After two years of industry consolidation and capacity rationalization, the silicon carbide sector is once again approaching an inflection point in its cycle. However, unlike the previous upturn, the current cycle is characterized by accelerating polarization in profitability across the industry. BASICSEMI, hailed as China's first silicon carbide chip stock, recently released its inaugural interim report, providing tangible evidence to address market expectations for the new silicon carbide cycle.
The most striking development is the decisive turnaround in overall gross margin, which has surged into positive territory. This is complemented by a strategic capital package encompassing share buybacks, equity incentives, and a proposed share issuance. The convergence of an operational inflection point and a declaration of confidence is clearly evident in this interim report.
Notably, these operational results were achieved entirely during the period before the company's IPO proceeds were received. With listing capital now at its disposal and the industry at an inflection point, the potential for future earnings release warrants close attention.
A 31.6 Percentage Point Leaps: Gross Margin Turns Positive in a Self-Driven Turnaround
On August 28, BASICSEMI disclosed its interim results for 2026. The report shows that the company's revenue grew 15.5% year-on-year. Crucially, overall gross margin improved dramatically from -28.8% in the same period last year to 2.8%, a leap of 31.6 percentage points. The adjusted net loss narrowed to RMB 112 million, a 15.1% reduction from the prior year.
While revenue growth and narrowed losses are positive, the most substantive signal in this report is the surge in gross margin into positive territory, indicating that BASICSEMI has begun to develop its own cash generation capabilities. Against the backdrop of prolonged industry overcapacity, intense price competition, widespread profitability pressure, and negative gross margins for most silicon carbide IDM players, BASICSEMI's gross margin turning positive first signifies that the company has found a "sweet spot" between product mix, customer structure, and cost management—a benchmark achievement for the broader industry.
Of course, this shift is not coincidental but results from the confluence of multiple internal factors, including product iteration and optimization of industry and customer structures. More precisely, this is a "turnaround battle" led by internal improvement.
The first improvement stems from sustained investment in product R&D iteration, steadily enhancing core competitiveness. As one of the few domestic SiC power device IDM companies achieving full-chain mass production from chip design to packaging and testing, BASICSEMI has continued to increase R&D investment, significantly accelerating its product iteration pace. Core performance metrics have improved steadily, with some parameters approaching international first-tier standards. In high-growth scenarios like new energy vehicles, photovoltaic energy storage, and AI power supplies, the company's high-performance silicon carbide solutions effectively address downstream customers' urgent need for power semiconductors with high efficiency and power density. Continuous technological breakthroughs constitute the primary driver of the company's fundamental improvement.
The second improvement arises from significant optimization of the industry structure, with high-growth and high-margin sectors becoming core growth poles. Strategic market positioning optimization is a key factor in the company's profitability enhancement. During the reporting period, BASICSEMI achieved breakthrough progress in the industrial-grade module market, with industrial and consumer applications ramping up rapidly. Combined with the high prosperity of emerging tracks such as artificial intelligence, the product mix has clearly shifted toward high-value-added segments. Data shows industrial-grade silicon carbide power module revenue surged by 2825.1% year-on-year, and silicon carbide MOSFET revenue grew by 582.3% in the first half. Both product lines scaled up in tandem. Simultaneously, the company proactively reduced sales of low-margin products, significantly improving revenue quality. These factors, alongside lower upstream raw material prices, jointly drove the notable improvement in overall gross margin.
The third improvement comes from the optimization and upgrade of the customer base, with high-value customers becoming the main growth engine. In customer development, BASICSEMI adopted a proactive strategy of selecting premium clients, extending its customer base to a broader, higher-quality segment, and diversifying revenue sources for greater stability. In the first half, the company secured a global vehicle project designated by a European first-tier automotive supplier, marking international mainstream recognition of its automotive-grade product capabilities. Additionally, new industrial-grade silicon carbide power module customers exceeded 60, with products successfully integrated into a major domestic telecom operator's AI data center. Electroplating power supply products accumulated orders exceeding 30,000 units, while discrete devices entered consumer applications such as LED lighting power supplies, PD fast charging, power adapters, and smart home appliances. The ongoing customer structure optimization reduces the impact of single-customer volatility and lays a more solid demand foundation for long-term growth.
The fourth improvement derives from enhanced integrated supply chain management, simultaneously boosting operational efficiency and cost control. Strengthened supply chain management serves as a crucial underlying support for improved operational quality. On the procurement front, the company reduced key raw material costs through centralized purchasing, long-term agreements, and domestic substitution. It also diversified supply channels for chips and packaging materials, enhancing bargaining power and risk resilience. On the manufacturing side, the company continues to implement lean production and process optimization, improving line yields and equipment utilization rates, shortening delivery cycles, and lowering unit manufacturing costs. In capacity construction, the company is advancing technical upgrades and expansion projects in phases based on high-margin product order growth, achieving efficient matching and release of capacity. The synergy of procurement cost reduction, manufacturing efficiency improvement, and capacity expansion not only elevates overall operational efficiency but also provides robust support for future scale expansion and enhanced customer responsiveness.
