Technological obsolescence drives escalating losses.
In June this year, China's securities regulator unveiled a new initiative at the 2025 Lujiazui Forum. Chairman Wu announced the official launch of the third listing standard for the ChiNext board, opening doors for innovative companies with strong technical capabilities that are not yet profitable.
Six months after the new rules took effect, following June's Dapu Micro, the ChiNext board welcomed another unprofitable IPO in December—Guangdong Core Semiconductor Technology Co., Ltd. (hereafter "Guangdong Core"). According to disclosures, this is a wafer foundry company, with GF Securities as its sponsor.
While the implementation of the third standard indeed provides an opportunity for innovators on their growth path, it simultaneously imposes higher requirements on the companies' core technological attributes.
Does this company, still in the loss-making phase, possess the requisite technical strength?
**Three-Year Losses of 5.2 Billion Yuan, Sinking Deeper into the Red** Guangdong Core's primary business is providing wafer foundry services and solutions to domestic and international chip design companies. Its main differentiation lies in focusing on specialty processes within mature technology nodes and utilizing large 12-inch wafers.
Regarding its technology platforms, Guangdong Core primarily focuses on analog and mixed-signal chips.
Within its integrated circuit foundry business, it covers various processes including MS (Mixed-Signal), HV (High-Voltage Display Driver), CIS (CMOS Image Sensor), eNVM (Embedded Non-Volatile Memory), BCD (Bipolar-CMOS-DMOS), and SiPho (Silicon Photonics).
Corresponding end products include fingerprint recognition chips, display driver chips, CMOS image sensors, and power management chips, primarily serving the consumer electronics sector downstream.
Additionally, Guangdong Core has ventured into power device foundry business, specifically encompassing MOSFET and IGBT processes.
In 2024, the revenue contribution of these two business segments was 80.3% and 19.7% respectively, with integrated circuit foundry being the core operation.
However, this expansive, multi-category process layout has not yielded scale advantages. Between 2022 and 2024, the company's revenue fluctuated significantly with the industry cycle, reaching 1.681 billion yuan in 2024.
Compared not only to established foundries like Semiconductor Manufacturing International Corporation (688981.SH) and Hua Hong Semiconductor Limited (688347.SH), but also to other specialty foundries like Nexchip Semiconductor Corporation (688249.SH), United Nova Technology Co., Ltd. (688469.SH), and Xinxin Semiconductor, Guangdong Core lags considerably behind.
The profit side is even more concerning. From 2022 to 2024, Guangdong Core's net profit attributable to shareholders was -1.043 billion yuan, -1.917 billion yuan, and -2.253 billion yuan respectively. Cumulative losses over three years exceeded 5 billion yuan, with the loss margin widening annually.
On a non-GAAP basis, the cumulative loss from 2022 to 2024 further expands to 6.5 billion yuan. In the first half of 2025, the company reported another loss of 1.201 billion yuan, showing no signs of improvement.
**The Mystery of the -71% Gross Margin: Lack of Technological Advancement** On paper, Guangdong Core is currently trapped in a predicament of "the more it sells, the more it loses." In 2024, its core business gross margin was a mere -71.0%, with a net profit margin of -138.4%. For every chip sold, not only does it fail to make a profit, but it also incurs costs exceeding the selling price.
Although the wafer foundry industry's景气度 (prosperity) has declined in recent years, Guangdong Core's dismal profitability clearly falls outside the range of normal industry fluctuations.
The company defended itself in its prospectus, stating that its business development period is short, capacity is not yet fully utilized, and gross margin is compressed by high depreciation—a normal phenomenon in the early stages of a wafer fab's development.
However, considering other data in the prospectus, this explanation is difficult to accept.
In 2024, Guangdong Core's capacity utilization rate reached 84.8%, rising further to 93.0% in the first half of 2025, with a production-to-sales ratio exceeding 100% during the period. This indicates that its capacity ramp-up is nearing completion, yet achieving a positive gross margin remains a distant prospect.
Furthermore, companies like Nexchip Semiconductor Corporation, founded in 2015, achieved profitability within 6 years; United Nova Technology Co., Ltd., founded in 2018, also reached the profitability threshold in the second quarter of 2025. Guangdong Core, established in 2017 and now in its eighth year, clearly lags behind a normal industry progression towards profitability.
