This is the second time after achieving "de-U" in 2022 that the non-IFRS net profit of Hu Silicon Industry has fallen into a loss.

Recently, Hu Silicon Industry, a leading company in the semiconductor silicon wafer industry, released its annual report for 2023.

In 2023, the company achieved a total revenue of 3.19 billion yuan, a year-on-year decrease of 11.39%; the net profit was 187 million yuan, a year-on-year decrease of 42.61%; and the non-IFRS net profit was -166 million yuan, a year-on-year decrease of 243.99%.

This is the second time after achieving "de-U" in 2022 that the non-IFRS net profit of Hu Silicon Industry has fallen into a loss.

Regarding the changes in performance, Hu Silicon Industry stated that in 2023, affected by the overall economic environment and the downturn in the semiconductor market cycle, the company's total revenue decreased year-on-year. At the same time, due to the large initial investment and fixed costs associated with the company's expansion, coupled with an increase in R&D expenses, the overall performance indicators for 2023 declined compared to the previous year.

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Hu Silicon Industry is in the upstream of the semiconductor industry chain, and its operating performance is closely related to the prosperity level of the overall semiconductor industry. According to SEMI data, the global shipment area of semiconductor silicon wafers in 2023 totaled 12,602 million square inches, a year-on-year decrease of 14.35%.

Looking at the product breakdown, in 2023, the company's main business, which includes semiconductor silicon wafers of 200mm and below, generated revenue of 1.452 billion yuan, a year-on-year decrease of 12.62%, accounting for 45.52% of total revenue; the revenue from 300mm semiconductor silicon wafers was 1.379 billion yuan, a year-on-year decrease of 6.55%, accounting for 43.23% of total revenue.

Furthermore, in terms of production and sales volume, during the reporting period, Hu Silicon Industry had an inventory of 290,100 pieces for 200mm and below semiconductor silicon wafers, and an inventory of 900,500 pieces for 300mm semiconductor silicon wafers; the inventory of the corresponding products increased by 3.96% and 322.97% compared to the previous year.In response to this, Shanghai Silicon Industry Co., Ltd. (referred to as "Shanghai Silicon Industry") stated that the production and sales volume of semiconductor silicon wafers with a diameter of 200mm and below have both declined by more than 20% due to market influences. The sales volume of 300mm semiconductor silicon wafers has been less affected by the market, with a decrease of approximately 3.48%. According to the company's market demand analysis and production inventory strategy for 300mm semiconductor silicon wafers, both production and inventory volumes have increased compared to the same period last year.

In recent years, Shanghai Silicon Industry has seen a significant increase in its asset scale. The company's total assets grew from 16.257 billion yuan at the end of 2021 to 29.032 billion yuan at the end of 2023, an increase of 78.58%. The net assets attributable to the shareholders of the listed company also increased from 10.422 billion yuan at the end of 2021 to 15.114 billion yuan at the end of 2023, an increase of 45.02%.

In 2023, the company's R&D expenditure reached 222 million yuan, a year-on-year increase of 5.03%, and the proportion of operating income increased by 1.09%. In 2023, the company applied for 100 invention patents and obtained authorization for 34; applied for 20 utility model patents and obtained authorization for 16. As of the end of the reporting period, the company owns 606 domestic and foreign invention patents, 101 utility model patents, and 4 software copyrights.

Regarding the latest progress of the "300mm semiconductor silicon wafer pulling, grinding, and polishing production base" project, Shanghai Silicon Industry stated that during the reporting period, its subsidiary Shanghai Xinsheng is implementing an additional 300,000 pieces/month 300mm semiconductor silicon wafer capacity construction project, achieving an additional capacity of 150,000 pieces/month. The company's total capacity for 300mm semiconductor silicon wafers has reached 450,000 pieces/month, and it is expected to reach 600,000 pieces/month by 2024.

Furthermore, the combined capacity for polished and epitaxial wafers of 200mm and below for Shanghai Silicon Industry's subsidiaries, Xinao Technology and Okmetic, exceeds 500,000 pieces/month; the combined capacity for SOI silicon wafers of 200mm and below for Xinao Technology and Okmetic exceeds 65,000 pieces/month.

At present, the mainstream products in the semiconductor silicon wafer market are those with diameters of 300mm and 200mm. From the perspective of end-market applications, 300mm is mainly used in relatively high-end fields such as smartphones, computers, cloud computing, artificial intelligence, and SSDs (solid-state storage drives), currently accounting for more than 60% of the shipment area.

Shanghai Silicon Industry Executive Vice President Li Wei: The semiconductor silicon wafer market is recovering, and the overseas market is a new opportunity.

Not long ago, Li Wei, Executive Vice President of Shanghai Silicon Industry, gave a speech in which he cited a forecast from SUMCO (a Japanese company), indicating that the semiconductor industry demand is gradually recovering from the low point in the fourth quarter of 2023. It is expected that the silicon wafer market will bottom out in the first quarter of 2024, with a slight recovery in the first half of the year, and a full recovery is expected by 2025.

"AI drives the global enhancement of computing power hardware, AI-empowered market demand growth for smartphones and PCs, and the rapid development of China's new energy vehicle industry." Speaking about the growth drivers of the semiconductor industry, Li Wei stated that the semiconductor industry will continue to push the limits of processes to meet AI computing power demands, and AI PCs and AI smartphones will bring new growth momentum to the semiconductor industry.Li Wei introduced that Shanghai Silicon Industry has achieved the first industrial breakthrough of 300mm silicon wafers in China, with world-class wafer factories in Lingang, Jiading, Taiyuan, and Finland, possessing a wafer production capacity of 450,000 pieces per month, and is expected to reach a monthly capacity of 600,000 pieces by 2024. In addition, the company is continuing to expand production, and the third-phase project has already been launched.

At present, Shanghai Silicon Industry is promoting the "One Two Three Strategy": a one-stop silicon material service provider, two platforms are the large-size silicon material platform and the SOI specialty silicon material platform, and three paths are self-innovation development, external cooperation and mergers and acquisitions, and the construction of an ecosystem.

It should be mentioned that the global semiconductor wafer market has long been dominated by a few major players, with Shin-Etsu Chemical, Sumco, GlobalWafers, Siltronic, and SK Siltron being the top five suppliers. Shanghai Silicon Industry broke the monopoly of the five giants on the semiconductor wafer market in 2022, with its global market share rising to 3.45%.

Based on the vigorous development of China's semiconductor industry, the growth rate of China's semiconductor wafer market is significantly higher than the global average, and there is a huge supply gap for 300mm semiconductor large wafers. Li Wei predicts that from 2023 to 2026, the demand for semiconductor wafers in the Chinese market will be 1.4 million pieces per month, 2 million pieces per month, 2.8 million pieces per month, and 3.5 million pieces per month, respectively.