Shenzhen Giahong Semiconductor, a subsidiary of Hongguang Semiconductor (06908), received a capital increase of 80 million yuan

Zhitong Finance App News, Hongguang Semiconductor (06908) issued an announcement. On October 29, 2026, the target company Shenzhen Giahong Semiconductor, Swift Power, Join Gain, Red Mont, employee shareholding platform, Taizhou Huirong Glaneng Youchuang Investment, Orchid Enterprises and the project company signed a capital increase agreement with the investor Chizhou Hengchuang Pilot Venture Capital Fund Partnership (limited partnership). The investors have conditionally agreed to increase the target company's capital by RMB 80 million (or (US dollar equivalent) to subscribe for the target company's newly registered capital of US$1,3381 million, accounting for about 6.9085% of the target company's expanded registered capital to increase its registered capital and capital reserves.

Upon completion, investors will own approximately 6.9085% of the expanded interest in the target company, while the Group's equity in the target company (held through Swift Power, Join Gain and Red Mont) will be diluted from about 73.2745% to approximately 68.2125%.

According to the capital increase agreement, the target company, Swift Power, Join Gain, Red Mont, Employee Shareholding Platform, Taizhou Huirong Glanneng Youchuang Investment, Orchid Enterprises, investors and project companies will enter into a shareholder agreement upon completion. According to the shareholders' agreement, the repurchase obligor will separately grant repurchase options to the investor and Taizhou Huirong Glaneng Youchuang Investment. The investor and Taizhou Huirong Glanneng Youchuang Investment have the right to request that the repurchase obligor purchase all or part of their shares in the target company at the repurchase price in accordance with the terms of the shareholder agreement.

The Group started the GaN business in 2021 and set up a plant in Xuzhou. Over the past few years of development, the Xuzhou plant has made strategic breakthroughs in the development and manufacture of GaN epitaxial wafers and device products. The Xuzhou plant began large-scale production of GaN epitaxial films in 2025, and the target group obtained revenue of about RMB 29.6 million for the year ended December 31, 2025. Compared with the revenue of approximately RMB 1.36 million for the year ended December 31, 2024, showing a revenue growth trend.

The Group will continue to step up efforts to improve the third-generation semiconductor GaN industry chain to accelerate the pace of R&D and expand the application of GaN related products. For the Group, the capital increase is an opportunity to introduce additional capital for the development of the target group and support the Chizhou module packaging production line project.

The Group has been actively seeking cooperation and investment with strategic partners, upholding the principles of complementary resources and win-win cooperation to upgrade its industrial chain. The Group is committed to continuously enhancing its R&D capabilities, introducing outstanding experts in the semiconductor field to strengthen production and R&D, and is determined to become an IDM enterprise in the entire GaN industry chain integrating R&D, manufacturing, packaging, packaging, testing and sales.

In terms of the semiconductor industry, according to the “2025 Overview” issued by the Semiconductor Industry Association, China is the world's largest single country market, and demand in the Chinese semiconductor market is showing good growth in various fields, including technological innovation, power devices, automotive electronics, artificial intelligence, and the Internet of Things. The government's support policy and industrial development strategy have also provided good development opportunities for China's semiconductor industry. In particular, in terms of new energy and new energy vehicle electronics, China's new energy investment is growing rapidly, and photovoltaics, wind power generation, energy storage, batteries, etc. are leading the global industry; China's NEV market is experiencing rapid development, and market demand for automotive intelligent driving chips and power chips is growing rapidly.

According to the Fall 2025 semiconductor market forecast update published by the World Semiconductor Trade Statistics (WSTS) organization, the global semiconductor market is expected to grow by more than 25% to reach US$975 billion. Growth is expected in all regions and product categories. Driven by demand for data center infrastructure and the rise of early AI edge applications, memory and logic are expected to take the lead again, both of which will grow by more than 30% year over year.

As an important member of third-generation semiconductors, GaN can operate under high frequency conditions and maintain high performance and high efficiency, and has lower losses compared to previously used silicon transistors. As third-generation semiconductors enter the window period, demand for third-generation semiconductor materials in different fields has surged, semiconductor products also tend to diversify, and the speed of iteration and innovation continues to accelerate.

Thanks to the huge market demand for consumer electronics, new energy and new energy vehicles, combined with major trends in industrial upgrading and process substitution, the market demand for GaN power products is strong, and the GaN power market has become the category with the fastest increase in output value in the third-generation semiconductor industry. Among them, new energy vehicles are the main driving force for growth — local Chinese brands account for more than 80% of the national electric vehicle market and are increasingly favored in terms of exports. This trend has brought huge business opportunities to the entire supply chain. Seeing this, domestic electric vehicle manufacturers are also accelerating the development of third-generation semiconductor devices in the automotive sector. Driven by national policy support and strong market demand, the GaN power product field is expected to develop further rapidly.

Therefore, the investors' capital increase is a valuable opportunity for the Group to raise capital in the current difficult market environment to expand the Group's production capacity to meet growing customer needs and enhance the Group's R&D capabilities in developing next-generation products. Investments made in target groups through capital increases will be allocated to GaN chip projects to boost business growth. Proceeds from the capital increase, together with the Group's self-raised capital of RMB 20 million, will be used for (i) the Chizhou module packaging production line project; and (ii) other purposes approved in writing by the investors.

Chizhou City, Anhui Province, China actively positions itself as a professional manufacturing and packaging center in the Yangtze River Delta semiconductor network, which can directly connect local professional suppliers and downstream partners. The Chizhou Municipal Government is also actively providing subsidies and financial incentives to support the local semiconductor industry. It is proposed to relocate the Group's module packaging production plant from Xuzhou plant to Chizhou as a strategic operation arrangement. Chizhou has formed a mature semiconductor industry cluster centered on power supplies and third-generation semiconductors, and has complete upstream and downstream supporting resources, preferential industrial policies, and competitive costs. The Chizhou module packaging production line project will help expand the Group's GaN product production capacity, shorten supply chain delivery time, get closer to major downstream customers in the Yangtze River Delta, and optimize the Group's cost structure and long-term gross profit level.