences power shortages or labor disputes for any reason, it would likely result in disruptions to the production activities we outsource to them.
The production of our ASIC chip products is dependent on adequate supplies of power and labor. If our production partners experience power shortages or labor disputes for any reason, it would likely result in disruptions to the production activities we outsource to them.
If the market for ASIC chips used in cryptocurrency mining machines ceases to exist or diminishes significantly, our business and results of operations would be materially harmed. • We generate all of our revenue from sales to customers in the PRC.
If the market for our ASIC chip products ceases to exist or diminishes significantly, our business and results of operations would be materially harmed. • We generate all of our revenue from sales to customers in the PRC.
The ability and willingness of our production partners to adequately and timely perform is largely beyond our control. If one or more of these production partners fail to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer.
If one or more of these production partners fail to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer.
As of December 31, 2020, 2021 and 2022, the outstanding balance of prepayments we made to our foundry service providers amounted to approximately RMB5.7 million, RMB22.2 million and RMB13.9 million (US$2.0 million), respectively. The amount of our prepayments can significantly increase at the beginning of our launch of advanced products in the future.
As of December 31, 2021, 2022 and 2023, the outstanding balance of prepayments we made to our foundry service providers amounted to approximately RMB22.2 million, RMB13.9 million and RMB32.8 million (US$4.6 million), respectively. The amount of our prepayments can significantly increase at the beginning of our launch of advanced products in the future.
Any such development in the jurisdictions where we sell our ASIC chips that are used in cryptocurrency mining machines could have a material and adverse effect on our business, financial condition and results of operations. Failure at tape-out or failure to achieve the expected final test yields for our ASIC chips could negatively impact our operating results.
Any such development in the jurisdictions where we sell our ASIC chip products for blockchain applications could have a material and adverse effect on our business, financial condition and results of operations. Failure at tape-out or failure to achieve the expected final test yields for our ASIC chips could negatively impact our operating results.
As a foreign-invested enterprise in the PRC in IC design industry, according to Announcement on Corporate Income Tax Policies for Promoting High-quality Development of the Integrated Circuit and Software Industries issued by the Ministry of Finance and other relevant authorities on December 11, 2020, our PRC subsidiary Shanghai Intchains qualifies for preferential tax treatment which allows it to be exempt from paying EIT for the first two years after it begins to generate taxable income, and to pay EIT at half of the statutory rate for the following three years.
As a foreign-invested enterprise in the PRC in IC design industry, according to Announcement on Corporate Income Tax Policies for Promoting High-quality Development of the Integrated Circuit and Software Industries issued by the Ministry of Finance and other relevant authorities on December 11, 2020, our PRC subsidiary Shanghai Intchains qualifies for preferential tax treatment which allows it to enjoy a 5-year tax holiday which exempts it from paying EIT for the first two years and allows it to pay EIT at half of the statutory rate for the following three years beginning from 2021 after utilizing all prior years’ tax losses.
We intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq that listed companies must have for as long as we qualify as a foreign private issuer including: • a nomination and corporate governance committee composed entirely of independent directors; • a compensation committee composed entirely of independent directors; • provide an annual certification by our chief executive officer that he or she is not aware of any non-compliance with any corporate governance rules of the Nasdaq; • have regularly scheduled executive sessions with only independent directors; or • seek shareholder approval for (i) the implementation and material revisions of the terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding ordinary shares or more than 1% of our outstanding voting power to a related party, (iii) the issuance of more than 20% of our outstanding ordinary shares, and (iv) an issuance that would result in a change of control.
We intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq that listed companies must have for as long as we qualify as a foreign private issuer including: • a nomination and corporate governance committee composed entirely of independent directors; • a compensation committee composed entirely of independent directors; • provide an annual certification by our chief executive officer that he or she is not aware of any non-compliance with any corporate governance rules of the Nasdaq; • have regularly scheduled executive sessions with only independent directors; or • seek shareholder approval for (i) the implementation and material revisions of the terms of share incentive plans, (ii) the issuance of more than 1% of our outstanding ordinary shares or more than 1% of our outstanding voting power to a related party, (iii) the issuance of more than 20% of our outstanding ordinary shares, and (iv) an issuance that would result in a change of control. 40 Table of Contents To the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under Nasdaq corporate governance standards applicable to U.S. domestic issuers.
For the years ended December 31, 2020, 2021 and 2022, our revenue amounted to RMB54.6 million, RMB631.8 million and RMB473.7 million (US$68.7 million), respectively. We may not be able to grow our revenue in the future if we are not able to successfully execute our product development and diversification, geographic expansion and other growth plans.
For the years ended December 31, 2021, 2022 and 2023, our revenue amounted to RMB631.8 million, RMB473.7 million and RMB82.2 million (US$11.6 million), respectively. We may not be able to halt the decrease in revenue and achieve future revenue growth if we are not able to successfully execute our product development and diversification, geographic expansion and other growth plans.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changePursuant to the Administrative Measures on the Accreditation of High and New Technology Enterprises, high and new technology enterprises accredited pursuant to these measures may make declarations under and benefit from tax concession policies in accordance with relevant regulations including the EIT Law and the EIT Implementation Rules, the Law of the PRC on Administration of Levying and Collection of Taxes and the Regulation of Implementation of the Law of the PRC on Administration of Levying and Collection of Taxes. 50 Table of Contents Pursuant to the Announcement on the Enterprise Income Tax Policies for Promoting the High-quality Development of the Integrated Circuit Industry and the Software Industry promulgated by the Ministry of Finance, the State Taxation Administration, the NDRC and the MIIT on December 12, 2020 and effective from January 1, 2020, and the Announcement No. 9 [2021] of the MIIT, the NDRC, the Ministry of Finance and the State Taxation Administration, upon certification, an integrated circuit design, equipment, materials, packaging, or testing enterprise or a software enterprise shall be exempt from the EIT from the first to the second year from the year when such enterprise makes profits, and be subject to the EIT levied at half of the 25% statutory tax rate from the third to the fifth year.
Biggest changePursuant to the Announcement on the Enterprise Income Tax Policies for Promoting the High-quality Development of the Integrated Circuit Industry and the Software Industry promulgated by the Ministry of Finance, the State Taxation Administration, the NDRC and the MIIT on December 12, 2020 and effective from January 1, 2020, and the Announcement No. 9 [2021] of the MIIT, the NDRC, the Ministry of Finance and the State Taxation Administration, upon certification, an integrated circuit design, equipment, materials, packaging, or testing enterprise or a software enterprise shall be exempt from the EIT from the first to the second year from the year when such enterprise makes profits, and be subject to the EIT levied at half of the 25% statutory tax rate from the third to the fifth year. 52 Table of Contents Value-Added Tax Pursuant to the Provisional Regulation on Value-Added Tax of the PRC promulgated by the State Council, as amended on November 5, 2008, February 6, 2016 and November 19, 2017 and effective November 19, 2017, all entities and individuals in the PRC engaging in the sales of goods, provision of processing services, repairs and replacement services, sales services, intangible assets, real estate and the importation of goods are required to pay value added tax, or VAT.
To suit our customers’ needs for mining different types of cryptocurrencies, we offer them a comprehensive suite of ASIC chips that can be used in cryptocurrency mining machines for a number of popular alternative cryptocurrencies other than Bitcoins, including Litecoin, Dogecoin, Handshake, Kadena and Nervos Network, among others.
To suit our customers’ needs for mining different types of cryptocurrencies, we offer them a comprehensive suite of ASIC chips that can be used in cryptocurrency mining machines for a number of popular alternative cryptocurrencies other than Bitcoins, including Litecoin, Dogecoin, Kaspa, Kadena, Nervos Network and Handshake, among others.
As at the date of this annual report, the Draft Cyber Data Regulations are still in draft form and subject to change with substantially uncertainty. 55 Table of Contents C. Organizational Structure For an organizational structure of the Company and its subsidiaries and a detailed description of the Company’s significant subsidiaries, see “Item 3. Key Information—Our Corporate Structure.” D.
As at the date of this annual report, the Draft Cyber Data Regulations are still in draft form and subject to change with substantially uncertainty. 57 Table of Contents C. Organizational Structure For an organizational structure of the Company and its subsidiaries and a detailed description of the Company’s significant subsidiaries, see “Item 3. Key Information—Our Corporate Structure.” D.
We establish an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. For the year ended December 31, 2022, substantially all of our customers paid the full purchase price before we delivered our products.
We establish an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. For the year ended December 31, 2023, substantially all of our customers paid the full purchase price before we delivered our products.
Pursuant to Provisions for Guiding the Foreign Investment Direction, projects with foreign investment fall into 4 categories, namely encouraged, permitted, restricted and prohibited. Projects with foreign investment that are encouraged, restricted or prohibited shall be listed in the Foreign Investment Catalog.
Pursuant to Provisions for Guiding the Foreign Investment Direction, projects with foreign investment fall into 4 categories, namely encouraged, permitted, restricted and prohibited. Projects with foreign investment that are encouraged, restricted or prohibited shall be listed in the Foreign Investment Catalog. Projects with foreign investment not listed as encouraged, restricted or prohibited projects are permitted projects.
From product development, component sourcing to product assembly and delivery, we strictly control the quality of our products and components, to ensure our ASIC chips meet our stringent internal standards as well as international and industry standards.
From product development, component sourcing to product assembly and delivery, we strictly control the quality of our products and components, to ensure our ASIC chip products meet our stringent internal standards as well as international and industry standards.
A significant uninsured loss or a loss in excess of our insurance coverage could have a material adverse effect on our results of operations and financial condition.” 46 Table of Contents Environmental Matters We are subject to PRC environmental laws and regulations including the Environmental Protection Law of the PRC.
A significant uninsured loss or a loss in excess of our insurance coverage could have a material adverse effect on our results of operations and financial condition.” Environmental Matters We are subject to PRC environmental laws and regulations including the Environmental Protection Law of the PRC.
Our warranties cover regular maintenance services and parts and labor for repairs. We accept exchanges of our ASIC chips only for major defects. We believe our exchange policy is consistent with relevant PRC laws and regulations governing product quality and consumer rights and interests.
Our warranties cover regular maintenance services and parts and labor for repairs. We accept exchanges of our ASIC chip products only for major defects. We believe our exchange policy is consistent with relevant PRC laws and regulations governing product quality and consumer rights and interests.
Patents Pursuant to the Patent Law of the PRC promulgated on March 12, 1984, last amended on October 17, 2020 and effective June 1, 2021, and the Rules for the Implementation of the Patent Law of the PRC amended on January 9, 2010 and effective February 1, 2010, after the grant of the patent right for inventions and utility models, except otherwise regulated under the Patent Law, no entity or individual may, without the authorization of the patent owner, exploit such patent, that is to manufacture, use, offer to sell, sell or import the patented product, or use the patented process, and use, offer to sell, sell or import products directly obtained from such patented process, for production or business purposes.
Patents Pursuant to the Patent Law of the PRC promulgated on March 12, 1984, last amended on October 17, 2020 and effective June 1, 2021, and the Rules for the Implementation of the Patent Law of the PRC last amended on December 11, 2023 and effective January 20, 2023, after the grant of the patent right for inventions and utility models, except otherwise regulated under the Patent Law, no entity or individual may, without the authorization of the patent owner, exploit such patent, that is to manufacture, use, offer to sell, sell or import the patented product, or use the patented process, and use, offer to sell, sell or import products directly obtained from such patented process, for production or business purposes.
The advantages of the “Xihe” Platform include the following: • it continuously establishes and updates the foundry database standards based on advanced technologies to effectively optimize the functionality, power consumption and surface area of power computing chips, thereby achieving lower cost and higher gross profit margin; • capabilities in blockchain PoW algorithms and related cryptology-based computing algorithms allow us to perform systematic analysis, analyze algorithms, develop ASIC solutions, and seize new market opportunities; • comprehensive baseboard design, testing board/design, automatic test equipment and system level test solution design capabilities give us flexibility in selecting ASIC chip types and production plans, which in turn enables us to roll out products quickly, ensure the quality of our chips and thereby lower our costs; and • it maximizes production efficiency through equipping our production process with self-developed software tailored to our chips, including self-developed factory production testing system, after-sales data system, server backstage system, and volume/group management system. 42 Table of Contents Through our “Xihe” Platform, we have been able to launch products with shorter time-to-market, lower overall costs and relatively higher gross profit margins compared to our competitors in the industry.
The advantages of the “Xihe” Platform include the following: • it continuously establishes and updates the foundry database standards based on advanced technologies to effectively optimize the functionality, power consumption and surface area of power computing chips, thereby achieving lower cost and higher gross profit margin; • capabilities in blockchain PoW algorithms and related cryptology-based computing algorithms allow us to perform systematic analysis, analyze algorithms, develop ASIC solutions, and seize new market opportunities; • comprehensive baseboard design, testing board/design, automatic test equipment and system level test solution design capabilities give us flexibility in selecting ASIC chip types and production plans, which in turn enables us to roll out products quickly, ensure the quality of our chips and thereby lower our costs; and • it maximizes production efficiency through equipping our production process with self-developed software tailored to our chips, including self-developed factory production testing system, after-sales data system, server backstage system, and volume/group management system.
Risk Factors—Risks Relating to Our Business and Industry—We may face intellectual property infringement claims or other related disputes, which could be time-consuming, costly to defend or settle and result in the loss of significant rights and lower sales.” Employees We had 101 full-time employees as of December 31, 2022.
Risk Factors—Risks Relating to Our Business and Industry—We may face intellectual property infringement claims or other related disputes, which could be time-consuming, costly to defend or settle and result in the loss of significant rights and lower sales.” 47 Table of Contents Employees We had 133 full-time employees as of December 31, 2023.
For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures.” B. Business Overview Overview We are a provider of integrated solutions consisting of high-performance computing ASIC chips and ancillary software and hardware for blockchain applications.
For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures.” B. Business Overview Overview We are a provider of integrated solutions of high-performance computing ASIC chip products for blockchain applications.
We engage in ongoing research and development activities to meet the technological requirements of customers and maintain our cutting-edge technological capabilities. As of December 31, 2022, our research and development team comprised a total of 69 employees, or approximately 68.3% of our total number of employees.
We engage in ongoing research and development activities to meet the technological requirements of customers and maintain our cutting-edge technological capabilities. As of December 31, 2023, our research and development team comprised a total of 99 employees, or approximately 74.4% of our total number of employees.
On May 27, 2021, the MIIT and the Office of the Central Cyberspace Affairs Commission issued the Guiding Opinions on Accelerating the Application of Blockchain Technology and the Development of the Industry, which points out efforts should be made to promote the integrated development of blockchain and the internet, big data, artificial intelligence and other new-generation information technologies, and build an advanced blockchain industry system.
On May 27, 2021, the MIIT and the Office of the Central Cyberspace Affairs Commission issued the Guiding Opinions on Accelerating the Application of Blockchain Technology and the Development of the Industry, which points out efforts should be made to promote the integrated development of blockchain and the internet, big data, artificial intelligence and other new-generation information technologies, and build an advanced blockchain industry system. 49 Table of Contents On November 1, 2021, the MIIT issued the “14th Five-Year Plan” Development Plan for the Information and Communication Industry.
In March, 2023, we completed our initial public offering on the Nasdaq Capital Market. In the offering, 1,114,516 ADSs, representing 2,229,032 Class A ordinary shares, were issued and sold to the public at a price of USD 8.00 per ADS, after underwriter partially exercised over-allotment option to purchase additional ADSs.
In the offering, 1,114,516 ADSs, representing 2,229,032 Class A ordinary shares, were issued and sold to the public at a price of USD 8.00 per ADS, after underwriter partially exercised over-allotment option to purchase additional ADSs.
Our research and development expenses were RMB48.4 million (US$7.0 million) for the year ended December 31, 2022. Our research and development team is led by our chief technology officer, Mr. Chaohua Sheng, who has more than 16 years of industry experience.
Our research and development expenses were RMB42.3 million (US$6.0 million) for the year ended December 31, 2023. 45 Table of Contents Our research and development team is led by our chief technology officer, Mr. Chaohua Sheng, who has more than 16 years of industry experience.
We also require our fabrication, packaging and testing service providers to apply their stringent quality control standards and provide us their quality inspection reports. Warranty and After Sales Services We provide a six-month warranty for our ASIC chips and ancillary software and hardware, which we believe is in line with prevailing industry practice.
