While operating its light-emitting diode (LED) bead business, the Group is working hard to explore diversification opportunities. Recognising the strong potential of third-generation semiconductor gallium nitride (GaN) and its vast number of applications, the Group officially entered the third-generation semiconductor industry during the Year. Leveraging its industry expertise in LED manufacturing, the Group expanded its business to third-generation semiconductor and system application design and manufacturing activities. In line with its business development strategies, the Group has changed its company name to "HG Semiconductor Limited" since October 2021.
HG Semiconductor is committed to strategically allocating resources for the development of its GaN business during the Year, hence LED business remained the main contributor of the Group's annual results. During the Year, the total revenue of the Group increased by approximately 3.4% to approximately RMB126.1 million (2020: approximately RMB122.0 million). Due to the loss arising on acquisition of intangible assets and the recognition of equity-settled share-based payment expenses for the share options granted on 17 June 2021, loss for the Year was approximately RMB446.8 million (2020: net profit of approximately RMB 4.6 million). Excluding the impact of the abovementioned one-off loss and expenses, the Group's loss for the Year was approximately RMB18.4 million. Basic and diluted loss per share was RMB0.92 (2020: basic and diluted earnings per share was RMB1.14 cents).
The management of the Group revealed that COVID-19 pandemic continued to affect all around the globe during the Year, coupled with the disruption of global supply chains and escalating inflation, hindering the full recovery of the economy. However, during the pandemic, the recovery of the global semiconductor market has become more optimistic. With the strong market demand for chips, the Group expanded its business to third-generation semiconductor and system application solutions during the Year. Leveraging its expertise, the professionalism of its teams, and its research and development (R&D) capabilities in semiconductor manufacturing, the Group successfully transformed its business strategy and strategically deployed capital to invest in the world's leading GaN companies.
Business Review
During the Year, the revenue of LED beads was approximately RMB126.1 million (2020: approximately RMB121.1 million), accounting for approximately 100.0% (2020: approximately 99.3%) of the total revenue. The increase in revenue during the Year was mainly attributable to the increase in sales volume driven by the strong demand for semiconductor products in China in the first half of 2021.
In addition, the Group expedited the business transformation of the third-generation semiconductor business in various repects to build its core capabilities of GaN during the Year, including creating breakthroughs in core technologies, strengthening industry R&D and production management, etc., and achieving phenomenal progress.
Strategic investments in leading technology companies to drive rapid business growth
During the Year, the Group actively entered into strategic and framework cooperation agreements with a number of third-generation semiconductor companies and made strategic investments in a number of leading firms to accelerate breakthroughs in core technologies as it strived to technologically outperform its competitors. In May 2021, the Group completed the acquisition of GSR GO Holding Corporation, mainly engaging in R&D involving fast-charging solutions for battery systems, helping the Group to capturing the market potential of electric bicycle battery systems and related fast-charging solutions. The Group also invested in VisIC Technologies Limited and GaN Systems Inc., the world's leading GaN companies, in August and November 2021 respectively.
Strong technological advantages and solid progress towards complete production layout
The Group has been actively enhancing GaN core equipment, R&D, and production facilities to optimise production management to cater for customers' needs and produce more chips to meet that demand. The Group has set up a new factory in the Xuzhou Economic and Technological Development Zone that includes 7,000 square metres of ultra-clean chambers and 850 square metres of office space, and acquired machinery to expand its semiconductor production capacity. Meanwhile, the Group has set up a R&D centre in Shenzhen with its own design and R&D team to enhance the design and production of materials and devices, and accordingly strengthen its R&D capabilities industry-wide. During the Year, the Group obtained six fast-charging battery system patents for charging stations, charging conversion systems, charging modules and fast-charging equipment for electric vehicle charging stations.
Strategic cooperation with target customers to generate early-stage profits
The Group has successfully entered into strategic cooperation arrangements with target customers, laying solid foundations for business expansion in the long run. The Group entered into the three-year strategic cooperation agreement with Shenzhen Romoss Technology Co., Ltd. and Beijing Hongzhi Electric Technology Co., Ltd. to jointly provide solutions for semiconductors, GaN-related products and chipsets for fast-charging batteries.
Building a world-class science and management team
To accelerate R&D involving the Group's third-generation semiconductors, the Group successfully invited a number of senior semiconductor experts to join the management and technology team during the Year. Moreover, the Group has established a Global Strategic Advisory Committee to strengthen and promote the development of its GaN business. The committee comprises three initial members: Mr. Sonny Wu, its chairman, and Mr. Kenneth James Bradley and Mr. Tang Yin Man, members of the Global Strategic Advisory Committee. The committee is responsible for reporting to and advising the management of HG Semiconductor on issues that the Group may face from time to time.
Outlook
Third-generation semiconductors are regarded as presenting an opportunity to secure rapid growth for the semiconductor industry in China. The country has also introduced a number of policies to support the R&D of key core technologies for high-end chips to develop independent control of the semiconductor industry. In the future, the Group will spare no effort to become a pioneer integrated device manufacturer (IDM) in semiconductor that spans the whole industry chain, including R&D, manufacturing, packaging and package testing, and sales. In addition to actively seeking cooperation with other enterprises, the Group will strengthen its own capabilities. The Group will continue to enhance its core equipment and various R&D and production support facilities, and is committed to renovating its Xuzhou factory, while continuing the construction and commissioning of production lines at the factory and enhancing its production capacity to satisfy future market demand. The Group will leverage the advantages brought about by its internal integration of resources, as it always does to enhance the efficiency of its operational management and shorten the time required to progress from product design to mass production, further consolidating its presence in existing markets and its R&D capabilities. The Group will continue to seek more collaboration opportunities with suitable third parties, and recruit more semiconductor talents to accelerate its R&D and create more applications for GaN-related products. The Group will also build a stronger sales team by recruiting sales professionals with extensive experience in the industry, which will help it to obtain cutting-edge advantages when approaching new customers.
The management of the Group believe that, leveraging the Group's strong technological advantages and the favourable national policies, the Group is poised to strategically transform its business in order to seize the opportunities arising from the huge market demand. The Group will allocate more resources and continue to build the broadest and deepest technological platform, while continuously improve its industry and product chains and further enhance its brand reputation. The management is confident in the Group's future business performance, and believe that its GaN business will gradually support the Group's revenue growth and become its growth engine in the future, thereby creating long-term returns for shareholders.
About HG Semiconductor Limited
HG Semiconductor Limited (6908.HK) is principally engaged in semiconductor product business in China, including the design, development, manufacturing, subcontracting services and sales of light-emitting diode ("LED") beads, new generation of semiconductor gallium nitride ("GaN") chips, GaN components and related application products, as well as fast charging products. Leveraging its industry expertise in LED manufacturing, the Group is dedicated to accelerating its research and development and expansion in the application of GaN related products, with an aim to become a leading semiconductor company with the integration of design, manufacturing and sales of semiconductor chips, as well as providing total solutions with higher efficiency and competitive system cost.
For more details, please visit www.hg-semiconductor.com
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