Risk Analysis of Leadrive Technology's Business Model with 94% Customer Concentration

Based on the information obtained, I will provide you with a detailed analysis of the business model risks of Leadrive Technology with a 94% customer concentration.

was founded in 2017, and is a high-tech company focused on domestic power semiconductors and new energy vehicle drive solutions, with its headquarters located in Pudong, Shanghai. On January 2, 2026, the company submitted a prospectus to the Hong Kong Stock Exchange, seeking a listing on the Main Board of Hong Kong, with CITIC Securities and Guotai Haitong as joint sponsors[1].

The company’s main products include:

• Motor Controllers
• Power Semiconductor Modules
• Electric Drive System Solutions

Its products have been matched with dozens of mainstream domestic and foreign vehicle models, and are sold in markets such as China and Europe. The cumulative shipments of motor controllers exceed 1 million units, and power modules exceed 2.7 million pieces[2].

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According to search results, Leadrive Technology’s sales to its top few customers account for as high as 94% of total revenue, which means the company’s revenue is heavily dependent on a small number of customers. Such a highly concentrated customer structure is somewhat common in the new energy vehicle electronic control industry, but it also brings significant business risks.

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When customer concentration exceeds 50%, customers have strong bargaining power; when it reaches 94%, customers almost hold full pricing power:

• Customers may suppress purchase prices, compressing the company’s gross profit margin
• Customers may demand longer credit periods, affecting the company’s cash flow
• Customers may put forward more stringent technical standards and delivery requirements

The company’s performance is highly tied to the operational status of a small number of customers:

• Customer performance decline → Order reduction → Revenue drop
  : If major customers’ sales decline, Leadrive Technology will be directly affected
• Customer strategic adjustment → Supplier replacement risk
  : Customers may replace suppliers due to cost, technology and other reasons
• Customer capital chain problems → Accounts receivable risk
  : If major customers encounter financial difficulties, the company’s accounts receivable may face bad debts

Customer churn is a fatal blow to enterprises highly dependent on customers:

• Losing one major customer may lead to a revenue decline of over 30%-50%
• After customer churn, the vacant production capacity is difficult to fill quickly
• It may trigger a chain reaction, causing concerns among other customers

The new energy vehicle industry has obvious cyclical characteristics:

• During industry boom periods
  : Customer demand is strong, and the company’s performance grows rapidly
• During industry downturns
  : Customers cut orders, and the company’s performance declines sharply

A 94% customer concentration means that the amplitude of the company’s cyclical fluctuations will be significantly amplified.

High dependence on customers means:

• The direction of technological development is dominated by customer demands
• R&D resources need to be allocated around customer projects
• Space for independent innovation is limited

For Leadrive Technology seeking a listing in Hong Kong, high customer concentration may affect investor confidence:

• Investors may assign lower valuation multiples
• Stock prices may be more severely impacted during market fluctuations
• Refinancing capacity may be restricted

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The power semiconductor and new energy vehicle electronic control industries have the following characteristics, which make high customer concentration a common phenomenon in the industry:

1. High concentration of downstream customers
   : The new energy vehicle industry itself shows a trend of head concentration, with a few enterprises such as BYD and Tesla occupying a large market share

2. Long supplier certification cycle
   : The certification cycle for automotive-grade products is long, and once entering the supply chain, it has strong stickiness

3. Technology and capital intensive
   : There are a small number of downstream manufacturing enterprises with large scales

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Despite the high customer concentration, there are also some positive factors:

1. First-mover advantage
   : Having passed strict certifications to enter customers’ supply chains, with certain entry barriers

2. Technological strength
   : The company has more than 450 patents and over 360 R&D personnel, with continuous innovation capabilities[2]

3. Customer stickiness
   : The replacement cost of power semiconductors and electronic control systems is relatively high, so customers will not easily replace suppliers

4. Market expansion
   : The company’s products have successfully expanded to cutting-edge fields such as electric aviation[2]

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Risk Type	Impact Level	Focus Areas
Customer Bargaining Power	High	Trend of Gross Profit Margin Changes
Customer Churn Risk	High	Stability of Customer Relationships
Industry Cycle Risk	Medium-High	New Energy Vehicle Market Trends
Accounts Receivable Risk	Medium	Credit Status of Top 5 Customers
Technological Iteration Risk	Medium	R&D Investment and Technical Routes

: Leadrive Technology’s 94% customer concentration indeed constitutes significant operational risks. Investors need to pay close attention to:

• Order stability and cooperation sustainability of major customers
• The company’s ability and progress in expanding new customers
• Trends in changes in gross profit margin and cash flow
• Changes in the industry competition pattern

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[1] NE Time - “【NE News Flash】Leadrive Technology Submits IPO Prospectus for Intended Listing in Hong Kong” (https://ne-time.cn/web/article/37510)

[2] Leadrive Technology Official Website - “Leadrive Technology (Shanghai) Co., Ltd.” (http://www.leadrive.com/about/show.php?lang=cn&id=106)

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