We also require our fabrication, packaging and testing, and computing equipment production service providers to apply their stringent quality control standards and provide us their quality inspection reports. 46 Table of Contents Warranty and After Sales Services We provide a six-month warranty for our ASIC chip products, which we believe is in line with prevailing industry practice.
However they could have an impact on the Company’s customers in the PRC, which could indirectly impact the demand for the Company’s ASIC chips. 48 Table of Contents Laws and Regulations Relating to Other Business Areas Foreign Exchange Pursuant to the Administrative Regulations of the PRC on Foreign Exchange promulgated by the State Council on January 29, 1996 and amended on August 1, 2008 with effect from August 5, 2008, and various regulations issued by SAFE, and other PRC regulatory agencies, foreign currency could be exchanged or paid through two different accounts, namely current account and capital account.
Laws and Regulations Relating to Other Business Areas Foreign Exchange Pursuant to the Administrative Regulations of the PRC on Foreign Exchange promulgated by the State Council on January 29, 1996 and amended on August 1, 2008 with effect from August 5, 2008, and various regulations issued by SAFE, and other PRC regulatory agencies, foreign currency could be exchanged or paid through two different accounts, namely current account and capital account.
In general, the following factors are unfavorable for the determination of “beneficial owner” status of an applicant: (1) the applicant is obligated to pay 50% or more of the income, within 12 months from its receipt, to a resident of a third country (region), where the term “obligated” includes agreed obligations and de facto payment for which there is no agreed obligation; (2) the business activities undertaken by the applicant do not constitute substantive business activities, where substantive business activities shall include manufacturing, distribution and management activities of a substantive nature, the determination of whether the business activities undertaken by the applicant are of a substantive nature shall be based on the functions actually performed and the risks borne, and investment holding management activities of a substantive nature undertaken by the applicant may constitute substantive business activities (where the applicant undertakes investment holding management activities which do not constitute substantive business activities, and simultaneously undertakes other business activities, if such other business activities are not sufficiently significant, these shall not constitute substantive business activities); (3) the treaty counterparty country (region) does not levy, or exempts tax on the relevant income, or levies tax but with a very low actual tax rate; (4) in addition to the loan contract based on which interest is derived and paid, there exists other loans or deposit contracts between the creditor and the third party, of which factors such as the amount, interest rate and date of execution are similar; and (5) in addition to the transfer contract for rights to use such as copyright, patent, technology, from which the royalties are derived and paid, there exists other transfer contracts for rights to use or ownership in relation to copyright, patent, technology between the applicant and a third party. 51 Table of Contents Pursuant to the Notice of the SAT on the Relevant Issues Concerning the Implementation of Dividend Clauses in Tax Treaties promulgated by the SAT and effective February 20, 2009, all of the following conditions shall be satisfied before the concession tax rate in a tax treaty can be enjoyed: (1) the tax resident obtaining dividends shall be restricted to the company as provided in the tax treaty; (2) among all the ownership equity interests and voting shares of the PRC resident company, the proportion directly owned by the tax resident complies with the prescribed proportions under the tax treaty; and (3) the proportion of the equity interests of the PRC resident company directly owned by such tax resident complies with, at all times within the twelve months before obtaining the dividends, the proportions specified in the tax treaty.
In general, the following factors are unfavorable for the determination of “beneficial owner” status of an applicant: (1) the applicant is obligated to pay 50% or more of the income, within 12 months from its receipt, to a resident of a third country (region), where the term “obligated” includes agreed obligations and de facto payment for which there is no agreed obligation; (2) the business activities undertaken by the applicant do not constitute substantive business activities, where substantive business activities shall include manufacturing, distribution and management activities of a substantive nature, the determination of whether the business activities undertaken by the applicant are of a substantive nature shall be based on the functions actually performed and the risks borne, and investment holding management activities of a substantive nature undertaken by the applicant may constitute substantive business activities (where the applicant undertakes investment holding management activities which do not constitute substantive business activities, and simultaneously undertakes other business activities, if such other business activities are not sufficiently significant, these shall not constitute substantive business activities); (3) the treaty counterparty country (region) does not levy, or exempts tax on the relevant income, or levies tax but with a very low actual tax rate; (4) in addition to the loan contract based on which interest is derived and paid, there exists other loans or deposit contracts between the creditor and the third party, of which factors such as the amount, interest rate and date of execution are similar; and (5) in addition to the transfer contract for rights to use such as copyright, patent, technology, from which the royalties are derived and paid, there exists other transfer contracts for rights to use or ownership in relation to copyright, patent, technology between the applicant and a third party.
As of the date of annual report, we have registered five trademarks and a total of seven patents in the PRC, including three inventions and four utility model patents. As of the same date, we have registered ten software copyrights and 25 IC layout-design rights in the PRC.
As of the date of annual report, we have registered 28 trademarks (including two in mainland China and 26 outside mainland China) and a total of ten patents in the PRC, including six inventions and four utility model patents. As of the same date, we have registered ten software copyrights and twenty-five IC layout-design rights in the PRC.
Pursuant to the Notice on Administration of Foreign Exchange Involved in Offshore Investment, Financing and Round-Trip Investment Conducted by Domestic Residents Through Special Purpose Vehicles, which was promulgated by SAFE and went into effect on July 4, 2014, prior to making capital contribution in a special purpose vehicle by a PRC resident using its legitimate assets or interests in the PRC or overseas, the PRC resident shall apply to the foreign exchange bureau for completion of foreign exchange registration formalities for overseas investments.
Capital account items, such as direct equity investment, loans and repatriation of investment, require the prior approval from or registration with SAFE or its local branch for conversion between RMB and the foreign currency, and remittance of the foreign currency outside the PRC. 50 Table of Contents Pursuant to the Notice on Administration of Foreign Exchange Involved in Offshore Investment, Financing and Round-Trip Investment Conducted by Domestic Residents Through Special Purpose Vehicles, which was promulgated by SAFE and went into effect on July 4, 2014, prior to making capital contribution in a special purpose vehicle by a PRC resident using its legitimate assets or interests in the PRC or overseas, the PRC resident shall apply to the foreign exchange bureau for completion of foreign exchange registration formalities for overseas investments.
Competition The overall ASIC chips market is relatively fragmented, with many ASIC providers focusing on different end applications and corresponding algorithms. However, for certain market segments, the concentration ratio is relatively high.
Competition The overall ASIC chips market and related downstream markets, such as computing equipment incorporating ASIC chips, are relatively fragmented, with many ASIC-related products providers focusing on the different end applications and corresponding algorithms of the ASIC chips. However, for certain market segments, the concentration ratio is relatively high.
Our Products Our core business focuses on the design of ASIC chips for blockchain applications. We engage in the front-end and back-end of ASIC chip design, the major links in the product development chain for ASIC chips.
We engage in the front-end and back-end of ASIC chip design, the major links in the product development chain for ASIC chips.
We enter into employment contracts with our full-time employees. The remuneration payable to our employees includes fixed salaries and performance-based project bonuses. We determine employees’ remuneration based on factors including years of experience, qualifications and market rate. In order to maintain the quality, knowledge and skills of our employees, we appreciate the importance of training to employees.
We enter into employment contracts with our full-time employees. The remuneration payable to our employees includes fixed salaries, performance-based project bonuses and share-based compensation pursuant to our share incentive plan. We determine employees’ remuneration based on factors including years of experience, qualifications and market rate.
We design our ASIC chips in-house, enabling us to leverage proprietary silicon data for next generation products. Furthermore, from our past tape-outs with 100% success rate, we own the most critical silicon data that gives us advantages to deliver the most advanced product ahead of our competitors.
Furthermore, from our past tape-outs with 100% success rate, we own the most critical silicon data that gives us advantages to deliver the most advanced product ahead of our competitors.
During the year ended December 31, 2022, our revenue was primarily generated from the sales of chips used for mining alternative cryptocurrencies, and its historical rapid growth was largely driven by the drastic increase of the price of alternative cryptocurrencies.
Instead, our business and financial condition correlate with the market price of alternative cryptocurrencies. During the year ended December 31, 2023, our revenue was primarily generated from the sales of ASIC chip products used for mining alternative cryptocurrencies, and its historical rapid growth was largely driven by the drastic increase of the price of alternative cryptocurrencies.
Outbound Investment Pursuant to the Measures for Administration of Overseas Investment Management promulgated by the MOFCOM on September 6, 2014 and effective October 6, 2014 and the Measures for Administration of Overseas Investment of Enterprises promulgated by the NDRC on December 26, 2017 and effective March 1, 2018, a domestic institution is required to undergo relevant procedures for offshore investment prior to its overseas direct investment and obtain relevant record-filing, approval, certificate or permit.
Since our current and planned business is not on the 2021 Negative List, to the best of our knowledge, it will not create any material adverse effect to our Company’s business. 51 Table of Contents Outbound Investment Pursuant to the Measures for Administration of Overseas Investment Management promulgated by the MOFCOM on September 6, 2014 and effective October 6, 2014 and the Measures for Administration of Overseas Investment of Enterprises promulgated by the NDRC on December 26, 2017 and effective March 1, 2018, a domestic institution is required to undergo relevant procedures for offshore investment prior to its overseas direct investment and obtain relevant record-filing, approval, certificate or permit.
Since our inception, we have developed over 40 different hardware models and several innovative systems under the “Xihe” Platform that are dedicated to the research and development of chips, including a factory production test system, an after-sales data system, a computing server system and a batch management system.
Since our inception, we have developed over 40 different hardware models and several innovative systems under the “Xihe” Platform that are dedicated to the research and development of chips, including a factory production test system, an after-sales data system, a computing server system and a batch management system. 44 Table of Contents Our “Xihe” Platform is a platform based on advanced computing technologies and focused on the application of HPC ASIC chips and their related integrated solutions in the blockchain field.
The global cryptocurrency mining hardware industry consists of all the hardware used for mining cryptocurrencies under different chip architecture and algorithms, mainly dominated by ASIC-based and GPU-based mining hardware with high computing power.
For most cryptocurrencies that require a mining process to be released or traded, the computing services mainly revolve around the mining hardware. The global cryptocurrency mining hardware industry consists of all the hardware used for mining cryptocurrencies under different chip architecture and algorithms, mainly dominated by ASIC-based and GPU-based mining hardware with high computing power.
Projects with foreign investment not listed as encouraged, restricted or prohibited projects are permitted projects. 49 Table of Contents Pursuant to the Special Administrative Measures for Access of Foreign Investment (2021 Edition), or the 2021 Edition Negative list, issued by the MOFCOM and the NDRC on December 27, 2021, which came into effect on January 1, 2022.
Pursuant to the Special Administrative Measures for Access of Foreign Investment (2021 Edition), or the 2021 Edition Negative list, issued by the MOFCOM and the NDRC on December 27, 2021, which came into effect on January 1, 2022. Our business does not fall into the negative list and is permitted for foreign investment.
We provide regular training to our employees, which include orientation training for new employees and continuing on-the-job training for existing employees.
In order to maintain the quality, knowledge and skills of our employees, we appreciate the importance of training to employees. We provide regular training to our employees, which include orientation training for new employees and continuing on-the-job training for existing employees.
Regulation Regulations and Government Policies Relating to the IC Industries and Blockchain Industries Regulations and Government Policies Relating to the IC Industries As demonstrated by The Circular of the State Council on Printing and Distributing Policies for Encouraging the Development of the Software Industry and the Integrated Circuit Industry issued on June 24, 2000, the PRC continues to enact policies encouraging new and advanced technology and supporting the software and IC industries.
If we fail to comply with present or future laws and regulations, we could be subject to fines, suspension of production or cessation of operations. 48 Table of Contents Regulation Regulations and Government Policies Relating to the IC Industries and Blockchain Industries Regulations and Government Policies Relating to the IC Industries As demonstrated by The Circular of the State Council on Printing and Distributing Policies for Encouraging the Development of the Software Industry and the Integrated Circuit Industry issued on June 24, 2000, the PRC continues to enact policies encouraging new and advanced technology and supporting the software and IC industries.
Our customer base consists of distributors located in the PRC. For the year ended December 31, 2022, we had seven customers with three contributing more than 10% of our total revenue each, accounting for 47.3%, 33.3% and 17.4%, respectively.
Our Customer Base Our customer base primarily consists of distributors located in the PRC. For the year ended December 31, 2023, we had seven customers with two contributing more than 10% of our revenue each, accounting for 56.2% and 41.9%, respectively, of our revenue.
If these domestic companies fail to complete their indirect overseas offering and listing within such six-month transition period, they will be required to make filings with the CSRC pursuant to the Trial Measures; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies seeking listing with contractual arrangements if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. 54 Table of Contents On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
If these domestic companies fail to complete their indirect overseas offering and listing within such six-month transition period, they will be required to make filings with the CSRC pursuant to the Trial Measures; and (3) the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of companies seeking listing with contractual arrangements if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources.
On November 1, 2021, the MIIT issued the “14th Five-Year Plan” Development Plan for the Information and Communication Industry. This notice makes it a priority for future development to significantly increase the level of computing power and significantly enhance the service capacity of facilities such as artificial intelligence and blockchain.
This notice makes it a priority for future development to significantly increase the level of computing power and significantly enhance the service capacity of facilities such as artificial intelligence and blockchain.
Due to the nature of our operations, the waste we produce is not hazardous and has minimal impact on the environment. Our operations are subject to regulation and periodic monitoring by local environmental authorities. If we fail to comply with present or future laws and regulations, we could be subject to fines, suspension of production or cessation of operations.
Due to the nature of our operations, the waste we produce is not hazardous and has minimal impact on the environment. Our operations are subject to regulation and periodic monitoring by local environmental authorities.
IC Layout Designs Pursuant to the Regulation on the Protection of Integrated Circuit Layout Designs promulgated on April 2, 2001 and implemented on October 1, 2001, and the Protection of Integrated Circuit Layout Designs Regulations Implementing Rules promulgated on September 18, 2001 and effective October 1, 2001, layout design proprietary right holders enjoy the following proprietary rights: to duplicate the whole or any part of the protected layout designs that is original; to make commercial use of the protected layout designs, ICs containing such layout designs, or items containing such ICs. 53 Table of Contents Regulations in relation to M&A Rules and Overseas Listing Accordance with the M&A Rules which was promulgated by the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the State Administration for Industry and Commerce, the CSRC and SAFE and took effect on September 8, 2006 and was subsequently amended on June 22, 2009 by the MOFCOM, a foreign investor was required to obtain necessary approvals when (i) a foreign investor acquires equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes for new equity in a domestic enterprise via an increase of registered capital thereby converting it into a foreign-invested enterprise; or (ii) a foreign investor establishes a foreign-invested enterprise which purchase and operates the assets of a domestic enterprise, or which purchases the assets of a domestic enterprise and injects those assets to establish a foreign-invested enterprise.
Regulations in relation to M&A Rules and Overseas Listing Accordance with the M&A Rules which was promulgated by the MOFCOM, the State-owned Assets Supervision and Administration Commission of the State Council, the SAT, the State Administration for Industry and Commerce, the CSRC and SAFE and took effect on September 8, 2006 and was subsequently amended on June 22, 2009 by the MOFCOM, a foreign investor was required to obtain necessary approvals when (i) a foreign investor acquires equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes for new equity in a domestic enterprise via an increase of registered capital thereby converting it into a foreign-invested enterprise; or (ii) a foreign investor establishes a foreign-invested enterprise which purchase and operates the assets of a domestic enterprise, or which purchases the assets of a domestic enterprise and injects those assets to establish a foreign-invested enterprise.
The following table sets forth the numbers of our full-time employees, categorized by function, as of December 31, 2022: Function Number of Employees Percentage of Total Number of Employees Research and development 69 68.3 % Sales and marketing 17 16.8 % Administration 4 4.0 % Finance and accounting 11 10.9 % Total 101 100.0 % As of December 31, 2022, we employed two part-time cleaning staff.
The following table sets forth the numbers of our full-time employees, categorized by function, as of December 31, 2023: Function Number of Employees Percentage of Total Number of Employees Research and development 99 74.4 % Sales and marketing 17 12.8 % Administration 6 4.5 % Finance and accounting 11 8.3 % Total 133 100.0 % As of December 31, 2023, we did not employ any part-time staff.
