Jin Rong Jie·2025-08-22 10:31Core Viewpoint - Huahong Semiconductor is set to acquire a controlling stake in Shanghai Huahong Microelectronics, marking a significant internal consolidation in the mature process sector since the establishment of the Sci-Tech Innovation Board [1][2]. Group 1: Transaction Details - The acquisition involves a combination of shares and cash, aimed at resolving industry competition as per a commitment made by Huahong Group during Huahong Semiconductor's listing [3]. - The transaction is currently in the planning stage, with identified counterparties including state-owned investment funds and the parent company [3][4]. - Upon completion, Huahong will control a monthly production capacity of approximately 38,000 12-inch wafers, with total capacity expected to double in the next two years [4]. Group 2: Financial Implications - Huahong's revenue for Q2 2025 is projected to be $566 million, an 18.3% year-on-year increase, with net profit expected to rise by 19.2% [4]. - The company anticipates 2024 revenue of $2 billion, with a capacity utilization rate of 99.5%, although gross margin is expected to decline by nearly 4 percentage points [4]. - The acquisition could reduce internal competition and lower unit costs by 3%-5%, positively impacting profitability [4]. Group 3: Market Context - The global mature process sector is experiencing a dual-track cycle, with rising demand for AI and automotive chips, while consumer electronics continue to destock [5]. - Huahong's market share is projected to be 2.7% globally by Q1 2025, ranking sixth, and second domestically after SMIC [5][6]. - The integration of Huahong Microelectronics is seen as a strategic move to enhance profitability and operational efficiency [5][6]. Group 4: Policy Support - The National Integrated Circuit Fund's third phase, with a registered capital of 344 billion yuan, emphasizes investment in mature process technologies, facilitating the transaction [6][8]. - Recent regulatory changes, including the "Merger Six" policy, are accelerating asset consolidation among state-owned enterprises [8]. Group 5: Market Reaction - Following the announcement, Huahong's stock price surged, reflecting market optimism about the acquisition and its potential impact on the competitive landscape [8][9].