HG Semiconductor Announces 2022 Annual Results
HONG KONG, Apr 3, 2023 – (ACN Newswire) – HG Semiconductor Limited (“HG Semiconductor”, together with its subsidiaries, “the Group”; stock code: 6908.HK) announced its audited consolidated results for the year ended 31 December 2022 (the “Year”). HG Semiconductor actively developed its new third-generation semiconductor business during the Year, by further accelerating the pace of research and development (“R&D”) and application of gallium nitride (“GaN”) technology and achieving several important milestones.
During the Year, since the third-generation semiconductor business was still in investment and R&D stage, the Group’s revenue was mainly contributed from the LED bead business. The recurring COVID-19 pandemic (“COVID-19” or “Pandemic”) had severe negative impact on China’s economy. The temporary closure of factories due to lockdown measures among cities had halted the industrial chain of the Group’s LED bead business for certain period of time and impacted its production capacity accordingly. Revenue for the Year was approximately RMB87.5 million (2021: approximately RMB126.1 million), while gross profit decreased to RMB16.4 million (2021: approximately RMB25.5 million). As the Group did not record any non-cash flow items such as loss on acquisition of intangible assets, loss for the Year attributable to the owners of the Company narrowed significantly to approximately RMB101.3 million (2021: approximately RMB446.8 million) despite the increase in expenditure on the promotion and R&D of the third-generation semiconductor business.
The management of the Group revealed that the global economic recovery was hampered by multiple factors during the Year, and the world economy was undergoing a turbulent state. Despite the macroeconomic uncertainties, the global semiconductor demand remained robust. Facing the challenges of the international environment, the Group focused on developing new GaN business during the Year to move towards the goal of becoming an integrated device manufacturer (“IDM”) of semiconductor serving for whole industrial chain with a core focus on semiconductor design and manufacturing, integrating R&D, manufacturing, packaging and package testing and sales.
Business Review
During the Year, the Group’s revenue of LED bead business was approximately RMB87.2 million (2021: approximately RMB126.1 million). The decrease in revenue was mainly due to the decrease in the average selling price of LED beads during the Year, as the demand for high-end LED products in the PRC has substantially decreased as a result of the recurrences of the COVID-19 outbreaks and the emergence of mutated variants of the virus, which adversely impacted the Chinese economy.
Nonetheless, with the strong scientific research capabilities and diligent efforts in the R&D and production of the Group’s team of scientists, the epitaxial wafer and fast charging products in the third-generation GaN business began to generate revenue for the Group during the Year.
GaN epitaxial wafer R&D and production breakthrough turbo-charges development of third-generation semiconductor industry chain
During the Year, the Group’s R&D, manufacturing and implementation of GaN third-generation semiconductors were realised, and quickly channelled into the production of epitaxial wafer. The Group has installed two production lines in its semiconductor factory in Xuzhou Economic and Technological Development Zone, Jiangsu Province, PRC for the production of GaN-related products, and core machines imported from Europe and Japan have been delivered to the factory and are ready for chips manufacturing to meet the market needs. With the efforts of the scientist team and their strong R&D capabilities, the Group achieved a major breakthrough during the Year by successfully commencing the production of its own 6-inch GaN power device epitaxial wafer in October. The success in manufacturing the epitaxial wafers is well ahead of the expected schedule, representing an important achievement in the Group’s transformation into a third-generation GaN semiconductor supplier, and paving the way for mass production of GaN chips.
In addition, the Group was granted 9 utility models patents and appearance patents during the Year, including GaN-based inverters and power supply modules, with a number of invention patents pending for approval. Xuzhou GSR Semiconductor Co., Ltd., the Group’s wholly-owned subsidiary, conducted its first publicised industry field trial of GaN with GaN Systems in the power infrastructure of an internet data centre. The test results marks that GaN can be widely used in the power infrastructure of data centres.