In our view, the crux of Guangdong Core's problem lies in its lack of technological advancement.
As a specialty process foundry, Guangdong Core's technology nodes are concentrated in the mature range of 180nm to 55nm. Although analog chips have relatively lower requirements for process node size, the prospectus discloses that the process levels of its major technology platforms lag behind the market's leading nodes.
Simultaneously, with rapid semiconductor technology iteration, market demand for mature nodes is gradually being replaced by more advanced processes.
For example, in the CIS field, Guangdong Core's capability maxes out at 55nm, whereas leading market demand has reached 40nm. Top manufacturers like Sony and Smartsens Technology (Shanghai) Co., Ltd. (688213.SH) have flagship main camera CIS products already in the 22nm era.
In the display driver chip sector, 55nm is also Guangdong Core's upper limit. In contrast, the most advanced mass-produced process in the market is 40nm, and recently, peer Nexchip Semiconductor Corporation announced its 28nm process has entered the continuous tape-out stage.
Signs of technological lag are also directly reflected in the financial statements.
From 2022 to the first half of 2025, Guangdong Core recognized inventory write-down provisions of 162 million yuan, 228 million yuan, 181 million yuan, and 249 million yuan respectively. The average provision ratio exceeded 30%, far above the industry average, seemingly indicating insufficient market competitiveness.
Another worrying aspect is that, despite being in a technology-intensive industry, Guangdong Core has failed to establish a virtuous cycle of "R&D investment - performance growth - further R&D." Instead, it is caught in a negative feedback loop of "R&D investment - continuous losses - cutting R&D."
As losses widened, the company's R&D expenditure contracted year by year, amounting to 601 million yuan, 605 million yuan, and 446 million yuan from 2022 to 2024.
**IPO at an 11% Paper Loss, Seeking 7.5 Billion Yuan Emergency Funding** Throughout Guangdong Core's development, capital has always been the core driver.
Public information shows that since its establishment, Guangdong Core has completed three major financing rounds. The Series A round occurred in July 2021, details of which were not disclosed in the prospectus, but Tianyancha indicates a scale of several billion yuan.
In 2022, the company successively completed Series B and B+ rounds, introducing over twenty diverse investors including local state-owned capital, industrial capital, and financial investment platforms, raising a total of 6.8 billion yuan.
The cost, however, was steep. The equity of the main initiator, Jinyu Industrial, was progressively diluted from 80% at the company's inception to just 16.9% currently, resulting in a complete loss of control.
Guangdong Core now operates without an actual controller.
Notably, in the final pre-IPO financing round, the company's valuation reached a high of 25.3 billion yuan, despite reporting a loss of 1 billion yuan that same year, highlighting the high expectations of investing institutions.
Subsequent developments are well-known: not only did losses continue to widen, but meager operating cash flow proved insufficient to support massive capital expenditures. Over the three-and-a-half years from 2022 to the first half of 2025, Guangdong Core's free cash flow showed a net outflow totaling nearly 14 billion yuan.
As of mid-2025, cash on the books stood at only 3.026 billion yuan, while long-term borrowings amounted to 12 billion yuan.
Furthermore, after years of bleeding cash, Guangdong Core's net asset size has dwindled to just 3.8 billion yuan. At the 2024 loss rate, this would only sustain operations for about two more years.
Regardless of motive, Guangdong Core's most urgent need is to secure another massive round of funding.
In this IPO, the company plans to raise 7.5 billion yuan. Based on the maximum issuance, this implies a valuation of approximately 22.5 billion yuan. This means investors who entered at the 25.3 billion yuan peak in the previous round are facing paper losses of around 11%.
It can be said that listing has become the only way for shareholders to potentially exit their positions. If forced to seek offers from industry peers, one might wonder what discount would be required?
Regarding the specific use of proceeds, only one-third is allocated to advanced process R&D, while approximately half the funds are earmarked for building the Phase III production line, aiming to double existing capacity.
The perplexing aspect lies here: these expensive new production lines are still targeting the same 180nm-90nm mature nodes that previously failed to generate profits. In the current scenario of "escalating losses with increased sales," can this strategy truly help the company escape the cycle of continuous losses?
In the prospectus, management's projections are extremely cautious, estimating that the company might only achieve breakeven by 2029 at the earliest, painting a highly uncertain future.