Confidence in a Steeper Profit Trajectory: Diversified Demand Drivers and Dual Strategic Positioning
A positive gross margin answers the question of "is the business healthy," but the market's key concern is "how far can it go." The answer is unfolding on the demand side. Currently, industries generating new demand for power semiconductors are emerging with unprecedented density. Traditional pillars like new energy vehicles and photovoltaic energy storage maintain growth resilience. The AI computing boom is intensifying demand for high-voltage, high-frequency, high-efficiency power conversion in data centers, prompting a repricing of wide-bandgap semiconductors like SiC. Humanoid robots and embodied intelligence are moving toward mass production, placing new requirements on power devices for precision motion control. Industrial electroplating power supplies and consumer-side applications—PD fast charging, LED lighting, smart home appliances—are also opening new growth avenues.
Supply-side dynamics are equally critical. Following the latest round of price competition, outdated industry capacity is being phased out, and leading players are adopting more rational, cautious expansion plans. Meanwhile, demand has shifted from being solely driven by new energy vehicles to a multi-engine model encompassing automotive, energy storage, industry, and AI computing. With more rational supply and a broadening demand base, this industry cycle rests on firmer foundations than previous ones.
For IDM manufacturers that have already amassed technology, capacity, and customer relationships, the improving industry environment is not a universal dividend but a lever amplifying earnings elasticity. Since its listing, the company has notably accelerated its strategic moves: announcing Q3 product price increases, deepening collaboration with HANLAKU Technology on 8-inch wafer capacity, partnering with UBTECH to enter the embodied intelligence field, and planning to invest nearly RMB 200 million in a new factory in Pingshan. On one front, 8-inch wafers consolidate the technological foundation; on the other, the company positions itself in emerging applications like AI data centers and humanoid robots. The dual positioning of "technology foundation plus application scenarios" is gradually taking shape. With product structure optimization, industrial-grade product ramp-up, customer base expansion, and industry supply-demand improvements all preliminarily validated, the slope of the company's profit curve is becoming increasingly clear.
Capital Market Narrative: Three Signals Aligned – Buyback and Equity Incentives Signal Strongest Confidence
At this point, BASICSEMI's complete growth logic has emerged: a positive gross margin proves self-sustaining cash generation capability, while diversified demand drivers coupled with volume, price, and cost improvements across all three fronts support expectations of accelerated future profit release. The final piece falls to how the capital market prices this industry upcycle—and the company clearly doesn't intend to be a passive observer.
Reviewing past industry price hike cycles, the sustained progression of the capital market growth narrative fundamentally relies on four categories of signals: the first three concern business execution, while the fourth involves capital market signals.
First, consider the implementation of manufacturer price increases. Many companies announce price hikes, but few translate them into actual orders. BASICSEMI's public announcement of Q3 price increases immediately after listing is both a declaration of its pricing power and confidence in its product value—the market values precisely this "dare to raise prices" conviction.
Second, assess capacity support. Price increases without corresponding capacity expansion result in profit growth lacking a sustainable foundation. The core allocation of BASICSEMI's IPO proceeds is directed at expanding production capacity, providing a clear path for potential capacity growth. When price increases and volume expansion work in tandem, profit elasticity gains greater sustainability and imagination space.
Third, examine order wins in new directions. Price increases in traditional demand create cyclical elasticity, but new demand orders are the source of growth. The continuous integration of AI data center orders, cumulative orders exceeding 30,000 units for electroplating power supplies, and collaboration with UBTECH in embodied intelligence all represent solid performance support reflected in financial statements.
Beyond these three business signals, the company's own financial commitment may be the most compelling indicator. Around the interim report release, BASICSEMI simultaneously launched a share buyback and equity incentive plan—mutually reinforcing, pointing to a common core: the stock is undervalued, and the team has determination. Since listing nearly two months ago, the stock price has gained substantially from its issue price. Management initiating a buyback at this juncture is a clear action-based demonstration of fundamental confidence. Using its own funds to purchase company shares for incentive purposes is a more authentic valuation endorsement than any statement. This buyback is strategically focused on building a reserve to provide a share pool for core talent equity incentives.
For hard-tech companies, the foundation lies in R&D, and the foundation of R&D lies in people. A buyback immediately after listing is not market manipulation—it's converting top engineers into "insiders," making the incentive plan perfectly timed. With gross margin turning positive and the profitability path clear, binding the core team's interests now is a natural move. The buyback provides fuel, incentives generate growth, and the team is betting on a dual commitment to technological iteration and performance delivery. For hard-tech companies, talent is the core asset—with proper incentives, growth achieves its slope. The proposed share issuance represents a capital-level reaffirmation of the company's medium-to-long-term value. Long-term and industrial capital entering looks beyond one or two quarters of fluctuation, focusing instead on a three-to-five-year industrial trajectory. Positioning at the starting point of the silicon carbide cyclical recovery, this conviction itself is the most powerful endorsement of the company's growth logic.
Three actions, one core: confidence. The company believes in itself, hence the buyback; the team believes in the future, hence the incentives; capital believes in the trend, hence the issuance. When the operational inflection point and capital consensus converge at the same moment, the certainty of the growth story transcends mere narrative. BASICSEMI has hit all four categories of signals. From the gross margin leap into positive territory, to profit growth expectations, to capital market signals represented by buybacks, incentives, and share issuance, the three-layered logic is interconnected, each layer supported by verifiable evidence. Financial figures can only explain the past; capital actions point to the future. As the industry recovery aligns with proactive corporate action, market pricing logic for this Chinese silicon carbide chip leader is shifting from "will it survive" to "how big can it grow."
The gross margin turning positive is merely the prelude; subsequent capacity release and new application order execution will be the main event. For investors, the value of this interim report lies not in the 31.6 percentage point leap itself, but in the window it opens—revealing a gradually clarifying growth trajectory.