Xinhua Technology IPO: Product Unit Price Declines, Founding Shareholders Exit with Full Liquidation

Source: Securities Star

Recently, Jiangsu Xinhua Semiconductor Technology Co., Ltd. (hereinafter referred to as “Xinhua Technology”), a domestic electronic-grade polysilicon company, has had its Sci-Tech Innovation Board IPO application accepted.

Securities Star notes that although the company’s performance has improved in recent years, it still faces challenges such as continuous decline in product prices and a single product structure. At the same time, the pressure from depreciation and amortization due to production line commissioning cannot be ignored. The company’s close ties with major customers in equity and senior management have led to a yearly increase in related-party transactions, with customer concentration continuing to rise. Just before submitting the application, the company also experienced its largest shareholder liquidating their holdings.

1. Product unit prices continue to decline, depreciation pressure remains

Since its establishment in 2015, Xinhua Technology has focused on R&D and production of electronic-grade polysilicon. Currently, the company’s products cover 12-inch, 8-inch, 4-6 inch wafers, and semiconductor silicon components across various application levels.

The prospectus shows that the company’s performance has been unstable in recent years. Affected by industry cycles and price fluctuations, the company’s 2023 performance declined, with revenue and net profit attributable to the parent at 946 million yuan and 45.54 million yuan, down 25.75% and 69.41%, respectively. Since 2024, performance has shown some recovery. In the first three quarters of 2024 and 2025, the company’s revenue was 1.11 billion yuan and 1.336 billion yuan; net profit attributable to the parent was 68.62 million yuan and 123 million yuan.

Securities Star observes that although revenue continues to recover, product prices still face downward pressure. Data shows that the average selling prices of electronic-grade polysilicon in 2023, 2024, and the first three quarters of 2025 decreased by 4.37%, 8.57%, and 4.88%, respectively, indicating ongoing price weakness.

From the revenue structure, Xinhua Technology’s core products are divided into polysilicon for Czochralski (CZ) growth and for zone melting. CZ-grade products are further subdivided into J, P, and S grades. The company mainly sells P-grade products, with revenue from this segment increasing from 700 million yuan in 2022 to 1.071 billion yuan in the first three quarters of 2025, accounting for 68.6% to 82.78% of total revenue, respectively. The risk of a single product structure is significant.

Currently, Xinhua Technology is actively expanding capacity. The prospectus states that the company has two major production bases: an 8,000-ton/year Xuzhou plant and a Inner Mongolia plant. The Inner Mongolia line began trial production in the second half of 2024 and was officially put into operation by the end of that year, adding 10,000 tons of capacity annually.

It is noteworthy that rapid capacity expansion has brought new operational pressures. On one hand, the depreciation and amortization from the Inner Mongolia line’s commissioning will impact net profit. From January to September 2025, the average monthly depreciation was 15.88 million yuan, affecting net profit attributable to the parent by approximately 9.53 million yuan per month.

On the other hand, due to high by-product output rates during initial production, the company has seen a significant increase in inventory impairment provisions. During the reporting periods of 2022, 2023, 2024, and the first three quarters of 2025, the provisions were 3.00 million yuan, 5.22 million yuan, 53.15 million yuan, and 95.59 million yuan, respectively, with inventory impairment provisions accounting for 3.61%, 2.79%, 16.94%, and 20.49% of inventory balances.

2. Shareholders also as customers, related-party transactions rising

Securities Star notes that in recent years, customer concentration has continued to increase. Revenue from the top five customers rose from 53.84% in 2022 to 66.58% in 2024. In the first three quarters of 2025, this proportion further increased to 71.34%.

Among the top five customers, Hu Si Silicon Industry is not only a major customer but also a shareholder. The prospectus shows that Hu Si Silicon Industry is an investor in the company’s Series A+ funding round, holding a 0.9% stake. Driven by customer demand, sales to Hu Si Silicon Industry increased year by year, from 124 million yuan in 2023 to 187 million yuan in the first three quarters of 2025. Additionally, there are cross-executive positions: Li Wei, a director of Xinhua Technology, also serves as director and executive vice president of Hu Si Silicon Industry.

