The silicon carbide sector in the Hong Kong stock market shows clear differentiation. As Tianyu Semiconductor hits a new low on its debut, can Basic Semiconductor convince the market to buy in on its second attempt?
<h4>Key Points:</h4>
<ul>
<li>Basic Semiconductor has submitted its application to the Hong Kong Stock Exchange for the second time, reporting a loss of 177 million yuan in the first half of the year, a year-on-year increase of 50.3%.</li>
<li>The gross loss rate of silicon carbide modules has narrowed from 75.5% in 2022 to 27.9% in 2024.</li>
</ul>
Li Shida
The Hong Kong stock market has reignited its IPO enthusiasm this year, with several Chinese semiconductor companies flocking to the capital market. Under the long-term growth of new energy vehicles, energy storage, and grid construction, silicon carbide (SiC), as a representative of third-generation semiconductors, has been endowed with the strategic halo of &#34;core materials for domestic substitution.&#34; However, the rapidly expanding production capacity is quickly eroding the profit base of these companies, adding uncertainties to this sector.
Since the beginning of this year, several domestic silicon carbide companies have attempted to enter the capital market, but the outcomes have been vastly different. TianYue Advanced (2631.HK; 688234.SH), which produces silicon carbide substrate materials, has achieved dual-platform listing (A+H) and was once favored by the market after its Hong Kong listing; Tianyu Semiconductor (2658.HK), focused on silicon carbide epitaxial wafers, also successfully listed in Hong Kong but hit a new low on its debut last week; similarly, Hantian Tiancheng, which also focuses on epitaxial wafers, is still lingering outside the listing door.
Recently, Shenzhen Basic Semiconductor Co., Ltd., located in the mid-to-lower reaches of the industry chain and engaged in the R&amp;D and production of silicon carbide power devices, updated its application documents and initiated its second attempt to enter the Hong Kong stock market. The company has obtained the overseas listing filing from the China Securities Regulatory Commission, and everything is ready for the listing, just waiting for the right opportunity.
Unlike most silicon carbide companies that focus solely on a single process step, Basic Semiconductor has followed an IDM (Integrated Device Manufacturer) route since its inception: from chip design, wafer manufacturing to packaging, and extending to gate driver devices and overall system testing, forming a closed product and process chain. Basic Semiconductor belongs to the downstream high-value-added terminal and module solution provider level. As long as it can penetrate high-end scenarios such as main drive inverters for automotive companies and photovoltaic energy storage modules, its unit value density and customer stickiness can be significantly enhanced.
From a performance perspective, the company's growth has accelerated significantly in recent years. From 2022 to 2024, the company's revenue increased from 117 million yuan to 299 million yuan, with a compound annual growth rate of about 60%. In the first half of this year, it recorded a revenue of 104 million yuan, a year-on-year increase of 52.7%. Among them, the revenue from silicon carbide modules surged from 5.05 million yuan in 2022 to 49.78 million yuan in the first half of this year, an increase of 8.8 times.
<h4>Selling One Loses Two</h4>
If we only look at the above data, one might feel optimistic about the company's prospects, but while IDM and modularization can raise technical barriers, they do not serve as a &#34;price shield.&#34; In the past two years, the expansion of silicon carbide production capacity has been too rapid, and the price of epitaxial wafers has dropped from over 8,000 yuan per piece in 2022 to below 2,000 yuan. The company's cost reduction speed is far behind the pace of the price collapse
This has led to the company's long-standing high gross loss rate. The gross loss rate was 48.5% in 2022, increased to 59.6% in 2023, and although it dropped to 9.7% in 2024, it rose again to 28.8% in the first half of this year. Among them, the most unprofitable silicon carbide discrete devices had a gross loss rate as high as 194%, meaning that for every item sold, the company lost nearly two items' worth.
In 2024, the company actively reduced the shipment proportion of discrete devices, which faced intense price competition, and concentrated resources on promoting power modules and systematic solutions with higher unit prices and greater added value. As power modules were introduced for testing and validation by automotive and industrial customers and gradually went into mass production, the gross loss rate of silicon carbide modules significantly improved from 75.5% in 2022 to 27.9% in 2024. Coupled with the increased capacity utilization rate of production bases, depreciation and labor costs began to be diluted, leading to a significant narrowing of the overall gross loss rate in 2024.
However, by the first half of 2025, the gross loss rate increased again, which the company attributed to the cyclical fluctuations during the ramp-up period of the production line. On one hand, although industrial-grade modules and power stacks have entered the stage of bulk delivery, with over 1,800 sets of industrial-grade modules and 2,000 sets of power stacks delivered in the first half of the year, there has not yet been sufficient fixed cost dilution effect. Additionally, some new production lines are still in the yield debugging and process optimization phase, which temporarily lowers the overall gross profit performance.
With long-term gross losses, the company naturally cannot make a profit. From 2022 to 2024, the company accumulated losses exceeding 800 million yuan, with a loss of 177 million yuan in the first half of this year, an increase of 50.3% year-on-year. At the same time, the company's operating cash flow has been in net outflow for consecutive years, although it has narrowed year by year, it still recorded a net outflow of 39.29 million yuan in the first half of this year, compared to a net inflow of 10.019 million yuan in the same period last year. Fortunately, the company raised 223 million yuan during this period, leaving cash and cash equivalents of 180 million yuan at the end of the period.
Currently, the capital market has shown a differentiated attitude towards different silicon carbide sectors. TianYue Advanced, which mainly produces substrates and is located upstream in the supply chain, has seen its stock price rise by about 27% since its listing, with a price-to-sales ratio of about 16.1 times. In contrast, TianYu Semiconductor, a silicon carbide epitaxial wafer manufacturer that just went public last week, saw its stock price plummet by 30% on its first day of trading, becoming one of the most disappointing IPO debuts in Hong Kong's semiconductor sector in recent times

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The Hong Kong stock market's silicon carbide sector is experiencing differentiation, with Basic Semiconductor submitting its application to the Hong Kong Stock Exchange for the second time, and losses are widening. The gross loss margin of silicon carbide modules has improved, and revenue has grown significantly. The company is following an IDM (Integrated Device Manufacturer) approach, focusing on high value-added terminals. Silicon carbide companies face challenges in entering the capital market

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