We rely on patent, trademark, copyright, trade secret protection and confidentiality agreements to safeguard our interests in this respect. Intellectual property rights resulting from the research and development work by our employees belong to us. 45 Table of Contents Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology.
We rely on patent, trademark, copyright, trade secret protection and confidentiality agreements to safeguard our interests in this respect. Intellectual property rights resulting from the research and development work by our employees belong to us.
This notice points out that advancing the integration of blockchain technology and artificial intelligence and establishing a new social credit system will significantly minimize the cost and risk of interpersonal communications. 47 Table of Contents On October 5, 2017, the General Office of the State Council issued the Guiding Opinions on Actively Promoting Supply Chain Innovation and Application, which highlights and promotes the research of using emerging technologies such as blockchain and artificial intelligence to establish a credit evaluation mechanism based on supply chain.
On October 5, 2017, the General Office of the State Council issued the Guiding Opinions on Actively Promoting Supply Chain Innovation and Application, which highlights and promotes the research of using emerging technologies such as blockchain and artificial intelligence to establish a credit evaluation mechanism based on supply chain.
As prior to the acquisition of all the equities of Shanghai Intchains by Jerryken Intelligent Technology (Shanghai) Co., Ltd., Shanghai Intchains was a sino-foreign equity joint venture and did not belong to “domestic companies” based on M&A Rules.
It does not matter whether the Chinese party and the foreign party are related parties or whether the foreign party is an existing shareholder or a new investor. 55 Table of Contents As prior to the acquisition of all the equities of Shanghai Intchains by Jerryken Intelligent Technology (Shanghai) Co., Ltd., Shanghai Intchains was a sino-foreign equity joint venture and did not belong to “domestic companies” based on M&A Rules.
As the cryptographic algorithms involved for mining different types of cryptocurrencies are different, we have developed various unique ASIC chip designs to drive such mining hardware. The ASIC chips and ancillary software and hardware we offer include the professional version used for professional computer servers and the box version used for individual users.
As the cryptographic algorithms involved for mining different types of cryptocurrencies are different, we have developed various unique ASIC chip designs to drive such mining hardware.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We are a holding company incorporated in the Cayman Islands and conduct our operations in China through our PRC subsidiaries. We began our operations in December 2017 when Shanghai Intchains Technology Co., Ltd., or Shanghai Intchains, was founded in Shanghai, China.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We, Intchains Group Limited, are a holding company incorporated in the Cayman Islands and conduct our operations primarily through our PRC subsidiaries.
Foreign investors are not allowed to invest in fields or sectors prohibited in the market access negative list for foreign investment. Foreign investors that intend to invest in the fields subject to access restrictions stipulated in the market access negative list for foreign investment shall be required to satisfy the conditions stipulated in such negative list.
Foreign investors that intend to invest in the fields subject to access restrictions stipulated in the market access negative list for foreign investment shall be required to satisfy the conditions stipulated in such negative list. The PRC policies supporting enterprise development are equally applicable to foreign-invested enterprises. The PRC does not impose expropriation on foreign investment.
If such employer fails to make the overdue contributions within such time limit, the relevant administrative department may impose a fine equivalent to 1—3 times the overdue amount. 52 Table of Contents Pursuant to the Administrative Regulations on the Housing Provident Fund effective from April 3, 1999, amended on March 24, 2002 and March 24, 2019, enterprises are required to register with the competent administrative centers of housing provident fund and open bank accounts for housing provident funds for their employees.
Pursuant to the Administrative Regulations on the Housing Provident Fund effective from April 3, 1999, amended on March 24, 2002 and March 24, 2019, enterprises are required to register with the competent administrative centers of housing provident fund and open bank accounts for housing provident funds for their employees.
Laws and Regulations Relating to Intellectual Property Trademarks Pursuant to the Trademark Law of the PRC promulgated on August 23, 1982, amended on April 23, 2019 and effective November 1, 2019 and the Regulation on Implementation of the Trademark Law of the PRC amended on April 29, 2014 and effective May 1, 2014, the right to the exclusive use of a registered trademark is limited to the approved trademark registration, and to goods for which the use of the trademark has been approved.
When an employer fails to pay housing provident fund due in full and in time, housing provident fund center is entitled to order it to rectify, failing to do so would result in enforcement exerted by the court. 54 Table of Contents Laws and Regulations Relating to Intellectual Property Trademarks Pursuant to the Trademark Law of the PRC promulgated on August 23, 1982, amended on April 23, 2019 and effective November 1, 2019 and the Regulation on Implementation of the Trademark Law of the PRC amended on April 29, 2014 and effective May 1, 2014, the right to the exclusive use of a registered trademark is limited to the approved trademark registration, and to goods for which the use of the trademark has been approved.
Shortly after its incorporation, Intchains Group Limited incorporated a wholly-owned subsidiary in the British Virgin Islands, or BVI, namely, Intchains Investment (BVI) Limited, or Intchains BVI. In October 2021, Intchains Global Limited, or Intchains Global, was incorporated in the BVI as a wholly-owned subsidiary of Intchains Group Limited. In February 2022, Intchains Global acquired 100% equity interest in Intchains Pte.
In June 2021, Intchains Group Limited was incorporated in the Cayman Islands as our offshore holding company. Shortly after its incorporation, Intchains Group Limited incorporated a wholly-owned subsidiary in the British Virgin Islands, or BVI, namely, Intchains Investment (BVI) Limited, or Intchains BVI.
Our business does not fall into the negative list and is permitted for foreign investment. The Foreign Investment Law replaced the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises. It stipulates that the PRC implements a system of pre-establishment national treatment plus negative list for the administration of foreign investment.
The Foreign Investment Law replaced the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises. It stipulates that the PRC implements a system of pre-establishment national treatment plus negative list for the administration of foreign investment. Foreign investors are not allowed to invest in fields or sectors prohibited in the market access negative list for foreign investment.
We place orders to the Foundry Partner according to our business needs. After we place our orders, and once the Foundry Partner accepts our orders, we are required to prepay in full in order to secure production capacity from the Foundry Partner.
After we place our orders, and once the Foundry Partner accepts our orders, we are required to prepay in full in order to secure production capacity from the Foundry Partner. It takes an average of approximately four months from the time when we place our order to the delivery of wafers.
Zhaoyang Ma who is a principal shareholder, acquired 1% equity interest in Shanghai Intchains, upon completion of which, Shanghai Intchains became a sino-foreign equity joint venture.
In October 2021, Golden Stone Hong Kong Holding Limited, a then independent third party which is wholly owned by Mr. Zhaoyang Ma who is a principal shareholder, acquired 1% equity interest in Shanghai Intchains, upon completion of which, Shanghai Intchains became a sino-foreign equity joint venture.
Foreign-invested enterprises can raise funds through public issuance of stocks, corporate bonds and other securities in accordance with the law. Overall, The Foreign Investment Law establishes the clear principle of applying national treatment to FIEs except those engaged in industries on the 2021 Negative List.
Overall, The Foreign Investment Law establishes the clear principle of applying national treatment to FIEs except those engaged in industries on the 2021 Negative List.
While we continue to seek opportunities to improve our supply chain, we face concentration risks, as we currently depend on one supplier for our wafers. See “Item 3. Key Information—D.
We started our cooperation with the Foundry Partner in 2018, and we do not maintain any long-term contract or framework agreement. While we continue to seek opportunities to improve our supply chain, we face concentration risks, as we currently depend on one supplier for our wafers. See “Item 3. Key Information—D.
On or after March 31, 2023, any failure or perceived failure by the Company or PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
On or after March 31, 2023, any failure or perceived failure by the Company or PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. 56 Table of Contents Regulations Relating to Dividend Distributions According to the PRC Company Law and Foreign Investment Law, each of our PRC subsidiaries, as a foreign invested enterprise, or FIE, is required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, and which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital.
Ltd., or Intchains Singapore, a private limited company incorporated in Singapore, for the purpose of holding our planned business in Singapore. Following the incorporation of Intchains BVI, Intchains Technology (Hongkong) Limited, or Intchains HK, was incorporated in Hong Kong in July 2021 as a wholly-owned subsidiary of Intchains BVI.
In October 2021, Intchains Global Limited, or Intchains Global, was incorporated in the BVI as a wholly-owned subsidiary of Intchains Group Limited. In February 2022, Intchains Global acquired 100% equity interest in Intchains Pte. Ltd., or Intchains Singapore, a private limited company incorporated in Singapore, for the purpose of holding our planned business in Singapore.
We normally set an initial price for our product at launch and lower the price as more competing products enter the market. When the market price of a cryptocurrency fluctuates, we will adjust the price of our products accordingly. The total volume of ASIC chips we sold was 3,235,235 units in 2022.
Additionally, we have adopted a floating pricing mechanism, consistent with industry practice. We normally set an initial price for our product at launch and lower the price as more competing products enter the market. When the market price of a cryptocurrency fluctuates, we will adjust the price of our products accordingly.
Our total revenue increased significantly from RMB54.6 million in 2020 to RMB631.8 million in 2021 and decreased to RMB473.7 million (US$68.7 million) in 2022.
Our total revenue decreased from RMB631.8 million in 2021 to RMB473.7 million (US$68.7 million) in 2022 and further decreased to RMB82.2 million (US$11.6 million) in 2023. Our net income decreased from RMB450.1 million in 2021 to RMB355.2 million in 2022.
We conduct limited sales and marketing efforts as customers assess and engage us through professional channels based on the known specifications of our products. Professional third-party websites in our industry have rankings of ASIC chip products based on performance criteria, and many customers connect with us through these websites.
Sales and Marketing For our ASIC chip products used in blockchain applications, customers evaluate technical performance specifications of chips and select their suppliers. We conduct limited sales and marketing efforts as customers assess and engage us through professional channels based on the known specifications of our products.
The PRC policies supporting enterprise development are equally applicable to foreign-invested enterprises. The PRC does not impose expropriation on foreign investment. Under special circumstances, if it requires imposing expropriation on foreign investment due to the need of public interest, expropriation shall be imposed according to legal procedures, and the foreign-invested enterprises concerned shall receive fair and reasonable compensation.
Under special circumstances, if it requires imposing expropriation on foreign investment due to the need of public interest, expropriation shall be imposed according to legal procedures, and the foreign-invested enterprises concerned shall receive fair and reasonable compensation. Foreign-invested enterprises can raise funds through public issuance of stocks, corporate bonds and other securities in accordance with the law.
We utilize a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain.
We utilize a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain. See forth below is a diagram illustrating the general process of our ASIC chip design and production: Our ASIC Chip Products We focus on the design of ASIC chips for blockchain applications.
In September 2021, Intchains HK established Jerryken Intelligent Technology (Shanghai) Co., Ltd., or WFOE, as a wholly foreign owned entity in the PRC. In October 2021, Golden Stone Hong Kong Holding Limited, a then independent third party which is wholly owned by Mr.
Following the incorporation of Intchains BVI, Intchains Technology (Hongkong) Limited, or Intchains HK, was incorporated in Hong Kong in July 2021 as a wholly-owned subsidiary of Intchains BVI. In September 2021, Intchains HK established Jerryken Intelligent Technology (Shanghai) Co., Ltd., or WFOE, as a wholly foreign owned entity in the PRC.
WFOE acquired approximately 82.49% equity interest in Shanghai Intchains in November 2021 and further acquired the remaining 17.51% equity interest in Shanghai Intchains in December 2021, and Intchains Group Limited became the ultimate holding company of our operating subsidiaries. 40 Table of Contents On July 8, 2022, we subdivided our authorized share capital from US$50,000 divided into US$0.0001 par value each to US$50,000 divided into US$0.000001 par value each.
WFOE acquired approximately 82.49% equity interest in Shanghai Intchains in November 2021 and further acquired the remaining 17.51% equity interest in Shanghai Intchains in December 2021, and Intchains Group Limited became the ultimate holding company of our operating subsidiaries.
See forth below is a diagram illustrating the general process of our ASIC chip design and production: Our “Xihe” Platform We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability.
We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability. We design our ASIC chips in-house, which enables us to leverage proprietary silicon data to deliver products reflecting the latest technological developments ahead of our competitors.
Our fabrication partner is responsible for procurement of the majority of the raw materials used in the production of our ASIC chips.
Our fabrication partner is responsible for procurement of the majority of the raw materials used in the production of our ASIC chips. As a result, we can focus our resources on research and development, product design and additional quality assurances.
With the growth of our business and in order to facilitate international capital raising, we underwent an offshore reorganization in the second half of 2021. In June 2021, Intchains Group Limited was incorporated in the Cayman Islands as our offshore holding company.
We began our operations in December 2017 when Shanghai Intchains Technology Co., Ltd., or Shanghai Intchains, was founded in Shanghai, China. 41 Table of Contents With the growth of our business and in order to facilitate international capital raising, we underwent an offshore reorganization in the second half of 2021.
We typically settle with our packaging and testing partners on a monthly basis and we are required to pay them within 30 days upon receipt of invoices. Quality Control We emphasize quality control in all aspects of our operations.
We typically settle with our packaging and testing partners on a monthly basis and we are required to pay them within 30 days upon receipt of invoices. Computing Equipment Assembly We outsource the assembly of our computing equipment for blockchain applications to third-party contract manufacturers in order to prioritize on the design and development of new ASIC chips offerings.
Our sales and marketing personnel communicate with potential customers to understand their needs and product requirements and recommend suitable products to them. Demand for our products has generally exceeded our production output and we require either full or partial prepayment from customers upon placement of purchase orders.
Demand for our products has generally exceeded our production output and we require either full or partial prepayment from customers upon placement of purchase orders. We have not relied heavily on sales force for advertising and marketing of our ASIC chip products, as most of our customers approach us proactively.
In order to maintain our competitive advantage in the ASIC chip market, we continually iterate our ASIC chip design to optimize computing power and power efficiency. The following table sets forth a summary of the milestones and status of the development of our ASIC chips.
The ASIC chip products we offer include the professional version used for professional computer servers, the lite version and the box version used for individual users. 43 Table of Contents In order to maintain our competitive advantage in the ASIC chip market, we continually iterate our ASIC chip design to optimize computing power and power efficiency.
As a result, we can focus our resources on research and development, product design and additional quality assurances. 44 Table of Contents Wafer Fabrication We work with our Foundry Partner, a world’s leading semiconductor foundry, which is also our only wafer fabrication partner, to produce wafers for our ASIC chips.
Wafer Fabrication We work with our Foundry Partner, a world’s leading semiconductor foundry, which is also our only wafer fabrication partner, to produce wafers for our ASIC chips. We place orders to the Foundry Partner according to our business needs.
Our products consist of high-performance computing ASIC chips that have high computing power and superior power efficiency as well as ancillary software and hardware, which cater to the evolving needs of the blockchain industry. We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability.
Our products primarily include high-performance computing ASIC chip products consisting of ASIC chips that have high computing power and superior power efficiency, computing equipment incorporating our ASIC chips, which we began offering to customers in the fourth quarter of 2023 and ancillary software and hardware, all of which cater to the evolving needs of the blockchain industry.
Pursuant to the Announcement of the State Taxation Administration on Issuing the Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers promulgated by the SAT on October 14, 2019 and effective January 1, 2020, entitlement to treaty benefits for non-resident taxpayers shall be handled by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference”.
Pursuant to the Notice of the SAT on the Relevant Issues Concerning the Implementation of Dividend Clauses in Tax Treaties promulgated by the SAT and effective February 20, 2009, all of the following conditions shall be satisfied before the concession tax rate in a tax treaty can be enjoyed: (1) the tax resident obtaining dividends shall be restricted to the company as provided in the tax treaty; (2) among all the ownership equity interests and voting shares of the PRC resident company, the proportion directly owned by the tax resident complies with the prescribed proportions under the tax treaty; and (3) the proportion of the equity interests of the PRC resident company directly owned by such tax resident complies with, at all times within the twelve months before obtaining the dividends, the proportions specified in the tax treaty. 53 Table of Contents Pursuant to the Announcement of the State Taxation Administration on Issuing the Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers promulgated by the SAT on October 14, 2019 and effective January 1, 2020, entitlement to treaty benefits for non-resident taxpayers shall be handled by means of “self-judgment of eligibility, declaration of entitlement, and retention of relevant materials for future reference”.
