The key question for National Silicon Industry Group Co.,Ltd. (NSIG) to achieve a turnaround hinges on a central contradiction: its 12-inch wafer business is expanding rapidly, yet profits are being severely eroded by depreciation and price wars. The core strategy for recovery is clear, focusing entirely on 12-inch wafers and forging deep partnerships with domestic foundries. This path is undoubtedly challenging, requiring the company to navigate three major hurdles: reaching the breakeven point for its 12-inch business, stabilizing the bleeding 8-inch segment, and resisting competitive price pressures.
Roots of the Losses: 12-inch Expansion vs. 8-inch Drain
The current losses stem from two primary pressures: an industry-wide trend of "increasing volume but decreasing prices" and the company-specific "front-loaded costs" of capacity expansion. In 2024, NSIG's 300mm wafer sales volume surged over 70% with revenue growing more than 50%. However, industry prices continued to decline during the same period, with global silicon wafer sales revenue dropping 6.2% in 2024 and projected to fall another 1.2% in 2025, illustrating the classic divergence of rising volumes amid falling prices. Both of the company's main business lines are under pressure.
The 8-inch and smaller wafer segment saw revenue plummet 28% to 10.47 billion yuan in 2024, with gross margin sinking to -14.09%, impacted by weak consumer electronics demand and customer inventory reductions. Goodwill impairment of approximately 3 billion yuan from previous acquisitions of Okmetic and Simgui Technology was a significant contributor to the losses.
The 12-inch wafer business is undergoing rapid capacity expansion, with monthly capacity reaching 650,000 wafers by the end of 2024 and projected to climb to 850,000 wafers by the end of 2025. While sales volume grew 72%, the high fixed-cost nature of new projects resulted in a pre-tax loss of about 2 billion yuan during the period, driving the gross margin for the 12-inch segment down to -14.99%.
Full-year losses for 2025 widened further to 1.508 billion yuan, with gross margin deteriorating to -17.78%. The recent reduction of approximately a 3% stake by the National Integrated Circuit Industry Investment Fund, recouping about 2.6 billion yuan, while a market-driven exit, adds pressure during a cash-flow-sensitive period.
The Road to Recovery: A Three-Part Turnaround Logic
A successful turnaround is not a single switch but the simultaneous unfolding of three repair mechanisms.
The first part is the 12-inch business: switching from "volume" to "price" for breakeven. The 12-inch wafer segment is currently at a critical stage where price increases are essential to generate profits. Analysis suggests that under the persistent "volume up, price down" dynamic, the company's medium-term profitability remains constrained. The key to reversing the situation is price hikes, with some forecasts indicating this logic could emerge by the second quarter of 2026, particularly看好 the price elasticity of 12-inch heavily doped wafers, driven by an AI-fueled upturn cycle.
Management commentary supports this outlook. NSIG's director and executive vice president, Li Wei, stated that semiconductor wafer prices are gradually stabilizing. With improving demand and accelerated domestic substitution, there will be opportunities to negotiate for more favorable pricing with customers. Current capacity utilization for 12-inch wafers remains high, and the Taiyuan facility is gradually achieving batch sales of prime wafers. A combination of price recovery and full-capacity utilization could directly drive gross margin into positive territory.
The second part is the 8-inch business: awaiting the end of the destocking cycle and shedding the goodwill burden. The 8-inch wafer segment is the primary drag on overall gross margin, with goodwill impairment being a major loss driver in 2024. However, a turning point may be approaching. As inventories normalize, semiconductor wafer shipments and prices are expected to recover, suggesting a bottoming-out for the 8-inch segment. 2025 revenue for the 8-inch segment reached 1.125 billion yuan, a 7.49% year-on-year increase, indicating the repair process has begun. However, management acknowledged at the earnings briefing that challenges from sluggish consumer electronics demand and slow recovery in capacity utilization for 200mm wafers are unlikely to ease significantly in the short term. The pace of narrowing losses in the 8-inch business will directly impact the overall timeline for returning to profitability.
The third part involves SOI high-end products: not yet contributing, but offering long-term potential. Silicon-on-Insulator (SOI) wafers represent a key source of long-term elasticity for NSIG. The pilot line for the 300mm high-end silicon-based materials (SOI) R&D project has been completed. SOI wafers for high-reliability applications have begun tape-outs and completed customer sampling, while SOI wafers for silicon photonics applications have also been sent to customers. Annual 300mm SOI wafer capacity is expected to increase to 160,000 wafers by 2025. If this high-end product line achieves volume supply, it would significantly optimize the product mix and enhance overall gross margin.
Diverging medium-term profit expectations reflect the uncertainty of this turnaround logic. Some forecasts predict the company could return to profitability in 2026, while others suggest profit pressure may persist into 2027. The core difference between these outlooks lies in whether industry-wide price increases can materialize substantially in 2026, which is precisely the decisive variable for NSIG's return to profitability.
Can the Moat Withstand the Test?
NSIG's long-term moat is built on the certain demand from domestic foundry expansion. Projections indicate China will build 47 new wafer fabs by 2028, with China's share of global capacity for mainstream 22-40nm processes rising from 25% in 2024 to 42% by that time. This downstream expansion will continue to drive silicon wafer demand. With a 92% yield rate and a portfolio of over 820 certified product specifications, NSIG has established a deep绑定 with key customers like SMIC.
However, the biggest variable lies on the pricing front. Li Wei's comment that China's large wafer sector "has already seen a situation of 'internal competition' in mature process areas" reveals a deeper risk—domestic silicon wafer capacity expansion is equally intense. Against the backdrop of a soft consumer electronics market, price wars could continue to suppress profitability for mid-to-low-end wafers for an extended period.
In summary, NSIG does possess the potential for a turnaround. Its 12-inch wafer business, driven by AI, is approaching a critical inflection point for simultaneous volume and price growth. The 8-inch segment has a floor-support logic based on inventory cycle recovery and a global capacity gap. Its deep integration with domestic foundries, through "domestic substitution + capacity闭环," builds a medium-term moat.
Yet, the arduousness of this path should not be underestimated. Risks are intertwined, including a slower-than-expected rebound in 8-inch wafers, uncertainty over the sustainability of industry price hikes, and intensifying domestic capacity competition. The core bet for the turnaround rests on 2026: if the price hike logic materializes in the second half, NSIG could embark on a fast track to profit recovery; if the industry recovery is delayed again, the depreciation pressure from capacity expansion will continue to amplify losses.
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