The firm is accelerating its expansion into the specialist materials used to make semiconductors, as China seeks supply-chain resilience in key sectors



<figure class="wp-block-image size-large"><img src="https://imageproxy.pbkrs.com/https://contributor-assets.benzinga.com/wp-content/uploads/2026/02/13031125/%E5%B1%8F%E5%B9%95%E6%88%AA%E5%9B%BE_13-2-2026_105555_thebambooworks.com_-1024x654.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" class="wp-image-27333" width="1024" height="654" original-src="https://imageproxy.pbkrs.com/https://contributor-assets.benzinga.com/wp-content/uploads/2026/02/13031125/%E5%B1%8F%E5%B9%95%E6%88%AA%E5%9B%BE_13-2-2026_105555_thebambooworks.com_-1024x654.jpeg"/></figure>



image credit: Bamboo Works



<h4>Key Takeaways:</h4>



<ul>
<li>Red Avenue has filed for a secondary listing in Hong Kong to bolster its capital base as it doubles down on advanced chemicals</li>



<li>The revenue contribution from electronic materials has jumped by 8.7 percentage points over two years to 27.8%, emerging as the company's main growth engine.</li>
</ul>



The driving force for China's semiconductor industry right now can be summed up in one word – self-reliance.



With global trade relationships in a fraught state of flux, China's state-led push for technological independence and control over supply chains has taken on added urgency, particularly in the critical chip sector.



The drive to substitute domestic products for imports is underway across the product cycle, from chip design and fabrication equipment to semiconductor consumables, forcing some traditional chemical companies to rethink their roles in the industry.



Red Avenue New Materials Group Co. Ltd. (603650.SH) is one of those shapeshifters. Initially a supplier of rubber additives for tires, it has chosen to stake its future on high-risk, high-barrier advanced materials for high-tech use. The Shanghai-listed firm is still in the business of tire chemicals but is increasingly focused on the chemical-based materials for chip manufacture such as solvents, light-sensitive polymers and polishing pads.



As such, it is one of the few companies in the new materials sector to span two distinct industries. And it is looking for funds to support further expansion, having recently filed for a secondary listing in Hong Kong.



Red Avenue has a striking backstory, founded in 1999 by a 25-year-old biochemistry graduate, Zhang Ning. She started out distributing rubber additives for tires, a low-margin trade that relied on forging close relationships with customers and ensuring dependable supply. The experience gave her a deep understanding of the tire industry's value chain.



Starting in 2006, Red Avenue began building its own manufacturing facilities in Jiangsu province, while also establishing centers for testing and R&amp;D. The move marked a formal transition from distributor to manufacturer. The company gradually secured core formulations and production capabilities for specialty rubber additives, laying the groundwork for its 2018 listing in Shanghai.



As the original business matured, Zhang led the company into chemicals for electronics and chip production, executing a tricky leap up the value chain. Through acquisitions and building in-house capacity, Red Avenue moved into semiconductor photoresists, display panel materials, high-purity solvents and wafer polishing pads. In 2024, the company invested in building its own production base for polishing pads, which play a key role in wafer fabrication.



<h4>Corporate divorce</h4>



As the company transformed, the spotlight fell on the founder's family situation. It was disclosed in 2023 that shares previously held jointly with Zhang's husband had been transferred back to her. Control of the listed company became solely vested in Zhang while her ex-husband, Liu Dongsheng, exited without an equity stake.



Zhang's stake was valued at roughly 13.9 billion yuan ($2 billion) at the time, prompting media to label the break-up a &#34;10 billion yuan divorce&#34;. In fact the couple's divorce was the final step in a capital restructuring, as Zhang's husband had been cashing out through share sales in 2022. The remaining holdings were diluted via a private placement and Zhang regained full corporate control. Only afterwards was the divorce revealed.



The outcome was largely win-win: the ex-husband walked away with cash, while the listed company maintained stability. On the day the news broke, the stock slipped just about 1% and observers praised the founder's acumen in managing the situation.



As the corporate transformation continued, the shifting product mix had an impact on earnings. Revenue stood at 2.94 billion yuan in 2023 and rose 11% to 3.26 billion yuan in 2024. For the first nine months of 2025, revenue edged up 4% to 2.52 billion yuan from the year-earlier period. Meanwhile, electronic materials rose from 19.1% of total revenue in 2023 to 27.8% in the first nine months of 2025, while rubber additives for tires and other chemical products fell to around 69.7%.



Profitability has also been enhanced. Net profit for the first nine months of last year reached 511 million yuan, up about 12.8%. Overall gross margin improved from 23.3% in 2023 to 25.2% in the first three quarters of 2025, with margins on electronic materials exceeding 30% at one point. While tire materials remain a source of cash flow, electronic materials are increasingly becoming the growth engine.



As of the end of September 2025, total liabilities stood at 5.43 billion yuan, accounting for roughly 60% of total assets, including more than 2.5 billion yuan in borrowings and financial liabilities due within one year. Net cash inflows from operating activities totaled about 204 million yuan in the first nine months of last year. Cash and cash equivalents amounted to roughly 806 million yuan by end-September, providing some buffer, but funding pressure remains. The company's reliance on external capital has clearly increased, hence the Hong Kong listing bid.



Red Avenue may offer a compelling narrative, with a youthful entrepreneur seizing the initiative and adapting with the times. But whether investors are willing to buy into that story will depend on the company's ability to scale up its business and complete the transition to advanced materials.



To subscribe to Bamboo Works weekly free newsletter, click here



Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

603650

588780

159995

512760

159998

512480

159325

588170

Red Avenue is accelerating its expansion into semiconductor materials amid China's push for self-reliance in the chip sector. The company has filed for a secondary listing in Hong Kong to support this growth, with electronic materials now contributing 27.8% to its revenue. Founded in 1999, Red Avenue has transitioned from rubber additives to advanced materials for chip production. Despite a recent corporate restructuring involving its founder's divorce, the company has seen revenue growth and improved profitability, with net profit rising 12.8% in the first nine months of 2024.

benzinga_article

Red Avenue New Materials

GTJA Allianz SSE STAR Chip Design Thematic ETF

ChinaAMC Guozheng Semiconductor Chip ETF

Guotai CES Semiconductor Chip Industry ETF

Tianhong CSI Computer Theme ETF

GTJA Allianz CSI All Share Semiconductors & Semiconductor Equipment ETF

China Southern CSI Semiconductor Industry Custom ETF

ChinaAMC SSE STAR Semiconductor Material & Equipment Thematic ETF

Red Avenue Accelerates Expansion Into Chip Chemicals Amid China's Semiconductor Self-Reliance Push