Multi-party strategic cooperation achievements continue to drive GaN business
During the Year, HG Semiconductor entered into strategic framework agreements with a number of industry-leading companies to establish mutually beneficial strategic partnerships and enhance the Group’s capabilities in innovation and manufacturing, including entering into a strategic cooperation agreement with Ingdan Inc. (Stock Code: 400.HK) in March, to assist the Group in the sale of its manufactured chips in the PRC, and a long-term strategic cooperation between the two parties in the application and development of chips. In May, the Group reached a strategic cooperation agreement with China Titans Energy Technology Group Co., Limited (Stock Code: 2188.HK) in respect of technology R&D and exchange, to cooperate in the R&D of the new generation of fast-charging piles using the Group’s third-generation semiconductor technology in the next three years. While in terms of overseas, the Group also entered into a non-legally binding memorandum of understanding with GUH Holdings Berhad (“GUH”; Stock code: 3247.KL) to expand the sales of fast-charge batteries and GaN devices to Malaysia and Southeast Asia. At the same time, the Group will provide GUH with plans for the construction of a battery factory and the procurement of related equipment, as well as the provision of a complete set of module equipment for a 100 MWh energy storage station. Moreover, the Group continued to cooperate with Hong Kong’s statutory bodies, wherein both sides will jointly research and promote “smart city” development in Hong Kong, as well as study the upgrade of local electric vehicle and charging facilities.
Introduction of major strategic shareholders to accelerate the pace of entering the new energy field
GaN, as an emerging new technology, its broad prospects are favoured by investors. During the Year, the Group successfully introduced a number of strategic shareholders to raise more capital for the development of key technologies and to further enlarge its shareholder base. Among them, the Group entered into an agreement with Profit Act Limited (“Strategic Investor”) in August, a company that is indirect wholly-owned by Mr. Zhu Gongshan (“Mr. Zhu”), the Founder, Chairman and Executive Director of GCL Technology Holdings Limited (“GCL Technology”; Stock Code: 3800.HK), and the Strategic Investor agreed to subscribe for 60 million subscription shares and 60 million subscription warrants. Subsequently, the Group also entered into a strategic cooperation framework agreement with Golden Concord Group Limited (“Golden Concord Group”), for a long-term strategic cooperation in the application of GaN power chips in the new energy sector. This partnership will assist HG Semiconductor in entering the supply chain market in the new energy industry.
Prospect
With the rise of technologies such as 5G and artificial intelligence, the R&D and application of third-generation semiconductors represented by GaN are also included in the national strategic planning. The Group will continue to make increased efforts to the third-generation semiconductor GaN industry chain in order to accelerate the pace of R&D and expand the applications of GaN-related products. Along with the upgrade of Xuzhou Factory and the production lines and machines are well in place, the Group’s R&D team and experts will continue to focus on production research, aiming to accelerate the realisation of production capacity.
As market penetration of electric vehicles in Mainland China and Hong Kong increases, coupled with policy support and solid market demand, the further development of GaN power products is expected to be rapid. The Group will continue to develop and commercialise new-generation charging piles in both China and Hong Kong, and actively explore the establishment of a stronghold for fast-charging battery solutions in Hong Kong. In addition, the Group expects that GaN technology will play a key role in great energy systems in the future. The Group intends to establish a new-energy joint venture company with Golden Concord Group in China and provide technical support to the venture for the purpose of co-developing silicon-based power chips and products that use third-generation semiconductors. In this way, the Group can further accelerate the pace of R&D of technologies and applications of GaN in the new-energy field.
Looking ahead, the Group will actively seek strategic partners and upgrade its industrial chain while upholding the principle of achieving synergy in use of resources and dual-win cooperation. Meanwhile, the Group will also continue to bring in outstanding experts and talents in the field of semiconductor to enhance its production and R&D. Buoyed by three factors – the government’s favourable policies, extensive downstream application markets, and domestic substitution opportunities – the Group will benefit from tailwinds in further developing and exploring third-generation semiconductor products and applications with GaN at their core, continue to boost quality and efficiency, maximising value for its shareholders.
About HG Semiconductor Limited
HG Semiconductor Limited (6908.HK) is principally engaged in semiconductor product business in China, including the design, development, manufacturing, subcontracting services and sales of light-emitting diode (“LED”) beads and a new generation of semiconductor gallium nitride (“GaN”). The Group is committed to accelerating its research and development and expansion in the application of GaN related products, with an aim to become a leading semiconductor company with the integration of design, manufacturing and sales of semiconductor chips, as well as providing total solutions with higher efficiency and competitive system cost.
For more details, please visit www.hg-semiconductor.com
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