In the AI era, intelligent display chips and smart sensing-control chips are becoming highly sought-after in the market. However, Xihua Technology, the world's largest ASIC scaler chip provider, has accumulated losses exceeding RMB 460 million in less than four years. The company recently submitted its listing application to the Hong Kong Stock Exchange's main board, with ABC International as its sole sponsor.
Xihua Technology is an edge-AI chip and solution provider. According to Frost & Sullivan, the company ranked second globally in the scaler industry by shipment volume in 2024, with an 18.8% market share. It also leads the ASIC scaler segment with a 55% global market share. The company boasts industry-leading R&D capabilities, mature mass-production experience, and cutting-edge technology. Its portfolio of mass-produced chips caters to diverse needs in consumer electronics, automotive, and emerging markets like embodied intelligence.
The company has demonstrated strong revenue growth, with sales increasing from RMB 87 million in 2022 to RMB 244 million in 2024, representing a 67.5% CAGR. Revenue continued to grow by 24.2% in the first nine months of 2025. However, profitability has declined, with gross margins dropping from 35.7% in 2022 to 22.1% in the first nine months of 2025. While still reporting net losses annually, the deficit has narrowed, with cumulative net losses reaching RMB 462 million (59.08% loss ratio) during this period. As of September 2025, the company held RMB 60 million in cash equivalents against RMB 102 million in short-term bank borrowings.
**Dual-Business Strategy Shows Improving Profitability** Founded in 2018, Xihua Technology offers standalone chips and comprehensive solutions integrating proprietary chips with basic software, development kits, and key algorithms. Its technology is based on an "MCU + sensing/display" architecture, with two product lines comprising 17 chip models as of September 2025.
The company operates two main businesses: 1. Intelligent display chips and solutions (core products: AI Scaler and STDI chips) 2. Intelligent sensing-control chips and solutions (core products: TMCU, general-purpose MCU, touch chips, and smart cockpit solutions)
While intelligent display chips remain the primary revenue driver (85.6% share in first nine months of 2025), the sensing-control segment is growing rapidly (14.4% share). The AI Scaler and STDI chips, launched in 2022 and 2024 respectively, are flagship products, while the smart cockpit solution has shown rapid adoption since its 2025 debut.
The company serves customers through direct sales (59.1% of revenue) and distribution (10.9%), with customer retention rates of 22% and 69% respectively. Client concentration is high, with top five customers contributing 82.2% of revenue in the first nine months of 2025 (down from 89.9% in 2022). Similarly, top five suppliers accounted for 76.6% of procurement during the same period.
**Profitability Challenges Persist** Gross margins declined across both business segments: - Intelligent display solutions: 27.6% (down 11.5 percentage points since 2022) - Sensing-control solutions: 9.2% (down 37 percentage points)
As an R&D-driven firm, Xihua Technology has significantly reduced its R&D expense ratio from 131.9% in 2022 to 27.8% in the first nine months of 2025. The company holds 169 granted patents (including 128 inventions) and 150 pending applications, along with 38 software copyrights and trademarks. Cost optimization has improved adjusted net loss margin from 112.73% in 2022 to 14.73%.
**Competitive Position in Growing Markets** Key growth drivers for display and sensing-control chips include smartphones, TWS earphones, AR/VR, automotive, robotics, and industrial automation. Frost & Sullivan projects: - AR/VR shipments to grow at 35.7% CAGR (2020-2029) - Robotics market to expand at 19.1% CAGR (reaching RMB 878.5 billion by 2029)
In the scaler market, Xihua Technology shipped 37 million ASIC scalers in 2024 (55% market share), ranking first with a 33-percentage-point lead over its nearest competitor. The company has established partnerships with 7 wafer foundries and 9 packaging/testing suppliers to ensure stable production capacity.
While Xihua Technology shows promising growth potential in AI-driven markets, its high dependence on key customers and suppliers presents risks. Nevertheless, as a segment leader in high-growth industries, the company may attract investor interest amid the ongoing AI investment wave.
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