Valuation surpasses 8 billion yuan! Domestic semiconductor polysilicon leader rushes for IPO

Ask AI · How does TCL Zhonghuan, as a major customer related party, influence the IPO process?

Text | Wang Jiarui

Xinhua Technology maintains the leading market share in China’s high-purity electronic-grade polysilicon for integrated circuits, supported by top capital such as the National Integrated Circuit Industry Investment Fund and Guotou Venture Capital.

Electronic-grade polysilicon is a core support for safeguarding national technological security and stabilizing the industrial chain. As a domestic leader in semiconductor polysilicon, Jiangsu Xinhua Semiconductor Technology Co., Ltd. (hereinafter “Xinhua Technology”)’s Sci-Tech Innovation Board IPO has been accepted by the Shanghai Stock Exchange and officially entered the inquiry stage on March 15.

This image may be AI-generated

According to data from the Semiconductor Materials Branch of the China Electronic Materials Industry Association, in 2024, Xinhua Technology’s market share of high-purity electronic-grade polysilicon for integrated circuits in China exceeds 50%, ranking first domestically. Relying on support from top institutions such as the National Integrated Circuit Industry Investment Fund, Guotou Venture Capital, China Construction Investment, Hoshine Silicon Industry, China International Capital Corporation, and others, Xinhua Technology’s valuation reached 8.07B yuan after its Series B financing in March 2023.

In this IPO, Xinhua Technology plans to raise 1.32 billion yuan, mainly investing in a 10,000-ton/year high-purity electronic-grade polysilicon industrial cluster, 1,500-ton/year ultra-high purity polysilicon, 1,500-ton/year zone-melting polysilicon, a high-purity silicon material R&D base, and supplementing working capital.

Table 1: Details of Fundraising Projects

Source: Prospectus

Through the implementation of these projects, the company aims to achieve large-scale expansion of advanced capacity, accelerate the promotion and application of high-end products, deepen core technological innovation, further consolidate its global market position, and enhance overall competitiveness.

Overall performance shows a V-shaped trend

Xinhua Technology was established in 2015, mainly engaged in R&D, production, and sales of electronic-grade polysilicon for the semiconductor industry. The semiconductor manufacturing industry chain begins with electronic-grade polysilicon, progressing to semiconductor wafers and chips, ultimately producing integrated circuit chips for end products. Electronic-grade polysilicon is a key foundational material supporting the entire semiconductor manufacturing industry; Xinhua Technology’s products are directly used in semiconductor wafer and silicon component production.

In recent years, the country has placed great emphasis on the security of the semiconductor industry chain and the自主可控 of key basic materials, continuously introducing policies to promote healthy and orderly industry development, greatly accelerating high-quality development in the semiconductor materials sector.

In 2024, seven departments including the Ministry of Industry and Information Technology jointly issued the “Implementation Opinions on Promoting Innovation and Development of Future Industries,” clearly stating the need to upgrade advanced basic materials such as non-ferrous metals, chemicals, and inorganic non-metals, develop key strategic materials like high-performance carbon fibers and advanced semiconductors, and accelerate the innovation and application of frontier new materials such as superconductors.

The semiconductor manufacturing industry is a crucial sector for China to achieve high-level technological independence and self-reliance. With years of R&D and technological breakthroughs, Xinhua Technology has achieved large-scale domestic production of electronic-grade polysilicon, making significant contributions to the自主可控 and stable supply of core raw materials needed for China’s semiconductor manufacturing.

Currently, Xinhua Technology’s products meet or exceed international advanced levels in key indicators, with some core metrics surpassing others. Its products cover the full range from 12-inch wafers, 6-8 inch wafers, small-sized wafers, to silicon components, and have been verified and adopted by nearly all leading domestic semiconductor wafer companies such as Xi’an Yicai, Hoshine Silicon Industry, TCL Zhonghuan, Lian’ang Micro, Ferrotec, Yansilicon, Zhongjing Technology, and others, with long-term supply agreements signed.

