A highly anticipated billion-dollar merger has been abruptly terminated. On December 10, Dawning Information Industry Co., Ltd. (603019.SH) saw its stock price hit the daily limit down at market open, closing at 90.12 yuan. The company's market capitalization shrank to 131.9 billion yuan, evaporating approximately 14.6 billion yuan in a single day following the announcement of the termination of its merger plan with semiconductor leader Hygon Information Technology (688041.SH).
In contrast, Hygon’s stock price initially dropped over 5% but later recovered, closing at 218.5 yuan, maintaining its market cap above 500 billion yuan.
The previous evening, Hygon disclosed that after careful evaluation and discussions with relevant parties, it had decided to terminate the proposed merger with Dawning via a share swap and fundraising plan. Dawning simultaneously announced the termination of the major asset restructuring.
Notably, the two companies share a unique relationship—both are part of the "Chinese Academy of Sciences (CAS) ecosystem." Dawning is Hygon’s largest shareholder, while CAS Computing Technology Research Institute controls Dawning. This rare "subsidiary-merging-parent" structure had drawn significant market attention since its proposal in mid-2024.
The merger plan, initiated in May 2024, involved Hygon absorbing Dawning through a share issuance to Dawning’s A-shareholders, accompanied by fundraising. Both stocks were suspended from trading on May 26, with their combined pre-suspension market cap exceeding 400 billion yuan. The deal was seen as a potential game-changer for China’s computing power industry.
Founded in 2006 and listed in 2014, Dawning started as a supercomputer developer and has since built a full industrial chain covering servers, storage, and computing services. Its investments in Hygon, CGSTAR, Dawning Cloud, and others span chips, hardware, cloud platforms, and data services. However, its 2019 inclusion on the U.S. Entity List severely impacted its server business due to reliance on imported high-end chips. Despite a 2020 capital raise of 4.78 billion yuan to develop domestic chip-based servers, Dawning’s 2024 revenue fell 8.4% to 13.15 billion yuan, ending a decade-long growth streak, while net profit growth slowed to a record low of 4.1%. Notably, its 563 million yuan investment income (+56.15% YoY), partly from Hygon, became a key profit driver.
Hygon, a leader in domestic x86 CPUs and DCUs, was founded in 2014 with backing from CAS and Dawning. Its 2016 joint venture with AMD secured critical x86 architecture licenses, enabling localized high-performance processors. Listed on the STAR Market in 2022, Hygon focuses on server/workstation processors. Despite rapid growth—2024 revenue surged 52.4% to 9.16 billion yuan with net profit up 52.87%—it remains relatively small-scale.
The termination came unexpectedly. As recently as late November, Dawning had reported progress on the restructuring, pledging further board reviews and regulatory procedures. However, citing "significant market changes" and "immature conditions," the deal collapsed within weeks.
At an investor briefing, Hygon’s CEO Sha Chaoqun acknowledged substantial stock volatility since the merger announcement, emphasizing that while the plan was rigorously evaluated, market shifts were unpredictable. Data shows Dawning’s stock had risen 62% from pre-announcement levels, while Hygon gained 61% over the same period.
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