Algorithm Chip Tape Out Status Blake2bsha3 ICC590 May 2020 In mass production Blake2s ICA586 October 2020 In mass production ICA585 December 2021 Confirmed for mass production (new product) Eaglesong ICA588 October 2020 In mass production Sha512MD160 ICA589 October 2020 In mass production Blake2b ICT580 June 2019 In mass production IAA561 May 2021 In mass production ICT560 June 2019 In mass production Scrypt ICQ550 October 2018 Near end of product cycle SIPC100/ICQ510 February 2018 Ceased production (November 2021) ICQ520 February 2018 Ceased production (November 2021) Cryptonight V4 ICT570 June 2019 In mass production Cryptonight V2 ICQ530 October 2018 Near end of product cycle Note: As of December 31, 2022, we also had immaterial sales from our trial production of a new chip which had not yet been used in any commercial product.
Algorithm Chip Model Tape Out Status Blake2bsha3 ICC590 May 2020 In mass production Blake2s ICA586 October 2020 In mass production ICA585 December 2021 In mass production Eaglesong ICA588 October 2020 In mass production Sha512MD160 ICA589 October 2020 In mass production Blake2b ICT580 June 2019 In mass production Scrypt IAA561 May 2021 In mass production ICT560 June 2019 In mass production ICQ550 October 2018 Near end of product cycle IEN610 October 2023 Tape-out completed and expected for mass production in Q1 2024 Cryptonight V4 ICT570 June 2019 In mass production Cryptonight V2 ICQ530 October 2018 Near end of product cycle kHeavyHash IEN616 October 2023 Tape-out completed and expected for mass production in Q1 2024 Confidential Algorithm ICC551/552/553 March 2022 In mass production Confidential Algorithm IEN618 October 2023 Tape-out completed and expected for mass production in Q1 2024 We price our ASIC chips in consideration of the market price of cryptocurrencies, prices of our competitors’ products, expected economic return of cryptocurrency mining, product types and demand for mining hardware.
We design our ASIC chips in-house, which enables us to leverage proprietary silicon data to deliver products reflecting the latest technological developments ahead of our competitors. As of December 31, 2022, we had completed a total of eight tape-outs using our “Xihe” Platform for 22nm ASIC chips, achieving a 100% success rate for all our tape-outs.
As of December 31, 2023, we had completed a total of nine tape-outs using our “Xihe” Platform for 22nm and 12nm ASIC chips, achieving a 100% success rate for all our tape-outs. The blockchain industry experienced challenges in 2023 and uncertainties in the market had negatively impacted our business performance.
Our strong commitment to advanced research and development enables us to innovate continuously and create ASIC chips with superior performance to power ratio at reasonable cost. We will continue to devote significant resources to design and tailor our ASIC chips for use in high-technology applications.
Our strong commitment to advanced research and development enables us to continuously innovate and create ASIC chips with superior performance to power ratio at reasonable cost. Our latest ASIC chip, designed and manufactured using a 12nm process node, completed the relevant IC verification and trial production processes in February 2024 and is set to enter mass production in March 2024.
Generally, fluctuations of the market price of alternative cryptocurrencies may impact cryptocurrency mining activities and the demand for our chips, and thus affect our overall operating results. 43 Table of Contents Sales and Marketing For ASIC chips used in blockchain applications, customers evaluate technical performance specifications of chips and select their suppliers.
Generally, fluctuations of the market price of alternative cryptocurrencies may impact cryptocurrency mining activities and the demand for our chips, and thus affect our overall operating results. Our “Xihe” Platform We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability.
On July 8, 2017, the State Council issued the Notice on Issuing New Generation AI Development Plan.
On July 8, 2017, the State Council issued the Notice on Issuing New Generation AI Development Plan. This notice points out that advancing the integration of blockchain technology and artificial intelligence and establishing a new social credit system will significantly minimize the cost and risk of interpersonal communications.
Property, Plant and Equipment Our principal executive offices are located at 9/F, A Block, No.333 Haiyang No.1 Road, Lingang Science and Technology Park, Pudong New Area, Shanghai, 201306, the People’s Republic of China. We lease all our properties in China in connection with our business operations. They mainly include premises for research and development and offices.
Property, Plant and Equipment Our principal executive offices are located at Building 16, Lane 999, Xinyuan South Road, Lin-Gang Special Area, Pudong, Shanghai, 201306, the People’s Republic of China. As of December 31, 2023, we occupied two properties in Shanghai, China, for research and development and office purposes, with a total gross floor area of approximately 3,935.32 square meters.
As we focus on offering ASICs, which are further embedded into mining machines to provide computing power for mining alternative cryptocurrencies, the price of bitcoin or ethereum does not directly impact our business. Our business and financial condition correlate with the market price of alternative cryptocurrencies.
Such ancillary hardware and software are sold to distributors in the PRC in connection with their sales of computing equipment for blockchain applications to end users. The price of bitcoin or thereum does not directly impact our ASICs chip products as they are used for mining alternative cryptocurrencies.
Our principal executive offices are located at 9/F, A Block, No.333 Haiyang No.1 Road, Lingang Science and Technology Park, Pudong New Area, Shanghai, 201306, the People’s Republic of China, and our telephone number is +86 021 5896 1080. Our primary website address is http://www.intchains.com . The information on our websites do not form a part of this annual report.
Corporate Information We are a Cayman Islands exempted company limited by shares, operating under the Companies Act of the Cayman Islands. Our principal executive offices are located at Building 16, Lane 999, Xinyuan South Road, Lin-Gang Special Area, Pudong, Shanghai, 201306, the People’s Republic of China, and our telephone number is +86 021 5896 1080.
Removed
For an organizational structure of the Company and its subsidiaries and a detailed description of the Company’s significant subsidiaries, see “Item 3. Key Information — Our Corporate Structure.” Corporate Information We are a Cayman Islands exempted company limited by shares, operating under the Companies Act of the Cayman Islands.
Added
On July 8, 2022, we subdivided our authorized share capital from US$50,000 divided into US$0.0001 par value each to US$50,000 divided into US$0.000001 par value each. In May 2023, Intchains Capital Limited was incorporated in the Cayman Islands as a wholly-owned subsidiary of Intchains Group Limited.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth the breakdown of sales volume and average selling price (per unit) (“ASP”) of ASIC chips delivered for the periods indicated: 2020 2021 2022 2022 Revenue Sales Volume ASP Revenue Sales Volume ASP Revenue Sales Volume ASP Revenue ASP (RMB’000) (Unit) (RMB) (RMB’000) (Unit) (RMB) (RMB’000) (Unit) (RMB) (US$’000) (US$) ASIC Chips ICQ510 15,189 1,308,351 11.61 — — — — — — — — SIPC100 884 66,240 13.35 — — — — — — — — ICQ520 1,313 114,789 11.44 — — — — — — — — ICT560 10,486 622,015 16.86 83,770 1,437,544 58.27 42,793 598,264 71.53 6,204 10.37 ICT570 1,111 34,885 31.85 7,380 74,592 98.94 5,197 34,464 150.80 753 21.86 ICT580 1,075 36,350 29.57 — — — 4,231 42,624 99.27 613 14.39 ICC590 18,553 123,130 150.68 131,975 1,169,405 112.86 49,104 527,048 93.17 7,119 13.51 ICA585 — — — — — — 166,508 681,454 244.34 24,142 35.43 ICA586 — — — 108,092 411,944 262.39 71,865 199,012 361.11 10,419 52.36 ICA588 — — — 206,823 1,706,716 121.18 61,939 549,596 112.70 8,980 16.34 ICA589 — — — 22,065 306,952 71.88 5,884 69,396 84.79 853 12.29 IAA561 — — — — — — 25,875 486,663 53.17 3,752 7.71 ICC551 — — — — — — 3,570 43,848 81.42 518 11.80 Others — — — — — — 14 2,866 5.04 2 0.73 Total 48,611 2,305,760 21.08 560,105 5,107,153 109.67 436,980 3,235,235 135.07 63,335 19.58 58 Table of Contents The average selling price of our ASIC chips changes from period to period and is primarily affected by the market price of cryptocurrencies, prices of our competitors’ products, expected economic return of cryptocurrency mining, product types and demand for the chips.
Biggest changeThe following table sets forth the breakdown of sales volume and average selling price (per unit) (“ASP”) of ASIC chips delivered for the years indicated: 2021 2022 2023 2023 Revenue Sales Volume ASP Revenue Sales Volume ASP Revenue Sales Volume ASP Revenue ASP (RMB’000) (Unit) (RMB) (RMB’000) (Unit) (RMB) (RMB’000) (Unit) (RMB) (US$’000) (US$) ASIC Chip (as a standalone product) ICT560 83,770 1,437,544 58.27 42,793 598,264 71.53 256 4,096 62.50 36 8.80 ICT570 7,380 74,592 98.94 5,197 34,464 150.80 — — — — — ICT580 — — — 4,231 42,624 99.27 2,304 59,066 39.01 325 5.49 ICC590 131,975 1,169,405 112.86 49,104 527,048 93.17 5,552 186,722 29.73 782 4.19 ICA585 — — — 166,508 681,454 244.34 7,300 196,164 37.21 1,028 5.24 ICA586 108,092 411,944 262.39 71,865 199,012 361.11 235 10,936 21.49 33 3.03 ICA588 206,823 1,706,716 121.18 61,939 549,596 112.70 1,070 39,232 27.27 151 3.84 ICA589 22,065 306,952 71.88 5,884 69,396 84.79 424 19,934 21.27 60 3.00 IAA561 — — — 25,875 486,663 53.17 10,823 273,442 39.58 1,524 5.57 ICC551 — — — 3,570 43,848 81.42 19,260 520,800 36.98 2,712 5.21 ICC552 — — — — — — 493 8,568 57.54 69 8.10 Others — — — 14 2,866 5.04 19 3,245 5.86 3 0.82 Total 560,105 5,107,153 109.67 436,980 3,235,235 135.07 47,736 1,322,205 36.10 6,723 5.08 Since we offer a wide range of computing equipment for blockchain applications, with each unit incorporating anywhere from tens to thousands of ASIC chips, as well as varying quantities and types of hardware and software depending on the number of ASIC chips embedded, it would not be meaningful to measure the per unit ASP of our computing equipment.
ASIC chips are the most crucial hardware component embedded into our products that provide computing power and are also the key factor determining efficiency of the applications of our products. Other key hardware includes the computing board, control board, and other accessories such as power supply and structural parts.
ASIC chips are the most crucial hardware component embedded into our products that provide computing power and are also the key factor determining efficiency of the applications of the Group’s products. Other key hardware includes the computing board, control board, and other accessories such as power supply and structural parts.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our income, expenses, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our income, expenses, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
Risk Factors — Risks Relating to Our Business and Industry—There is no assurance that a cryptocurrency will maintain its long-term value, and volatility in the market prices of cryptocurrencies may adversely affect our business and results of operations.” Market demand for our ASIC chips and development of blockchain technology and cryptocurrency markets Our current ASIC chips are mainly used for cryptocurrency mining.
Risk Factors — Risks Relating to Our Business and Industry—There is no assurance that a cryptocurrency will maintain its long-term value, and volatility in the market prices of cryptocurrencies may adversely affect our business and results of operations.” Market demand for our ASIC chips and development of blockchain technology and cryptocurrency markets Our current ASIC chip products are mainly used for cryptocurrency mining.
The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2018-19”), which clarifies certain topics included within ASU 2016-13.
The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. In November 2018, the FASB issued No. ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2018-19”), which clarifies certain topics included within ASU 2016-13. In November 2019, the FASB issued No.
See “Item 3 — Risk Factors — Risks Relating to Our Business and Industry — We are subject to risks associated with legal, political or other conditions or developments regarding holding, using or mining of cryptocurrencies and related products and services, which could negatively affect our business, financial condition, and results of operations.” 57 Table of Contents Production capacity As a fabless IC design company, we outsource the fabrication process of our ICs to our Foundry Partner, and we outsource the testing and packaging process to third-party testing and packaging partners.
See “Item 3 — Risk Factors — Risks Relating to Our Business and Industry — We are subject to risks associated with legal, political or other conditions or developments regarding holding, using or mining of cryptocurrencies and related products and services, which could negatively affect our business, financial condition, and results of operations.” Production capacity As a fabless IC design company, we outsource the fabrication process of our ICs to our Foundry Partner, and we outsource the testing and packaging process to third-party testing and packaging partners.
As of December 31, 2020, 2021 and 2022, we did not record any withholding tax on the retained earnings of its subsidiaries in the PRC as we do not have any plan to require its PRC subsidiaries to distribute their retained earnings and intends to retain them to operate and expand its business in the PRC.
As of December 31, 2021, 2022 and 2023, we did not record any withholding tax on the retained earnings of its subsidiaries in the PRC as we do not have any plan to require its PRC subsidiaries to distribute their retained earnings and intends to retain them to operate and expand its business in the PRC.
Our cost of revenue decreased by 23.6% from RMB114.0 million in 2021 to RMB87.0 million (US$12.6 million) in 2022, primarily due to the decrease in the sales volume of our ASIC chips. Gross profit.
Our cost of revenue decreased by 23.6% from RMB114.0 million in 2021 to RMB87.0 million (US$12.6 million) in 2022, primarily due to the decrease in the sales volume of our ASIC chips. Gross profit and gross profit margin.
Our results of operations will also be significantly affected by developments in overall blockchain technology and cryptocurrency markets, and in particular, the cryptocurrency market. Cryptocurrency prices have fluctuated significantly in the past few years and resulted in a corresponding fluctuation in our sales of ASIC chips.
Our results of operations will also be significantly affected by developments in overall blockchain technology and cryptocurrency markets, and in particular, the cryptocurrency market. Cryptocurrency prices have fluctuated significantly in the past few years and resulted in a corresponding fluctuation in our sales of ASIC chips between 2021 and 2023.
Our new generation ASICs using the most advanced process technologies will need to achieve strong sales in order to justify the initial setup costs of the new production techniques and maintain our profitability.
Our new generation ASIC chips using the most advanced process technologies will need to achieve strong sales in order to justify the initial setup costs of the new production techniques and maintain our profitability.
New and amended standards not yet adopted by our Group In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.
Recently issued accounting pronouncements New and amended standards adopted by our Group In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.
Our other income increased from RMB0.7 million in 2021 to RMB29.8 million (US$4.3 million) in 2022, primarily due to an increase in government grants we received from local government. 62 Table of Contents Net income. As a result of the foregoing, net income decreased by 21.1% to RMB355.2 million (US$51.5 million) in 2022 from RMB450.1 million in 2021.
Our other income, net increased by 5,374.4% from RMB0.5 million in 2021 to RMB29.7 million (US$4.3 million) in 2022, primarily due to an increase in government grants we received from local government. Net income. As a result of the foregoing, net income decreased by 21.1% to RMB355.2 million (US$51.5 million) in 2022 from RMB450.1 million in 2021.
Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving and obsolete inventory, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. We take ownership, risks and rewards of the products purchased.
Adjustments are recorded to write down the cost of inventory to the estimated net realizable value due to slow-moving and obsolete inventory, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. We take ownership, risks and rewards of the products purchased.
Investing Activities Net cash used in investing activities was RMB116.9 million (US$16.9 million) for the year ended December 31, 2022, which was primarily attributable to the prepayments on long-term assets in connection with purchase of a premise. Net cash used in investing activities was RMB1.8 million in 2021, which was primarily attributable to the purchase of property, equipment and software.
Net cash used in investing activities was RMB116.9 million for the year ended December 31, 2022, which was primarily attributable to the prepayments on long-term assets in connection with purchase of a premise. 68 Table of Contents Net cash used in investing activities was RMB1.8 million in 2021, which was primarily attributable to the purchase of property, equipment and software.
We expect that the cryptocurrency prices may continue to fluctuate in the future, and as such, we would expect to continue to experience a significant corresponding fluctuation in both sales volume and average selling prices of ASIC chips, as well as write-downs of inventory, which may erode our profitability in the case of a significant cryptocurrency price drop.
In the future, we expect that the cryptocurrency prices may continue to fluctuate, and as such, we would expect to experience a significant corresponding fluctuation in both sales volume and average selling prices of ASIC chip products, as well as write-downs of inventory, which may erode our profitability in the case of a significant cryptocurrency price drop. See “Item 3.