Financial data shows that, from 2022 to the first three quarters of 2025 (hereinafter “the reporting period”), Xinhua Technology achieved operating revenues of 1.27B yuan, 946 million yuan, 1.11 billion yuan, and 1.34B yuan, respectively, with net profits attributable to parent of 149 million yuan, 46 million yuan, 69 million yuan, and 123 million yuan. The overall performance exhibits a V-shaped trend, with 2023 seeing a significant decline in revenue and profit, gradually recovering from 2024. Regarding the reasons for the sharp drop in 2023, Xinhua Technology stated it was mainly due to fluctuations in the prices of副产品 solar-grade polysilicon.

Based on purity levels, polysilicon is divided into solar-grade and electronic-grade (semiconductor-grade). During the production of electronic-grade polysilicon, due to process characteristics, some副产品 are inevitably generated. Although these do not meet electronic-grade standards, they can be used in new energy fields and are sold as solar-grade polysilicon. However, the market price of solar-grade polysilicon experienced rare and significant fluctuations in 2022 and 2023. Xinhua Technology explained: “In 2022, the market price of solar-grade polysilicon was at a historic high, far above the historical average, resulting in a high net profit base for the company that year; in 2023, the market price dropped rapidly, with a maximum decline of nearly 80% compared to 2022.” Meanwhile, Xinhua Technology warned: “If the market price of副产品 solar-grade polysilicon fluctuates significantly again in the future, it may still impact the company’s overall performance to some extent.”

High product concentration

In terms of product structure, Xinhua Technology’s main products include Czochralski (CZ) polysilicon (P-grade, S-grade), zone-melting polysilicon, and others, with CZ polysilicon contributing over 97% of revenue, indicating a highly concentrated and relatively single product category.

Specifically, during the reporting period, the company’s sales of P-grade CZ polysilicon were 700 million yuan, 673 million yuan, 819 million yuan, and 1.07B yuan, accounting for 68.60%, 77.75%, 76.77%, and 82.78% of total revenue, respectively; sales of S-grade CZ polysilicon were 318 million yuan, 185 million yuan, 223 million yuan, and 201 million yuan, accounting for 31.19%, 21.37%, 20.85%, and 15.54%, respectively. Xinhua Technology’s revenue is heavily concentrated in CZ polysilicon products.

Table 2: Revenue by Product Category

Source: Prospectus

Regarding the potential risks of a highly concentrated product structure, Xinhua Technology acknowledged: “If the company cannot expand the production and sales of other silicon-based products in the future, growth potential may be limited. If the existing advantage of electronic-grade polysilicon is replaced by other materials, it could adversely affect the company’s operations.”

The prospectus shows that during the reporting period, the company’s gross profit margin fluctuated stage-wise, at 20.55%, 16.84%, 23.10%, and 25.08%, with electronic-grade polysilicon margins at 20.55%, 16.98%, 23.29%, and 25.07%. The company noted that these fluctuations were mainly influenced by electronic-grade polysilicon: “Due to the downturn in the semiconductor industry cycle in 2023, competition in the S-grade market was intense, leading to a significant decline in gross margin. In 2024 and the first nine months of 2025, the gross margin of electronic-grade polysilicon continued to rise, mainly due to reductions in unit costs.”

From the product pricing perspective, during the reporting period, the unit price of electronic-grade polysilicon was 18.66 yuan, 17.85 yuan, 16.32 yuan, and 15.52 yuan, with overall decreases of -4.37%, -8.57%, and -4.88%, showing a clear downward trend. Regarding the continuous price decline, the company stated that it is mainly due to rapid expansion in production and sales scale, leading to lower unit costs and allowing the company to reasonably reduce prices for downstream customers, which can promote the healthy development of the entire industry chain.