Further investigation reveals that the relationship between Xinhua Technology and its largest customer, TCL Zhonghuan, is even more complex. In the first three quarters of 2025, TCL Zhonghuan contributed 315 million yuan in sales, accounting for 23.58% of total revenue.

TCL Zhonghuan acquired Zhonghuan Leading Xuzhou in 2023, which is also recognized as a related party of Xinhua Technology. This is because the company was significantly influenced by one of the company’s original indirect major shareholders, Zhu Gongshan, through an acting person.

In addition, Xinhua Technology also has certain relations with TCL Zhonghuan’s parent company, TCL Technology. TCL Technology’s wholly owned subsidiary, Tianjin Silica, holds a 40% stake in Inner Mongolia Xinhua. As a minority shareholder of Xinhua Technology’s subsidiary, Tianjin Silica is a related party.

Moreover, the fundraising projects “10,000 tons/year high-purity electronic-grade polysilicon industry cluster project” and “1,500 tons/year ultra-high purity polysilicon project” are implemented by the subsidiary Inner Mongolia Xinhua. The prospectus indicates that if these projects are put into production and TCL Technology purchases products from Inner Mongolia Xinhua, there is a risk of increased related-party transactions due to the use of raised funds.

Against this background, related-party sales by Xinhua Technology have increased year by year, from 194 million yuan in 2022 to 441 million yuan in 2024. In the first three quarters of 2025, this amount further rose to 504 million yuan, nearly 40% of the company’s current revenue.

3. Valuation shrinks, major shareholders cash out

Furthermore, Xinhua Technology also faces a high concentration of suppliers.

During the reporting period, the top five suppliers accounted for 92.86%, 79.56%, 78.59%, and 76.78% of total procurement, respectively. Among them, Zhongneng Silicon Industry and its related parties have consistently been the company’s largest supplier.

Securities Star notes that Zhongneng Silicon Industry has deep ties with the company. It is part of GCL Group and is also one of the founding shareholders of Xinhua Technology. The company was established through a full transfer from Xinhua Xinhua Limited, which was initially jointly funded by Zhongneng Silicon Industry and an integrated circuit fund, with Zhongneng Silicon Industry contributing 520 million yuan in kind, holding 50.98% of the registered capital.

However, just before the IPO, Zhongneng Silicon Industry liquidated and reduced its holdings. The prospectus shows that in September 2025, Zhongneng Silicon Industry transferred its 24.55% stake, valued at 365 million yuan, to Hefei Guocai No.3 at a price of 14.72 billion yuan, with a per-share transfer price of 4.04 yuan. After the transaction, Zhongneng Silicon Industry no longer holds shares in the company, officially relinquishing its position as the largest shareholder.

Hefei Guocai No.3 has a strong background, with most of its seven partners having state-owned assets. Based on this transaction, Xinhua Technology’s valuation is approximately 5.996 billion yuan.

It is noteworthy that this valuation is significantly lower than previous figures. In June 2023, Tianjin Hongsheng transferred its 0.62% stake in Xinhua Technology to its related party, Gongqingcheng Hongsheng, for 50 million yuan, valuing the company at about 8.065 billion yuan. Over two years, the company’s valuation has shrunk by approximately 25.66%.

Currently, Xinhua Technology has no controlling shareholder or actual controller. The company’s largest shareholder, Hefei Guocai No.3, and its concerted action partner, China Construction Material New Materials Fund, hold a combined 25.55%. The second-largest shareholder, the Integrated Circuit Fund, owns 20.62%. Neither exceeds 30%, and there is no concerted action relationship between the two major shareholders. (This article first published by Securities Star, author | Li Ruohan)

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