The Group’s other PRC subsidiaries are subject to the statutory income tax rate of 25%. The carry forward period for net operating losses under the EIT Law is five years and all tax losses have been utilized during the year of 2021.
Our other PRC subsidiaries are subject to the statutory income tax rate of 25%. The carry forward period for net operating losses under the EIT Law is five years for general enterprises and ten years for HNTE and all tax losses have been utilized during the year of 2021.
Our general and administrative expenses as a percentage of our revenue was 2.4% in 2022 as compared with 2.3% in 2021. Interest income. Our interest income increased by 342.1% from RMB2.5 million in 2021 to RMB11.1 million (US$1.6 million) in 2022, primarily in connection with the interest from the increase in our cash balance. Interest expense and guarantee fee .
Our general and administrative expenses as a percentage of our revenue was 2.4% in 2022 as compared with 2.3% in 2021. Interest income. Our interest income increased by 342.1% from RMB2.5 million in 2021 to RMB11.1 million (US$1.6 million) in 2022, primarily in connection with the interest from the increase in our cash balance. Foreign exchange gain/(loss), net.
Major Factors Affecting Our Results of Operations In addition to the general factors affecting the Chinese and global economy and our industry, our results of operations and financial condition are affected by a number of industry- and company-specific factors, including those set out below: Expected economic returns on cryptocurrency mining activities and fluctuation of cryptocurrency price Our revenue primarily consists of proceeds of sales of ASIC chips, which are, in general, determined by the demand and pricing of our ASIC chips.
We completed such acquisition in February 2024. 58 Table of Contents Major Factors Affecting Our Results of Operations In addition to the general factors affecting the Chinese and global economy and our industry, our results of operations and financial condition are affected by a number of industry- and company-specific factors, including those set out below: Expected economic returns on cryptocurrency mining activities and fluctuation of cryptocurrency price Our revenue primarily consists of proceeds of sales of ASIC chip products, which are, in general, determined by the demand and pricing of our ASIC chips.
As a result, our ability to continue offering new and enhanced ASIC chips for cryptocurrency mining as well as competitive products and technologies will have a significant impact on our results of operations. Regulatory environment We have historically generated all of our revenue from customers based in China.
As a result, our ability to continue offering new and enhanced ASIC chip products as well as competitive products and technologies will have a significant impact on our results of operations. 59 Table of Contents Regulatory environment We have historically generated all of our revenue from customers based in China.
C ompetitiveness in research and development We are a leading ASIC chip design company, and research and development is key to the success of our products. In 2020, 2021 and 2022, we incurred research and development expenses of RMB22.5 million, RMB53.2 million and RMB48.4 million (US$7.0 million), respectively.
C ompetitiveness in research and development We are a leading ASIC chip design company, and research and development is key to the success of our products. In 2021, 2022 and 2023, we incurred research and development expenses of RMB53.2 million, RMB48.4 million and RMB42.3 million (US$6.0 million), respectively.
The amount of total warranty costs incurred was immaterial for the years ended December 31, 2020, 2021 and 2022, respectively. Cost of revenue Amounts recorded as cost of revenue relate to direct expenses incurred in order to generate revenue.
The amount of total warranty costs incurred was immaterial for the year ended December 31, 2021, 2022 and 2023, respectively. 64 Table of Contents Cost of revenue Amounts recorded as cost of revenue relate to direct expenses incurred in order to generate revenue.
Our foreign exchange gain, net was RMB0.3 million in 2020 and our foreign exchange loss, net was RMB0.2 million in 2021, as a result of the exchange rate fluctuation between RMB and U.S. dollars as we make prepayment to our Foundry Partner in U.S. dollars. Other income.
Our foreign exchange loss, net was RMB0.2 million in 2021. While our foreign exchange gain, net was RMB3.5 million (US$0.5 million) in 2022. The reversal was as a result of the exchange rate fluctuation between RMB and U.S. dollars as we make prepayment to our Foundry Partner in U.S. dollars. Other income, net.
Cost of Revenue Cost of revenue for our ASIC chips represents costs and expenses directly attributable to the manufacture of our products sold and delivered, which comprises product costs, including costs of raw materials, costs of contract manufacturers for production, shipping and handling costs.
Cost of Revenue Cost of revenue for our ASIC chip products represents costs and expenses directly attributable to the manufacture of our products sold and delivered, which comprises product costs, including costs of raw materials, costs of contract manufacturers for production, shipping and handling costs as well as inventories write-down and prepayment write-down.
Taxation Cayman Islands Under the current tax laws of Cayman Islands, we are not subject to income, corporation or capital gains tax, and no withholding tax is imposed upon the payment of dividends.
Taxation Cayman Islands Under the current tax laws of Cayman Islands, we are not subject to income, corporation or capital gains tax, and no withholding tax is imposed upon the payment of dividends. British Virgin Island Pursuant to the rules and regulations of the British Virgin Island, we are not subject to any income tax in the British Virgin Island.
A decrease in the expected economic returns of cryptocurrency mining activities and the cryptocurrency price may also lead to increase in inventory write-downs, credit sales and write-downs of advances to suppliers as a result of stagnant demand and decrease in the average selling price for our ASIC chips, which may significantly affect our gross margin and extend the billing cycle of our products. 56 Table of Contents Cryptocurrency prices have fluctuated significantly in the past few years and resulted in a corresponding fluctuation in our sales of ASIC chips.
A decrease in the expected economic returns of cryptocurrency mining activities and the cryptocurrency price may also lead to increase in inventory write-downs, credit sales and write-downs of advances to suppliers as a result of stagnant demand and decrease in the average selling price for our ASIC chip products, which may significantly affect our gross margin and extend the billing cycle of our products.
We work closely with a limited number of such production partners. We cannot guarantee that our third-party production partners will be able to meet our manufacturing requirements or capacity or that they will not raise their prices.
In addition, we outsource the assembly of our computing equipment for blockchain applications to third-party contract manufacturers. We work closely with a limited number of such production partners. We cannot guarantee that our third-party production partners will be able to meet our manufacturing requirements or capacity or that they will not raise their prices.
In accordance with ASC 855-10-55-1(b), we consider all data available, including future demand and subsequent changes in product prices that may provide additional information about the valuation of inventories at the balance sheet date. 61 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated.
In accordance with ASC 855-10-55-1(b), we consider all data available, including future demand and subsequent changes in product prices that may provide additional information about the valuation of inventories at the balance sheet date.
Chaohua Sheng, our co-founder and spouse of Mr. Chaohua Sheng. The loan was fully repaid in October 2021. As of December 31, 2022, our cash and cash equivalents were RMB712.2 million (US$103.3 million). Our cash and cash equivalents primarily consist of cash in bank with no restriction.
Chaohua Sheng, our co-founder and spouse of Mr. Chaohua Sheng. The loan was fully repaid in October 2021. As of December 31, 2023, our cash and cash equivalents were RMB694.8 million (US$97.9 million). Our cash and cash equivalents primarily consist of cash in bank and other financial institutions with no restriction.
PRC Withholding Income Tax on Dividends The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income.
These tax losses would not be expected to have effect on the effective taxation rate (0%) from 2021 to 2022 and 12.5% from 2023 to 2025. 63 Table of Contents PRC Withholding Income Tax on Dividends The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income.
A partial tax exemption and a three-year start-up tax exemption for qualifying start-up companies are available. Under partial tax exemption, 75% of the first SGD 10,000 of chargeable income is tax exempt and 50% of the next SGD 190,000 of chargeable income is tax exempt.
Under partial tax exemption, 75% of the first SGD 10,000 of chargeable income is tax exempt and 50% of the next SGD 190,000 of chargeable income is tax exempt. Under start-up tax exemption, 75% of the first SGD 100,000 of chargeable income is tax exempt and 50% of the next SGD 100,000 of chargeable income is tax exempt.
Net cash provided by operating activities for the year ended December 31, 2021 was RMB395.4 million, primarily reflecting net income of RMB450.1 million, as adjusted by (a) positive changes of RMB1.5 million in non-operating and non-cash items including interest expense and depreciation and amortization expenses; and (b) negative changes of RMB56.2 million in changes in assets and liabilities primarily reflecting (i) a decrease of RMB6.5 million in accounts receivable and an increase of RMB3.0 million in contract liabilities as a result of our requirement of full prepayment of purchase price since early 2021; (ii) an increase of RMB57.3 million in inventories and an increase of RMB30.5 million in prepayments and other current assets as a result of the significant growth in our production and sales; (iii) an increase of RMB17.0 million in accrued liabilities and other liabilities as a result of the increases in our accrued salaries and taxes resulting from the growth of our business; and (iv) an increase of RMB6.0 million in accounts payable as a result of the increase in our procurements due to the growth of our business. 64 Table of Contents Net cash provided by operating activities for the year ended December 31, 2020 was RMB15.6 million, primarily reflecting net income of RMB8.2 million, as adjusted by (a) positive changes of RMB0.9 million in non-operating and non-cash items including interest expense and depreciation and amortization expenses; and (b) positive changes of RMB6.5 million in working capital primarily reflecting (i) a decrease of RMB12.9 million in inventories as a result of the growth in our sales due to the growing market recognition our products; (ii) an increase of RMB2.7 million in accrued liabilities and current liabilities as a result of government grants we received in advance, which were recorded as liabilities; (iii) a decrease of RMB5.7 million in contract liabilities because we had fulfilled all the sales orders at the end of 2020; and (iv) an increase of RMB1.9 million in prepayment because we had more purchase orders in 2020 to secure production capacity.
Net cash provided by operating activities for the year ended December 31, 2021 was RMB395.4 million, primarily reflecting net income of RMB450.1 million, as adjusted by (a) positive changes of RMB0.7 million in non-operating and non-cash items including interest expense and depreciation and amortization expenses; and (b) negative changes of RMB55.4 million in changes in assets and liabilities primarily reflecting (i) a decrease of RMB6.5 million in accounts receivable and an increase of RMB3.0 million in contract liabilities as a result of our requirement of full prepayment of purchase price since early 2021; (ii) an increase of RMB57.3 million in inventories and an increase of RMB30.5 million in prepayments and other current assets as a result of the significant growth in our production and sales; (iii) an increase of RMB17.0 million in accrued liabilities and other liabilities as a result of the increases in our accrued salaries and taxes resulting from the growth of our business; and (iv) an increase of RMB6.0 million in accounts payable as a result of the increase in our procurements due to the growth of our business.
Performance and cost of our products The pricing of and demand for our ASIC chips are closely related to their performance. In general, more advanced process technologies can accommodate designs that produce ASICs with higher power efficiency. The introduction of new process and design technologies also enables us to gradually lower the production costs of ASICs with comparable computing power.
Performance and cost of our products The pricing of and demand for our ASIC chip products are closely related to their performance. In general, more advanced process technologies can accommodate designs that produce ASIC chips with higher power efficiency.
However, the application of such process technologies also commands high initial setup costs, particularly when the new production techniques first become available, which translates to higher per unit costs.
The introduction of new process and design technologies also enables us to gradually lower the production costs of ASIC chips with comparable computing power. However, the application of such process technologies also commands high initial setup costs, particularly when the new production techniques first become available, which translates to higher per unit costs.
In November 2019, the FASB issued ASU 2019-10, which extends the adoption date for certain registrants. The amendments in ASU 2016-13 and 2018-19 are effective for our Group for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates (“ASU 2019-10”), which extends the adoption date for certain registrants. The amendments in ASU 2016-13 and ASU 2018-19 are effective for the Group for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
However, Shanghai Intchains is eligible to enjoy a preferential tax rate of 0% after utilizing all prior year’s tax losses. These tax losses would not be expected to have effect on the effective taxation rate (0%).
However, Shanghai Intchains is eligible to enjoy a preferential tax rate of 0% after utilizing all prior year’s tax losses.
As a result of the foregoing, we recorded a gross profit of RMB386.7 million (US$56.1 million) in 2022 as compared to a gross profit of RMB517.9 million in 2021. Operating expenses.
As a result of the foregoing, we recorded a gross profit of RMB386.7 million (US$56.1 million) in 2022 as compared to a gross profit of RMB517.9 million in 2021. Our gross profit margin remained relatively stable at 82.0% and 81.6% in 2021 and 2022, respectively. 66 Table of Contents Operating expenses.
Capital Expenditures We made capital expenditures of RMB0.3 million, RMB1.8 million and RMB116.9 million (US$16.9 million) in 2020, 2021 and 2022, respectively. In these periods, our capital expenditures were mainly used for the prepayments on long-term assets and purchase of equipment and software.
Capital Expenditures We made capital expenditures of RMB1.8 million, RMB116.9 million and RMB50.9 million (US$7.2 million) in 2021, 2022 and 2023, respectively. In these periods, our capital expenditures were mainly used for the purchase of property, equipment and software, intangible assets and other non-current assets.
The following table sets forth components of our operating expenses for the periods indicated: Years ended December 31, 2020 2021 2022 2022 RMB’000 RMB’000 RMB’000 US$’000 Research and development expenses 22,481 53,153 48,387 7,015 Sales and marketing expenses 91 3,006 4,070 590 General and administrative expenses 3,165 14,403 11,557 1,676 Total 25,737 70,562 64,014 9,281 Research and development expenses.
The following table sets forth components of our operating expenses for the periods indicated: Years ended December 31, 2021 2022 2023 2023 RMB’000 RMB’000 RMB’000 US$’000 Research and development expenses 53,153 48,387 42,304 5,958 Sales and marketing expenses 3,006 4,070 6,532 920 General and administrative expenses 14,403 11,557 25,210 3,551 Total 70,562 64,014 74,046 10,429 62 Table of Contents Research and development expenses.
Software is embedded in hardware to provide basic configuration of relevant hardware that enables end-users to monitor the working conditions of the chips in real time, including real-time hash rate, temperature, and network connection. All of these components are part of our products with regard to us in completing its performance obligations.
Software is embedded in hardware to provide basic configuration of relevant hardware that enables end-users to monitor the working conditions of the chips in real time, including real-time hash rate, temperature, and network connection. Computing equipment represents the comprehensive integration of software and hardware, incorporated our ASIC chips.
The following table sets forth our selected consolidated cash flow data for the periods indicated: Years ended December 31, 2020 2021 2022 2022 RMB’000 RMB’000 RMB’000 US$’000 Net cash provided by operating activities 15,586 395,420 326,685 47,366 Net cash used in investing activities (251 ) (1,770 ) (116,874 ) (16,946 ) Net cash provided by financing activities 251 89,143 — — Net increase in cash and cash equivalents 15,586 482,793 209,811 30,420 Cash and cash equivalents, at the beginning of year 4,041 19,627 502,420 72,844 Cash and cash equivalents, at the beginning of year 19,627 502,420 712,231 103,264 Operating Activities Net cash provided by operating activities for the year ended December 31, 2022 was RMB326.7 million (US$47.4 million), primarily reflecting net income of RMB355.2 million, as adjusted by (a) positive changes of RMB4.2 million in non-operating and non-cash items including inventory provision, and depreciation and amortization expenses; and (b) negative changes of RMB32.7 million in working capital primarily reflecting (i) an increase of RMB12.3 million in inventories as a result of the increased stock of working in progress and key raw materials; (ii) a decrease of RMB10.9 million in accrued liabilities and other liabilities as a result of the decrease in VAT taxes payables and other current liabilities; (iii) an increase of RMB3.8 million in prepayments and other assets because of the increase in net VAT deductible taxes and prepayments of listing expenses, partially offset by the decrease in prepayments to vendors; (iv) a decrease of RMB3.7 million in accounts payable as a result of the decrease in purchase of inventories; and (v) a decrease of RMB3.0 million in contract liabilities as a result of the decrease in sales orders.
Net cash provided by operating activities for the year ended December 31, 2022 was RMB326.7 million, primarily reflecting net income of RMB355.2 million, as adjusted by (a) positive changes of RMB3.2 million in non-operating and non-cash items including inventory provision, and depreciation and amortization expenses; and (b) negative changes of RMB31.7 million in working capital primarily reflecting (i) an increase of RMB12.3 million in inventories as a result of the increased stock of working in progress and key raw materials; (ii) a decrease of RMB10.9 million in accrued liabilities and other liabilities as a result of the decrease in VAT taxes payables and other current liabilities; (iii) an increase of RMB3.8 million in prepayments and other assets because of the increase in net VAT deductible taxes and prepayments of listing expenses, partially offset by the decrease in prepayments to vendors; (iv) a decrease of RMB3.7 million in accounts payable as a result of the decrease in purchase of inventories; and (v) a decrease of RMB3.0 million in contract liabilities as a result of the decrease in sales orders.