Table 3: Unit Price of Electronic-Grade Polysilicon

Source: Prospectus

However, Xinhua Technology is also controlling costs while lowering prices. During the reporting period, the unit costs of electronic-grade polysilicon were 14.83 yuan, 14.82 yuan, 12.52 yuan, and 11.63 yuan, with overall decreases of -0.08%, -15.53%, and -7.08%, with larger reductions in the last two periods.

The company warned in the prospectus: “If the company cannot maintain strong R&D, cost control, and customer development capabilities in the future, product competitiveness may decline. Continued downturn or further decline in the semiconductor market, and further drops in the prices of S-grade electronic polysilicon, could impact the company’s gross margins; if副产品 solar-grade polysilicon prices continue to fall or stay low, the company faces risks of further margin compression or sustained low profitability in other businesses. These factors could cause fluctuations in the company’s overall gross profit margin and adversely affect operations.”

Major Customer is a Related Party

Xinhua Technology’s sales include electronic-grade polysilicon and副产品, with the top five customers’ cumulative sales ratios during the reporting period being 53.84%, 66.18%, 66.58%, and 71.34%, respectively, indicating increasing customer concentration. The company noted: “If major customers’ procurement strategies or operations change significantly, or if their creditworthiness deteriorates substantially, or if product quality issues lead to disputes, or if technical reasons prevent meeting customer needs, the company’s performance could decline or slow down.”

Regarding customer structure, TCL Zhonghuan ranked second among Xinhua Technology’s customers in 2022 and further rose to first place in the first three quarters of 2023–2025. During the reporting period, sales to TCL Zhonghuan and its subsidiaries were 142 million yuan, 212 million yuan, 243 million yuan, and 315 million yuan, respectively, accounting for 11.15%, 22.37%, 21.93%, and 23.58% of revenue, with continuous growth in scale and contribution.

Notably, TCL Zhonghuan has a close relationship with Xinhua Technology. Besides being a major customer, TCL Zhonghuan is also a related party.

According to the prospectus, TCL Zhonghuan and its subsidiaries are controlled by TCL Technology. In July 2022, Xinhua Technology and TCL Technology’s wholly owned subsidiary Tianjin Silica signed a capital increase agreement, agreeing to increase capital in Inner Mongolia Xinhua. Tianjin Silica holds 40% of Inner Mongolia Xinhua, which is an important subsidiary, and is considered a related party of Xinhua Technology. Moreover, following prudence principles, transactions between TCL-controlled TCL Zhonghuan and its subsidiaries and the company since January 2021 are disclosed as related-party transactions.

Meanwhile, Inner Mongolia Xinhua (held 60% by Xinhua Technology and 40% by Tianjin Silica) is also the main entity implementing the “10,000-ton/year high-purity electronic-grade polysilicon industrial cluster project” and the “1,500-ton/year ultra-high purity polysilicon project” funded by this IPO. After these projects are operational, if TCL Technology procures products from Inner Mongolia Xinhua, there is a risk of increased related-party transactions due to the use of raised funds.

Additionally, another key customer, Hoshine Silicon Industry, also has related-party and customer dual identities. During the first three quarters of 2023–2025, sales to Hoshine Silicon Industry were 124 million yuan, 162 million yuan, and 187 million yuan, respectively, accounting for 13.15%, 14.57%, and 14.00% of revenue, with sales steadily increasing and ranking as Xinhua Technology’s third-largest customer.

On the equity side, as of the signing date of the prospectus, Hoshine Silicon Industry held 13.4194 million shares of Xinhua Technology, with a 0.9% stake, making it a shareholder.

Furthermore, Hoshine Silicon Industry has further strengthened cooperation by nominating directors. The prospectus shows that Li Wei, a board member of Xinhua Technology, was nominated and serves as a director by Hoshine Silicon Industry, with a term from March 2025 to March 2028. According to the resume disclosed, Li Wei has held key positions at Hoshine Silicon Industry, including Executive Vice President, Board Secretary, and Executive Vice President, since December 2015.