An increase in the economic return of cryptocurrency mining activities would generally stimulate the demand and average selling price for our ASIC chips. An increase in the cryptocurrency price is the most significant factor that could increase the expected economic returns generated by cryptocurrency mining activities.
An increase in the cryptocurrency price is the most significant factor that could increase the expected economic returns generated by cryptocurrency mining activities.
In addition, our wholly foreign-owned subsidiary in mainland China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. 65 Table of Contents Under PRC law, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital.
Under PRC law, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital.
Our sales arrangements usually require full prepayment before the delivery of products after April 2021. Before that date, We offer credit sales to certain significant, long-standing customers in China. The payment terms was up to 6 months. Generally, the sales of ASIC chips and ancillary software and hardware forms an integral part of the performance obligations.
Products revenue We generate revenue primarily from the sales of ASIC chips, computing equipment that incorporated the ASIC chips, ancillary software and hardware and other products . Our sales arrangements usually require full prepayment before the delivery of products after April 2021. Before that date, we offered credit sales to certain significant, long-standing customers in China.
We generally incur higher per unit cost for models with better performance. The average cost of our ASIC chips per unit was RMB9.38, RMB11.89 and RMB17.55 in 2020, 2021 and 2022, respectively, excluding the impact of certain write-downs.
The average cost of our ASIC chips per unit (excluding those embedded in the computing equipment) was RMB11.89, RMB17.55 and RMB18.83 in 2021, 2022 and 2023, respectively, excluding the impact of certain write-downs.
Principal Accounting Policies Revenue from contracts with customers We recognize revenue to match the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. 60 Table of Contents Products revenue We generate revenue primarily from engaging in the IC design and sale of ASIC chips and ancillary software and hardware as a unified product.
Principal Accounting Policies Revenue from contracts with customers The Group recognizes revenue to match the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
Net cash used in investing activities was RMB0.3 million in 2020, which was primarily attributable to the purchase of property, equipment and software. Financing Activities Net cash provided by financing activities was nil for the year ended December 31, 2022 as we did not conduct any financing activities.
Net cash provided by financing activities was nil for the year ended December 31, 2022 as we did not conduct any financing activities.
We utilize a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain. We have established strong supply chain management with a leading foundry, which helps to ensure our product quality and stable production output.
We have strong supply chain management through our well-established business partnership with a leading foundry, which helps to ensure our product quality and stable production output.
In 2020, 2021 and 2022, we generated total revenue of RMB54.6 million, RMB631.8 million and RMB473.7 million (US$68.7 million), respectively.
In 2021, 2022 and 2023, we generated total revenue of RMB631.8 million, RMB473.7 million and RMB82.2 million (US$11.6 million), respectively. All of our revenue was generated in the PRC during the same years.
Years ended December 31, 2020 2021 2022 2022 RMB’000 RMB’000 RMB’000 US$’000 Products revenue 54,603 631,838 473,740 68,685 Cost of revenue (23,331 ) (113,955 ) (87,021 ) (12,617 ) Gross profit 31,272 517,883 386,719 56,068 Operating expenses: Research and development expenses (22,481 ) (53,153 ) (48,387 ) (7,015 ) Sales and marketing expenses (91 ) (3,006 ) (4,070 ) (590 ) General and administrative expenses (3,165 ) (14,403 ) (11,557 ) (1,676 ) Total operating expenses (25,737 ) (70,562 ) (64,014 ) (9,281 ) Income from operations: 5,535 447,321 322,705 46,787 Interest income 37 2,518 11,132 1,614 Interest expense and guarantee fee (168 ) (197 ) (73 ) (11 ) Foreign exchange gain/(loss), net 348 (238 ) 3,494 507 Other income 2,495 740 29,799 4,320 Income before income tax expenses 8,247 450,144 367,057 53,217 Income tax expense — — (11,856 ) (1,719 ) Net income and total comprehensive income 8,247 450,144 355,201 51,498 Year Ended December 31, 2022 Compared To Year Ended December 31, 2021 Revenue.
Years ended December 31, 2021 2022 2023 2023 RMB’000 RMB’000 RMB’000 US$’000 Products revenue 631,838 473,740 82,225 11,581 Cost of revenue (113,955 ) (87,021 ) (73,147 ) (10,302 ) Gross profit 517,883 386,719 9,078 1,279 Operating expenses: Research and development expenses (53,153 ) (48,387 ) (42,304 ) (5,958 ) Sales and marketing expenses (3,006 ) (4,070 ) (6,532 ) (920 ) General and administrative expenses (14,403 ) (11,557 ) (25,210 ) (3,551 ) Total operating expenses (70,562 ) (64,014 ) (74,046 ) (10,429 ) Income/(loss) from operations: 447,321 322,705 (64,968 ) (9,150 ) Interest income 2,518 11,132 16,750 2,359 Foreign exchange gain/(loss), net (238 ) 3,494 (524 ) (74 ) Other income, net 543 29,726 13,191 1,856 Income/(loss) before income tax expenses 450,144 367,057 (35,551 ) (5,009 ) Income tax (expense)/benefit — (11,856 ) 8,756 1,233 Net income/(loss) 450,144 355,201 (26,795 ) (3,776 ) Foreign currency translation adjustment, net of nil tax — — 1,838 259 Total comprehensive income/(loss) 450,144 355,201 (24,957 ) (3,517 ) Year Ended December 31, 2023 Compared To Year Ended December 31, 2022 Revenue.
Our sales and marketing expenses as a percentage of our revenue was 0.5% in 2021 as compared with 0.2% in 2020. • General and administrative expenses. Our general and administrative expenses increased by 350.0% from RMB3.2 million in 2020 to RMB14.4 million in 2021, primarily due to the increase in employee salaries, taxes surcharges and listing expenses.
Our selling expenses increased by 60.5% from RMB4.1 million in 2022 to RMB6.5 million (US$0.9 million) in 2023, primarily due the increase in staff cost of sales and marketing personnel. Our sales and marketing expenses as a percentage of our revenue was 7.9% in 2023 as compared with 0.9% in 2022. • General and administrative expenses.
No provision for Singapore has been made as we had no assessable profits derived from or earned in Singapore. PRC Enterprise Income Tax (“EIT”) Shanghai Intchains obtained its High and New Technology Enterprises certificate with a valid period of three years in 2019, which was renewed in 2022 for another three years.
The start-up exemption is not available to property development and investment holding companies. PRC Enterprise Income Tax (“EIT”) Shanghai Intchains obtained its High and New Technology Enterprises certificate with a valid period of three years in 2019, which was renewed in 2022 for another three years.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS A. Operating Results Overview Our Business We are a provider of integrated solutions consisting of high-performance computing ASIC chips and ancillary software and hardware for blockchain applications.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS A. Operating Results Overview Our Business We are a provider of integrated solutions of high-performance computing ASIC chip products for blockchain applications. We have a fabless business model and specialize in the front-end and back-end of IC design, which are the major components of the IC product development chain.
Gross profit and gross profit margin Our gross profit and gross profit margin are primarily affected by cryptocurrency prices, which have a significant effect on the average selling price of our products and, to a lesser extent, the average per unit production costs of our ASIC chips and the product mix.
Gross profit and gross profit margin Our gross profit and gross profit margin are primarily affected by cryptocurrency prices, which have a significant effect on the average selling price of our products and the product mix. In 2021, 2022 and 2023, our gross profit was RMB517.9 million, RMB386.7 million and RMB9.1 million (US$1.3 million), respectively.
Our other income decreased from RMB2.5 million in 2020 to RMB0.7 million in 2021, primarily due to the decrease in government grants we received from local government. Net income. As a result of the foregoing, our net income was RMB8.2 million in 2020 and our net income was RMB450.1 million in 2021.
The decrease was as a result of the exchange rate fluctuation between RMB and U.S. dollars. Other income, net. Our other income, net, decreased by 55.6% from RMB29.7 million in 2022 to RMB13.2 million (US$1.9 million) in 2023, primarily due to a decrease in government grants we received from local government. Net loss.
Contract liabilities Cash proceeds received from customers before product delivery is recognized as contract liabilities and is recognized as revenue when revenue recognition criteria are met. The prepayments received from customers as of December 31, 2020, 2021 and 2022 were nil, RMB3.0 million and RMB6.0 thousand, respectively.
The prepayments received from customers as of December 31, 2021, 2022 and 2023 were RMB3.0 million, RMB6.0 thousand and RMB9.8 million, respectively. The revenue recognized during years ended December 31, 2021, 2022 and 2023 for such contract liability was nil, RMB3.0 million and RMB6.0 thousand, respectively.
The revenue recognized during years ended December 31, 2020, 2021 and 2022 for such contract liability was RMB5.7 million nil and RMB3.0 million, respectively. Inventories Inventories consist of finished goods, work in process and raw materials, which are purchased from contract manufacturers and component suppliers. Inventories are stated at the lower of cost or net realizable value.
Inventories Inventories consist of finished goods, work in process and raw materials, which are purchased from contract manufacturers and component suppliers. Inventories are stated at the lower of cost or net realizable value. Cost of inventory is determined using the weighted average cost method.
We design our ASIC chips in-house, which enables us to leverage proprietary silicon data to deliver products reflecting the latest technological developments ahead of our competitors. As of December 31, 2022, we had completed a total of eight tape-outs using our “Xihe” Platform for 22nm ASIC chips, achieving a 100% success rate for all our tape-outs.
We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability. We design our ASIC chips in-house, which enables us to leverage proprietary silicon data to deliver products reflecting the latest technological developments ahead of our competitors.
Our total revenue increased significantly from RMB54.6 million in 2020 to RMB631.8 million in 2021 and decreased to RMB473.7 million (US$68.7 million) in 2022. Our net income increased from RMB8.2 million in 2020 to RMB450.1 million in 2021 and decreased to RMB355.2 million (US$51.5 million) in 2022,which was in line with the broad decline of cryptocurrency market in 2022.
Our total revenue decreased from RMB631.8 million in 2021 to RMB473.7 million in 2022 and further decreased to RMB82.2 million (US$11.6 million) in 2023. Our net income decreased from RMB450.1 million in 2021 to RMB355.2 million in 2022. We recorded a net loss of RMB26.8 million (US$3.8 million) in 2023.
We adopted this guidance on January 1, 2022 and it did not have a material effect on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.
We adopted this new guidance on January 1, 2023 and it did not have material effect on its consolidated financial statements and related disclosures. 69 Table of Contents New and amended standards not yet adopted by our Group On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”).
Our products consist of high-performance computing ASIC chips that have high computing power and superior power efficiency as well as ancillary software and hardware, which cater to the evolving needs of the blockchain industry. We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability.
Our products primarily include high-performance computing ASIC chip products consisting of ASIC chips that have high computing power and superior power efficiency, computing equipment incorporating our ASIC chips, which we began offering to customers in the fourth quarter of 2023 and ancillary software and hardware, all of which cater to the evolving needs of the blockchain industry.
We adopted this new guidance on January 1, 2023 and it did not have material effect on the Company’s consolidated financial statements. 66 Table of Contents C. Research and Development Please refer to “Item 4. Information of the Company—B. Business Overview—Research and Development” for details. D.
Research and Development Please refer to “Item 4. Information of the Company—B. Business Overview—Research and Development” for details. D.
For all other entities, for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. We completed the adoption of this guidance on January 1, 2022 and it did not have a material effect on the Company’s consolidated financial statements.
ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be adopted retrospectively. We do not expect that the adoption of ASU 2023-07 would have a material effect on its consolidated financial statements and related disclosures. C.
Our general and administrative expenses as a percentage of our revenue was 2.3% in 2021 as compared with 5.9% in 2020. Interest income. Our interest income increased from RMB37,000 in 2020 to RMB2.5 million in 2021, primarily in connection with the interest from the increase in our cash balance. Interest expense and guarantee fee.
Our general and administrative expenses increased by 118.1% from RMB11.6 million in 2022 to RMB25.2 million (US$3.6 million) in 2023, primarily due to an increase in rental expenses, labor costs and professional expenses. Our general and administrative expenses as a percentage of our revenue was 30.7% in 2023 as compared with 2.4% in 2022. Interest income.
Operating Expenses Our operating expenses include research and development expenses, sales and marketing expenses and general and administrative expenses.
Our overall gross profit margin was 82.0%, 81.6% and 11.0%, respectively, for the same years. Operating Expenses Our operating expenses include research and development expenses, sales and marketing expenses and general and administrative expenses.
Our strong commitment to advanced research and development enables us to innovate continuously and create ASIC chips with superior performance to power ratio at reasonable cost. We will continue to devote significant resources to design and tailor our ASIC chips for use in high-technology applications.
Despite these challenges, we maintain our confidence in our business strategy and long-term prospects, particularly as the broad market has shown signs of recovery in the fourth quarter of 2023. Our strong commitment to advanced research and development enables us to continuously innovate and create ASIC chips with superior performance to power ratio at reasonable cost.
Our research and development expenses as a percentage of our revenue was 8.4% in 2021 as compared with 41.2% in 2020. • Sales and marketing expenses. Our selling expenses increased from RMB91,000 in 2020 to RMB3.0 million in 2021, primarily due to the increase in salary of sales and marketing personnel and the accrued warranty provision.
We increased the headcount of our research and development team from 69 as of December 31, 2022 to 99 as of December 31, 2023. Our research and development expenses as a percentage of our revenue were 51.4% in 2023 as compared with 10.2% in 2022. • Sales and marketing expenses .
Our interest expense and guarantee fee decreased by 62.9% from RMB197,000 in 2021 to RMB73,000 (US$11,000) in 2022, primarily in connection with a bank loan we obtained. Foreign exchange gain/(loss), net. Our foreign exchange loss, net was RMB0.2 million in 2021. While our foreign exchange gain, net was RMB3.5 million (US$0.5 million) in 2022.
Our interest income increased by 50.5% from RMB11.1 million in 2022 to RMB16.8 million (US$2.4 million) in 2023, primarily due to our effective fund management. Foreign exchange gain/(loss), net. Our foreign exchange gain, net was RMB3.5 million in 2022. Our foreign exchange loss, net was RMB0.5 million (US$0.1 million) in 2023.
The following table sets forth the breakdown of our revenue for the periods indicated: Years ended December 31, 2020 2021 2022 2022 RMB’000 RMB’000 RMB’000 US$’000 Products revenue ASIC chips 48,611 560,105 436,980 63,355 Ancillary software and hardware 1,321 71,733 36,760 5,330 Customized IC products 4,671 — — — Total 54,603 631,838 473,740 68,685 Revenue from sales of our ASIC chips is primarily affected by the number of ASIC chips sold and their average selling price.
The following table sets forth the breakdown of our revenue for the years indicated: Years ended December 31, 2021 2022 2023 2023 RMB’000 RMB’000 RMB’000 US$’000 Products revenue ASIC chip products: 631,838 473,740 68,358 9,628 ASIC chips 560,105 436,980 47,736 6,723 Computing equipment for blockchain applications — — 8,496 1,197 Ancillary software and hardware 71,733 36,760 12,126 1,708 Others — — 13,867 (1) 1,953 Total 631,838 473,740 82,225 11,581 Note 1: Such revenue was derived from the sales of certain intelligent router products which were acquired from third parties and integrated with our software solutions for resale purposes.
Cost of revenue consists of product costs, including cost of raw materials, contract manufacturers for production, shipping and handling costs and research and development costs for production of customized hardware and chips in research phase.
Cost of revenue consists of product costs, including cost of raw materials, contract manufacturers for production, shipping and handling, costs inventories write-downs and prepayments write-downs. Contract liabilities Cash proceeds received from customers before product delivery is recognized as contract liabilities and is recognized as revenue when revenue recognition criteria are met.
Key Components of Results of Operations Revenues We derive our revenue primarily from sales of ASIC chips, and we also derive revenue from ancillary software and hardware as a unified product. In 2020, we also derived revenue from sales of customized IC products that we designed based on specifications and requirements of our customers.
Key Components of Results of Operations Revenues We derive our revenue primarily from sales of high-performance computing ASIC chip products including ASIC chips that have high computing power and superior power efficiency, computing equipment incorporating our ASIC chips, which we began offering to customers in the fourth quarter of 2023 and ancillary software and hardware, all of which cater to the evolving needs of the blockchain industry.
Our cost of revenue increased by 389.3% from RMB23.3 million in 2020 to RMB114.0 million in 2021, primarily due to the increase in the sales volume of our products. Gross profit. As a result of the foregoing, we recorded a gross profit of RMB517.9 million in 2021 as compared to a gross profit of RMB31.3 million in 2020.
As a result of the foregoing, we recorded a gross profit of RMB9.1 million (US$1.3 million) in 2023 as compared to a gross profit of RMB386.7 million in 2022. Our gross profit margin decreased significantly from 81.6% in 2022 to 11.0% in 2023.
Operating expenses . Our total operating expenses increased by 174.7% from RMB25.7 million in 2020 to RMB70.6 million in 2021, primarily due to the increase in research and development expenses for the design of ASIC chips. • Research and development expenses.
Our total operating expenses increased by 15.7% from RMB64.0 million in 2022 to RMB74.0 million (US$10.4 million) in 2023, primarily due to the increases in sales and marketing expenses and general and administrative expenses, partially offset by a decrease in research and development expenses. • Research and development expenses.
Removed
In 2020, we accepted orders from customers to develop and design customized IC products consisting of ASIC chips, other hardware and embedded software that targeted a certain cryptocurrency or algorithm. These customized IC products and our standard products were substantially similar in terms of chip design. The intellectual property resulting from the customized IC products belongs to us.
Added
As of December 31, 2023, we had completed a total of nine tape-outs using our “Xihe” Platform for 22nm and 12nm ASIC chips, achieving a 100% success rate for all our tape-outs. The blockchain industry experienced challenges in 2023 and uncertainties in the market had negatively impacted our business performance.
Removed
In 2020, 2021 and 2022, our cost of revenue was RMB23.3 million, RMB114.0 million and RMB87.0 million (US$12.6 million), respectively. Our average cost of ASIC chips per unit primarily comprises and is mainly affected by cost of wafer. The average per unit cost of wafers is affected by our purchase volume and technology advancement.
Added
Our latest ASIC chip, designed and manufactured using a 12nm process node, completed the relevant IC verification and trial production processes in February 2024 and is set to enter mass production in March 2024.
Removed
Customized IC products we sold in 2020 had lower gross profit margin compared with the ASIC chips wholly designed by ourselves without customization. In 2020, 2021 and 2022, our gross profit was RMB31.3 million, RMB517.9 million and RMB386.7 million (US$56.1 million), respectively. Our overall gross profit margin was 57.3%, 82.0% and 81.6%, respectively, for the same years.
Added
In addition, we initiated our business expansion in Singapore in 2023 by dispatching members of senior management to station in Singapore and entering dialogues with potential local distributors for cooperation.
Removed
British Virgin Island Pursuant to the rules and regulations of the British Virgin Island, we are not subject to any income tax in the British Virgin Island. 59 Table of Contents Hong Kong Profits Tax Profits tax for the first HK$2 million of profits of corporations is 8.25 percent.
Added
In December 2023, we entered into an asset acquisition agreement with a Singapore-based company to purchase certain assets used in the operation of its Goldshell WEB3 infrastructure brand with the aim of enabling us to enter the downstream production and sales sector across computing equipment for blockchain applications and other WEB3 infrastructure-related hardware and software products.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeOrdinary shares beneficially owned Number of Class A Ordinary Shares Number of Class B Ordinary Shares % of total ordinary shares on an as-converted basis* % of voting Power** Directors and Executive Officers†: — 47,780,300 39.86 67.71 Qiang Ding (1) — 17,307,700 14.44 24.53 Chaohua Sheng (2) — — — — Conway Kong-Wai Lee — — — — Qingyang Gu — — — — Weiping Ma — — — — Chaowei Yan — — — — Directors and Executive Officers Combined 65,088,000 54.30 92.24 Principal Shareholders: Intchain DQ Asset Holding Limited (1) — 25,961,500 21.66 36.79 Intchains SCH Holding Limited (2) — 17,307,700 14.44 24.53 Golden Stone Capital Limited (3) 17,647,000 — 14.72 2.50 Intchains CHX1 Limited (1) (4) — 12,500,000 10.43 17.71 Intchains ZWM Holding Limited (5) 7,691,900 — 6.42 1.09 Yangfeng 888 Holding Limited (6) 8,268,100 — 6.90 1.17 MAOCITY Holding limited (7) 6,616,900 — 5.52 0.94 Intchains CHX2 Limited(1)(8) — 6,318,800 5.27 8.95 * The number of common shares beneficially owned by each of the listed persons includes common shares that such person has the right to acquire within 60 days after April 28, 2023. 73 Table of Contents ** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all our Class A ordinary shares and Class B ordinary shares as a single class.
Biggest changeOrdinary shares beneficially owned Number of Class A Ordinary Shares Number of Class B Ordinary Shares % of total ordinary shares on an as-converted basis* % of voting Power** Directors and Executive Officers†: Qiang Ding (1) — 47,232,420 39.40 67.88 Chaohua Sheng (2) — 16,759,820 13.98 24.09 Conway Kong-Wai Lee — — — — Qingyang Gu — — — — Weiping Ma — — — — Chaowei Yan — — — — Directors and Executive Officers Combined 63,992,240 53.38 91.97 Principal Shareholders: Intchain DQ Asset Holding Limited (1) — 25,961,500 21.65 37.31 Intchains SCH Holding Limited (2) — 16,759,820 13.98 24.09 Golden Stone Capital Limited (3) 17,099,120 — 14.26 2.46 Intchains CHX1 Limited (1) (4) — 11,952,120 9.97 17.18 Intchains ZWM Holding Limited (5) 7,291,900 — 6.08 1.05 Yang Feng 888 Capital Limited (6) 7,268,100 — 6.06 1.04 Intchains CHX2 Limited(1)(7) — 6,318,800 5.27 9.08 * The number of common shares beneficially owned by each of the listed persons includes common shares that such person has the right to acquire within 60 days after March 18, 2024. ** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all our Class A ordinary shares and Class B ordinary shares as a single class.
Qiang Ding, has been serving as our chairman of the board of directors and chief executive officer since our inception. Mr. Ding has more than 16 years of experience in the IC design industry and is responsible for our overall strategic development and operation. Before founding the Group, Mr.
Qiang Ding, has been serving as our chairman of the board of directors and chief executive officer since our inception. Mr. Ding has more than 16 years of experience in the IC design industry and is responsible for our overall strategic development and operation. Before founding our Group, Mr.
Lee received a bachelor’s degree in arts from the Kingston Polytechnic (currently known as the Kingston University) in London in July 1980 and further obtained his postgraduate diploma in business from the Curtin University of Technology in Australia in February 1988. Mr.
Mr. Lee received a bachelor’s degree in arts from the Kingston Polytechnic (currently known as the Kingston University) in London in July 1980 and further obtained his postgraduate diploma in business from the Curtin University of Technology in Australia in February 1988. Mr.
The audit committee is responsible for, among other things: • appointing or removing the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditor; • setting clear hiring policies for employees or former employees of the independent auditor; • reviewing with the independent auditor any audit problems or difficulties and management’s response; • reviewing and approving all related-party transactions; • discussing the annual audited financial statements with management and the independent auditor; • discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations; • reviewing analyzes or other written communications prepared by management or the independent auditor relating to significant financial reporting issues and judgments made in connection with the preparation of the financial statements; • reviewing with management and the independent auditor the effect of key transactions, related-party transactions and off-balance sheet transactions and structures; • reviewing with management and the independent auditor the effect of regulatory and accounting initiatives; • reviewing policies with respect to risk assessment and risk management; • reviewing our disclosure controls and procedures and internal control over financial reporting; • reviewing reports from the independent auditor regarding all critical accounting policies and practices to be used by our company; • establishing procedures for the receipt, retention and treatment of complaints we received regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; • periodically reviewing and reassessing the adequacy of our audit committee charter; • evaluating the performance, responsibilities, budget and staffing of our internal audit function and reviewing and approving the internal audit plan; and • reporting regularly to the board of directors.
The audit committee is responsible for, among other things: • appointing or removing the independent auditor and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditor; • setting clear hiring policies for employees or former employees of the independent auditor; • reviewing with the independent auditor any audit problems or difficulties and management’s response; • reviewing and approving all related-party transactions; • discussing the annual audited financial statements with management and the independent auditor; 74 Table of Contents • discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations; • reviewing analyzes or other written communications prepared by management or the independent auditor relating to significant financial reporting issues and judgments made in connection with the preparation of the financial statements; • reviewing with management and the independent auditor the effect of key transactions, related-party transactions and off-balance sheet transactions and structures; • reviewing with management and the independent auditor the effect of regulatory and accounting initiatives; • reviewing policies with respect to risk assessment and risk management; • reviewing our disclosure controls and procedures and internal control over financial reporting; • reviewing reports from the independent auditor regarding all critical accounting policies and practices to be used by our company; • establishing procedures for the receipt, retention and treatment of complaints we received regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; • periodically reviewing and reassessing the adequacy of our audit committee charter; • evaluating the performance, responsibilities, budget and staffing of our internal audit function and reviewing and approving the internal audit plan; and • reporting regularly to the board of directors.
Interested Transactions A director may vote with respect to any contract or transaction in which he or she is interested, provided that the nature of the interest of any director in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter. D.
Interested Transactions A director may vote with respect to any contract or transaction in which he or she is interested, provided that the nature of the interest of any director in such contract or transaction is disclosed by him or her at or prior to its consideration and any vote in that matter.
The purpose of the 2022 Plan is to attract and retain highly qualified mid-to high-level management, consultants and other qualified persons, and to motivate such persons to serve us and to expend maximum effort to improve our business results and earnings, by providing such persons an opportunity to share equity interest in our operations and future success. 69 Table of Contents The maximum number of ordinary shares that may be issued under the 2022 Plan is 6,500,000.
The purpose of the 2022 Plan is to attract and retain highly qualified mid-to high-level management, consultants and other qualified persons, and to motivate such persons to serve us and to expend maximum effort to improve our business results and earnings, by providing such persons an opportunity to share equity interest in our operations and future success. 72 Table of Contents The maximum number of ordinary shares that may be issued under the 2022 Plan is 6,500,000.
The nomination and corporate governance committee is responsible for, among other things: • identifying and recommending to the board of directors qualified individuals for membership on the board of directors and its committees; • evaluating, at least annually, its own performance and reporting to the board of directors on such evaluation; • leading our board of directors in a self-evaluation to determine whether it and its committees are functioning effectively; • reviewing the evaluations prepared by each board committee of such committee’s performance and considering any recommendations for proposed changes to our board of directors; • reviewing and approving compensation (including equity-based compensation) for our directors; • overseeing compliance with the corporate governance guidelines and code of business conduct and ethics and reporting on such compliance to the board of directors; and • reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the board of directors for approval.
The nomination and corporate governance committee is responsible for, among other things: • identifying and recommending to the board of directors qualified individuals for membership on the board of directors and its committees; • evaluating, at least annually, its own performance and reporting to the board of directors on such evaluation; • leading our board of directors in a self-evaluation to determine whether it and its committees are functioning effectively; 75 Table of Contents • reviewing the evaluations prepared by each board committee of such committee’s performance and considering any recommendations for proposed changes to our board of directors; • reviewing and approving compensation (including equity-based compensation) for our directors; • overseeing compliance with the corporate governance guidelines and code of business conduct and ethics and reporting on such compliance to the board of directors; and • reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the board of directors for approval.
The registered office of CHX 1 BVI is located at Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, British Virgin Islands. (5) Represents 7,691,900 ordinary shares held by Intchains ZWM Holding Limited, a BVI company wholly owned by Weimin Zhou.
The registered office of CHX 1 BVI is located at Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, British Virgin Islands. (5) Represents 7,291,900 ordinary shares held by Intchains ZWM Holding Limited, a BVI company wholly owned by Weimin Zhou.
Compensation Committee 71 Table of Contents Our compensation committee consists of Dr. Weiping Ma, Mr. Qiang Ding and Mr. Conway Kong-Wai Lee and is chaired by Dr. Weiping Ma. Our board of directors has determined that Dr. Weiping Ma and Mr. Conway Kong-Wai Lee satisfy the “independence” requirements of Nasdaq Marketplace Rule 5605(a)(2).
Compensation Committee Our compensation committee consists of Dr. Weiping Ma, Mr. Qiang Ding and Mr. Conway Kong-Wai Lee and is chaired by Dr. Weiping Ma. Our board of directors has determined that Dr. Weiping Ma and Mr. Conway Kong-Wai Lee satisfy the “independence” requirements of Nasdaq Marketplace Rule 5605(a)(2).
The registered office of Intchains ZWM Holding Limited is located at Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, British Virgin Islands. (6) Represents 8,268,100 ordinary shares held by Yangfeng 888 Holding Limited, a BVI company wholly owned by Feng Yang.
The registered office of Intchains ZWM Holding Limited is located at Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, British Virgin Islands. (6) Represents 7,268,100 ordinary shares held by Yang Feng 888 Capital Limited , a BVI company wholly owned by Feng Yang.
Gu obtained his bachelor degree in mathematics from Human Normal University in 1982, his master degree in economics of eduction from Peking University 1988 and his PhD in economics from Nanyang Technological University in 2002. 68 Table of Contents Dr. Weiping Ma has been serving as our independent director since March 2023.
Gu obtained his bachelor degree in mathematics from Human Normal University in 1982, his master degree in economics of education from Peking University 1988 and his PhD in economics from Nanyang Technological University in 2002. 71 Table of Contents Dr. Weiping Ma has been serving as our independent director since March 2023.
The registered office of MAOCITY Holding limited is located at Vistra Corporate Service Centre, Wickham’s Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (8) Represents 6,318,800 ordinary shares held by CHX 2 BVI, a BVI company wholly owned by DQ BVI. The registered office of CHX2 BVI is located at Start Chambers, Wickham’s Cay II, P. O.
The registered office of Yangfeng 888 Holding Limited is located at Vistra Corporate Service Centre, Wickham’s Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (7) Represents 6,318,800 ordinary shares held by CHX 2 BVI, a BVI company wholly owned by DQ BVI. The registered office of CHX2 BVI is located at Start Chambers, Wickham’s Cay II, P. O.
(4) Represents 12,500,000 ordinary shares held by CHX 1 BVI, a BVI company owned as to 58.68% by DQ BVI, 5.21% by Dasui Wang, 5.21% by Zhengjie Sun, 5.21% by Yiming Luo, 4.51% by Haixu Fu, 4.51% by Bei Zhou, 4.17% by Lihong Zhou, 4.17% by Wei Sun, 1.74% by Feiyun Dong, 2.78% by Yuchen Yu, 1.39% by Fei Sun, 1.39% by Jinrong Kang and 1.04% by Zheng’an Wu.
(4) Represents 11,952,120 ordinary shares held by CHX 1 BVI, a BVI company owned as to 58.68% by DQ BVI, 5.21% by Dasui Wang, 5.21% by Zhengjie Sun, 5.21% by Yiming Luo, 4.51% by Haixu Fu, 4.51% by Bei Zhou, 4.17% by Lihong Zhou, 4.17% by Wei Sun, 1.74% by Feiyun Dong, 2.78% by Yuchen Yu, 1.39% by Fei Sun, 1.39% by Jinrong Kang and 1.04% by Zheng’an Wu.
Share Ownership The following table sets forth information with respect to the beneficial ownership, within the meaning of Section 13(d)(3) of the Exchange Act, of our common shares as of April 28, 2023 by: • each person known to us to own beneficially more than 5% of common shares, and • each of our directors and executive officers.
Share Ownership The following table sets forth information with respect to the beneficial ownership, within the meaning of Section 13(d)(3) of the Exchange Act, of our common shares as of March 18, 2024 by: • each person known to us to own beneficially more than 5% of common shares, and • each of our directors and executive officers.
Qiang Ding; (ii) 12,500,000 ordinary shares held by Intchains CHX1 Limited, or CHX 1 BVI; (iii) 3,000,000 ordinary shares held by Intchains DQ Holding limited, a BVI company wholly owned by DQ BVI; and (iv) 6,318,800 ordinary shares held by Intchains CHX2 Holding limited, or CHX 2 BVI, a BVI company wholly owned by DQ BVI.
Qiang Ding; (ii) 11,952,120 ordinary shares held by Intchains CHX1 Limited, or CHX 1 BVI; (iii) 3,000,000 ordinary shares held by Intchains DQ Holding limited, a BVI company wholly owned by DQ BVI; and (iv) 6,318,800 ordinary shares held by Intchains CHX2 Holding limited, or CHX 2 BVI, a BVI company wholly owned by DQ BVI.
Mr. Lee served as an independent non-executive director of several companies listed on the Hong Kong Stock Exchange, including CITIC Securities Company Limited (stock code: 6030), a company also listed on the Shanghai Stock Exchange (stock code: 600030), from August 2011 to May 2016, Tibet Water Resources Holdings Ltd.
Lee served as an independent non-executive director of several companies listed on the Hong Kong Stock Exchange, including CITIC Securities Company Limited (stock code: 6030), a company also listed on the Shanghai Stock Exchange (stock code: 600030), from August 2011 to May 2016, Guotai Junan Securities Company Limited (stock code: 2611), a company also listed on the Shanghai Stock Exchange (stock code: 601211), from October 2016 to November 2023, Tibet Water Resources Holdings Ltd.
We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes. Our employees have not entered into any collective bargaining agreements.
We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes. Our employees have not entered into any collective bargaining agreements. 76 Table of Contents E.
C. Board Practices Duties of Directors Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances.
Chaowei Yan 27,326 13,663 — May 29, 2023 C. Board Practices Duties of Directors Under Cayman Islands law, our directors have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances.
Box 2221, Road Town, Tortola, British Virgin Islands. To our knowledge and based on our review of our register of members as of the date of March 31, 2022, 2,229,032 of our Class A outstanding ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program.
Box 2221, Road Town, Tortola, British Virgin Islands. To our knowledge and based on our review of our register of members as of the date of February 29, 2024, 14,762,114 of our Class A outstanding ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program.
He was a non-executive director and the deputy chairman of China Environmental Technology and Bioenergy Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code: 1237) from July 2014 to September 2015. Mr.
Lee served as a partner of Ernst & Young for 29 years from September 1980 to September 2009. He was a non-executive director and the deputy chairman of China Environmental Technology and Bioenergy Holdings Limited, a company listed on the Hong Kong Stock Exchange (stock code: 1237) from July 2014 to September 2015. Mr.
Employees 72 Table of Contents We had 25, 64 and 101 employees as of December 31, 2020, 2021 and 2022 in China, respectively. As of December 31, 2022, we had 69 employees focus on research and development, 17 employees focus on sales and marketing, four employees in administration department and 11 employees in finance and accounting department.
Employees We had 64, 101 and 133 employees as of December 31, 2021, 2022 and 2023 in China, respectively. As of December 31, 2023, we had 99 employees focus on research and development, 17 employees focus on sales and marketing, 6 employees in administration department and 11 employees in finance and accounting department.
Lee has been serving as an independent non-executive director of several companies listed on the Hong Kong Stock Exchange, including Chaowei Power Holdings Limited (stock code: 0951) since June 2010, West China Cement Limited (stock code: 2233) since July 2010, China Modern Dairy Holdings Limited (stock code: 1117) since October 2010, Gome Electrical Appliances Holdings Limited (stock code: 0493) since March 2011, NVC Lighting Holding Limited (stock code: 2222) since November 2012, Yashili International Holdings Limited (stock code: 1230) since November 2013, GCL New Energy Holdings Limited (stock code: 0451) since May 2014 and Guotai Junan Securities Company Limited (stock code: 2611), a company also listed on the Shanghai Stock Exchange (stock code: 601211) since October 2016.
Lee has been serving as an independent non-executive director of several companies listed on the Hong Kong Stock Exchange, including Chaowei Power Holdings Limited (stock code: 0951) since June 2010, West China Cement Limited (stock code: 2233) since July 2010, China Modern Dairy Holdings Limited (stock code: 1117) since October 2010, NVC Lighting Holding Limited (stock code: 2222) since November 2012, GCL New Energy Holdings Limited (stock code: 0451) since May 2014.
(2) Represents 17,307,700 ordinary shares held by Intchains SCH Holding Limited, or SCH BVI, a BVI company wholly owned by Mr. Chaohua Sheng. The registered office of SCH BVI is located at Start Chambers, Wickham’s Cay II, P. O. Box 2221, Road Town, Tortola, British Virgin Islands.
(2) Represents 16,759,820 ordinary shares held by Intchains SCH Holding Limited, or SCH BVI, a BVI company wholly owned by Mr. Chaohua Sheng. The registered office of SCH BVI is located at Start Chambers, Wickham’s Cay II, P. O.
(3) Represents 17,647,000 ordinary shares held by Golden Stone Capital Limited which is a Samoa company wholly owned by Mr. Zhaoyang Ma. The registered office of Golden Stone Capital Limited is located at Offshore Chambers, P.O. 217, Apia, Samoa.
Box 2221, Road Town, Tortola, British Virgin Islands. 77 Table of Contents (3) Represents 17,099,120 ordinary shares held by Golden Stone Capital Limited which is a Samoa company wholly owned by Mr. Zhaoyang Ma. The registered office of Golden Stone Capital Limited is located at Offshore Chambers, P.O. 217, Apia, Samoa.
The functions and powers of our board of directors include, among others: • convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; • declaring dividends and distributions; • appointing officers and determining the term of office of officers; • exercising the borrowing powers of our company and mortgaging the property of our company; and • approving the transfer of shares of our company, including the registering of such shares in our share register. 70 Table of Contents Terms of Directors Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution or the unanimous written resolution of all shareholders.
The functions and powers of our board of directors include, among others: • convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; • declaring dividends and distributions; • appointing officers and determining the term of office of officers; • exercising the borrowing powers of our company and mortgaging the property of our company; and • approving the transfer of shares of our company, including the registering of such shares in our share register.
Name Age Position Qiang Ding 44 Chairman and Chief Executive Officer Chaohua Sheng 42 Director and Chief Technology Officer Conway Kong-Wai Lee 68 Independent Director Qingyang Gu 60 Independent Director Weiping Ma 61 Independent Director Chaowei Yan 37 Chief Financial Officer Mr.
Name Age Position Qiang Ding 45 Chairman and Chief Executive Officer Chaohua Sheng 43 Director and Chief Technology Officer Conway Kong-Wai Lee 69 Independent Director Qingyang Gu 62 Independent Director Weiping Ma 62 Independent Director Chaowei Yan 38 Chief Financial Officer 70 Table of Contents Mr.
Our Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. † Except as otherwise indicated below, the business address of our directors and executive officers is c/o 9/F, A Block, No.333 Haiyang No.1 Road, Lingang Science and Technology Park, Pudong New Area, Shanghai, 201306, the People’s Republic of China.
Our Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. † Except as otherwise indicated below, the business address of our directors and executive officers is c/o Building 16, Lane 999, Xinyuan South Road, Lin-Gang Special Area, Pudong, Shanghai, 201306, the People’s Republic of China.
He was a research and development manager at OmniVision Technologies Co., Ltd. from July 2010 to April 2013. Mr. Sheng was a research and development manager at Shanghai Accel Semiconductor Co., Ltd. from June 2005 to July 2010. He obtained a bachelor’s degree from Fudan University in 2002 and a master’s degree in computer architecture from Fudan University in 2005.
Sheng was a research and development manager at Shanghai Accel Semiconductor Co., Ltd. from June 2005 to July 2010. He obtained a bachelor’s degree from Fudan University in 2002 and a master’s degree in computer architecture from Fudan University in 2005. Mr. Conway Kong-Wai Lee has been serving as our independent director since March 2023. Mr.
Our audit committee will consist solely of independent directors that satisfy the Nasdaq and SEC requirements within one year of the completion of our initial public offering. We have determined that Mr.
Qingyang Gu and Dr. Weiping Ma satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act, and Nasdaq Marketplace Rule 5605(a)(2). Our audit committee will consist solely of independent directors that satisfy the Nasdaq and SEC requirements within one year of the completion of our initial public offering. We have determined that Mr.
(stock code: 1115) from July 2011 to February 2020, WH Group Limited (stock code: 0288) from August 2014 to June 2022 and China Rundong Auto Group Limited (stock code: 1365) from August 2014 to December 2020. Mr.
(stock code: 1115) from July 2011 to February 2020, WH Group Limited (stock code: 0288) from August 2014 to June 2022, China Rundong Auto Group Limited (stock code: 1365) from August 2014 to December 2020, Yashili International Holdings Limited (stock code: 1230) from November 2013 to July 2023 and Gome Electrical Appliances Holdings Limited (stock code: 0493) from March 2011 to September 2023.
He obtained a master’s degree in computer engineering from Fudan University in 2005. 67 Table of Contents Mr. Chaohua Sheng , has been serving as our chief technology officer since our inception and our director since December 2021.
He obtained a master’s degree in computer engineering from Fudan University in 2005. Mr. Chaohua Sheng , has been serving as our chief technology officer since our inception and our director since December 2021. He has more than 16 years of experience in the IC design industry and is responsible for overall management of research and development.
Our officers are elected by and serve at the discretion of our board of directors, and may be removed by our board of directors. Board Practices Our board of directors has established an audit committee, a compensation committee and a nomination and corporate governance committee. Audit Committee Our audit committee consists of Mr. Conway Kong-Wai Lee, Dr.
Board Practices Our board of directors has established an audit committee, a compensation committee and a nomination and corporate governance committee. Audit Committee Our audit committee consists of Mr. Conway Kong-Wai Lee, Dr. Qingyang Gu and Dr. Weiping Ma, and is chaired by Mr. Conway Kong-Wai Lee. Our board of directors has determined that Mr. Conway Kong-Wai Lee, Dr.
GAAP and International Financial Reporting Standards from performing audit work in connection with initial public offerings in the U.S. by China-based companies. Mr. Lee served as a partner of Ernst & Young for 29 years from September 1980 to September 2009.
Lee has over 30 years of experience in public accounting and auditing, corporate finance, merger and acquisition and initial public offerings. He has extensive experience in U.S. GAAP and International Financial Reporting Standards from performing audit work in connection with initial public offerings in the U.S. by China-based companies. Mr.
B. Compensation For the fiscal year ended December 31, 2022, we and our subsidiaries paid aggregate cash compensation of RMB2.2 million (US$0.3 million) to our directors and executive officers as a group. We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors.
B. Compensation For the year ended December 31, 2023, we and our subsidiaries paid aggregate cash compensation of RMB4.4 million (US$0.6 million) to our directors and executive officers as a group. This amount consisted only of cash and did not include any share-based compensation or benefits in kind.
The business address of each of our directors and executive officers is c/o 9/F, A Block, No.333 Haiyang No.1 Road, Lingang Science and Technology Park, Pudong New Area, Shanghai, 201306, the People’s Republic of China.
The business address of each of our directors and executive officers is c/o Building 16, Lane 999, Xinyuan South Road, Lin-Gang Special Area, Pudong, Shanghai, 201306, the People’s Republic of China.
Share Incentive Plan 2022 Plan We adopted the 2022 share incentive plan, or 2022 Plan, in July 2022 which became effective in March 2023.
We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors. Share Incentive Plan 2022 Plan We adopted the 2022 share incentive plan, or 2022 Plan, in July 2022 which became effective in March 2023.
He has more than 16 years of experience in the IC design industry and is responsible for overall management of research and development. Before founding the Group, he served as the chief technology officer at Shanghai Freqchip Microelectronics Co., Ltd. from January 2014 to February 2018.
Before founding our Group, he served as the chief technology officer at Shanghai Freqchip Microelectronics Co., Ltd. from January 2014 to February 2018. He was a research and development manager at OmniVision Technologies Co., Ltd. from July 2010 to April 2013. Mr.
Removed
Mr. Conway Kong-Wai Lee has been serving as our independent director since March 2023. Mr. Lee has over 30 years of experience in public accounting and auditing, corporate finance, merger and acquisition and initial public offerings. He has extensive experience in U.S.
Added
As of the date of this annual report, the maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2022 Plan is 7,698,760. As of the date of this annual report, awards to purchase 524,874 ordinary shares under the 2022 Plan have been granted and outstanding.
Removed
Qingyang Gu and Dr. Weiping Ma, and is chaired by Mr. Conway Kong-Wai Lee. Our board of directors has determined that Mr. Conway Kong-Wai Lee, Dr. Qingyang Gu and Dr. Weiping Ma satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act, and Nasdaq Marketplace Rule 5605(a)(2).
Added
The following table summarizes, as of the date of this annual report, the outstanding options that were granted to our directors and executive officers under the 2022 Plan: Name Class A Ordinary Shares to be Received based on the Options Awarded Options Awarded Exercise Price Date of Grant Date of Expiration Mr.
Removed
According to our contracts with our employees, our employees are generally prohibited from engaging in any activities that compete with our business during the period of their employment and for two years after termination of their employment with us.
Added
Chaowei Yan 20,832 10,416 $8.00 per award May 29, 2023 May 29,2033 73 Table of Contents The following table summarizes, as of the date of this annual report, the outstanding restricted share units that were granted to our directors and executive officers under the 2022 Plan: Name Class A Ordinary Shares to be Received based on the Restricted Share Units Awarded Restricted Share Units Awarded Exercise Price Date of Grant Mr.
Removed
Furthermore, all employees are prohibited, for a period of two years following termination, from soliciting other employees to leave us and, for a period of five years following termination, from soliciting our existing clients.
Added
Terms of Directors Our directors are not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution or the unanimous written resolution of all shareholders. Our officers are elected by and serve at the discretion of our board of directors, and may be removed by our board of directors.
Removed
However, we may have difficulty enforcing these non-competition and non-solicitation terms in China because the Chinese legal system, especially with respect to the enforcement of such terms, is still developing. E.
Added
Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers for a specified time period providing that the agreements are terminable for cause at any time. The terms of these agreement are substantially similar to each other.
Removed
The registered office of Yangfeng 888 Holding Limited is located at Vistra Corporate Service Centre, Wickham’s Cay II, Road Town, Tortola, VG1110, British Virgin Islands. (7) Represents 6,616,900 ordinary shares held by MAOCITY Holding limited, a BVI company wholly owned by Jieqiong Lyu.
Added
A senior executive officer may terminate his or her employment at any time by 30-day prior written notice.
Added
We may terminate the executive officer’s employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties.
Added
Each executive officer has agreed to hold in strict confidence and not to use, except for the benefit of our company, any proprietary information, technical data, trade secrets and know-how of our company or the confidential or proprietary information of any third party, including our subsidiaries and our clients, received by our company.
Added
Each of these executive officers has also agreed to be bound by noncompetition and non-solicitation restrictions during the term of his or her employment and typically for two years following the last date of employment.
Added
We have also entered into indemnification agreements with our directors and executive officers, pursuant to which we will agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer. D.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

2 edited+1 added−0 removed1 unchanged
Biggest changeDuring the years ended December 31, 2021 and 2022, except for disclosed above, we did not conduct any transaction with related parties. As of December 31, 2021 and 2022, the amount due to (or due from) related parties was nil. C. Interests of Experts and Counsel Not applicable. 74 Table of Contents
Biggest changeAs of December 31, 2021, 2022 and 2023, the amount due to (or due from) related parties was nil. C. Interests of Experts and Counsel Not applicable.
New Branch of Shanghai Pilot Free Trade Zone. with aggregated principal amount of RMB5,000,000, which was guaranteed by a controlling shareholder, and his spouse, and an independent third party with the interest fixed rates 4% per annum. The amount was fully repaid on October 25, 2021.
New Branch of Shanghai Pilot Free Trade Zone. with aggregated principal amount of RMB5,000,000, which was guaranteed by a controlling shareholder, and his spouse, and an independent third party with the interest fixed rates 4% per annum. The amount was fully repaid on October 25, 2021. As of December 31, 2020, the amounts due to Mr. Sheng and Mr.
Added
Feng Yang, the shareholders of our Group, were RMB4,790,000 and RMB13,000, respectively. These amounts are non-trade in nature, unsecured, interest-free and repayable on demand and were fully repaid in 2021. During the years ended December 31, 2021, 2022 and 2023, except for disclosed above, we did not conduct any transaction with related parties.