After trading on February 12, Shanghai silicon industry (688126. SH) announced that its subsidiaries plan to sign a long-term purchase order for electronic-grade polysilicon with Jiangsu Xinhua Semiconductor Technology Co., Ltd. (hereinafter referred to as "Xinhua Semiconductor"), with a total amount of 1.054 billion yuan.

The Times Weekly reporter noticed that in 2022, Shanghai Silicon Industry signed a similar long order with Xinhua Semiconductor, which was re-signed due to the change of the main body of the contract.

After the announcement was issued, on February 13, the Shanghai silicon industry fell slightly by 1.78% to close at 18.23 yuan per share.

Another 1.054 billion long orders were signed, and new contract subjects were added

Shanghai Xinsheng Semiconductor Technology Co., Ltd. (hereinafter referred to as "Shanghai Xinsheng"), a subsidiary of Shanghai Silicon Industry, and its holding subsidiaries Shanghai Xinsheng Jingrui Semiconductor Technology Co., Ltd. (hereinafter referred to as "Xinsheng Jingrui") and Taiyuan Jinke Silicon Material Technology Co., Ltd. (hereinafter referred to as "Jinke Silicon Materials") intend to sign an electronic grade polysilicon procurement framework contract with Jiangsu Xinhua Semiconductor Technology Co., Ltd. (hereinafter referred to as "Xinhua Semiconductor").

The two parties agreed that from 2025 to 2029, the total contract amount of Shanghai Silicon Industry to purchase electronic-grade polysilicon products from Xinhua Semiconductor is expected to be 1.054 billion yuan (tax included).

As Li Wei, executive vice president of Shanghai Silicon Industry, serves as a director of Xinhua Semiconductor, and in the past 12 months, Yang Liu, director of Shanghai Silicon Industry, has also served as a director of Xinhua Semiconductor and is a related party of the company. Therefore, this transaction constitutes a connected transaction. In 2024, Shanghai Silicon Industry and Xinhua Semiconductor have a transaction amount of 154 million yuan.

In this regard, Shanghai Silicon Industry said that this transaction will be conducive to further establishing a strategic partnership with suppliers, committed to mutual benefit and win-win results between the two sides, and laying a good foundation for long-term cooperation.

At present, the main domestic electronic grade polysilicon companies in China are Xinhua Semiconductor and Upper Yellow River Hydropower Development Co., Ltd. Xinhua Semiconductor is the first semiconductor material enterprise in China to realize the large-scale production of electronic-grade polysilicon.

In November 2022, Shanghai Silicon Industry signed a long-term order with Xinhua Semiconductor, and the two parties signed a long-term order with a total amount of 889 million yuan for electronic-grade polysilicon from 2023 to 2026.

On February 13, a reporter from Times Weekly called Shanghai Silicon Industry, and its staff said that due to the addition of a new subsidiary of Jinke Silicon Materials, the main body of the contract has changed, so a long purchase order has been re-signed.

Production capacity continued to expand, and capital management came under pressure

Jinke Silicon Materials is the main body of the implementation of the 300mm silicon wafer capacity upgrade project for integrated circuits in Taiyuan. According to the 2024 semi-annual report of Shanghai Silicon Industry, the total investment of its Taiyuan project is about 9.1 billion yuan, and it is planned to build a crystal pulling capacity of 600,000 pieces/month (including heavy doping) and a cutting and polishing capacity of 200,000 pieces/month (including heavy doping), and it is expected to complete the construction of the pilot line in 2024 to achieve a production capacity of 50,000 pieces/month.

At the same time, Shanghai silicon industry is also investing 4.1 billion yuan in Shanghai to build a 300mm silicon wafer production capacity upgrade project for integrated circuits, and plans to build a cutting and polishing capacity of 400,000 pieces per month. If the projects in Shanghai and Taiyuan are completed, the 300mm wafer production capacity of the Shanghai silicon industry will increase by 600,000 pieces/month on the existing basis to 1.2 million pieces/month.

However, on the question of whether the Taiyuan project will be completed as scheduled in 2024, Shanghai Silicon Industry only mentioned in the investor activity record in November 2024 that the company is currently accelerating the construction of the Taiyuan project, and production capacity will be released in the future. During the construction process, the rhythm of capacity release will also be controlled and adjusted according to market conditions.

In addition to the two projects in Shanghai and Taiyuan, the expansion project of Okmetic's 200mm semiconductor characteristic silicon wafer in Vantaa, Finland, is also under construction, and its 2024 semi-annual report mentioned that Okmetic's expansion project can be equipped within the year.

On February 13, for the latest progress of the above projects, the Times Weekly reporter called the Shanghai Silicon Industry Securities Department, and the above-mentioned staff said that all the progress of its projects is subject to regular disclosure.

The main products of Shanghai silicon industry are semiconductor silicon wafers and SOI silicon wafers of 300mm and below, which are important materials for chip manufacturing. However, due to the impact of the semiconductor market recovery not meeting expectations, since 2024, the Shanghai silicon industry has fallen into a loss situation of increasing revenue but not increasing profits.

In the first three quarters of 2024, its revenue was 2.479 billion yuan, a year-on-year increase of 3.70%; The net profit attributable to the parent company was -536 million yuan, a year-on-year decrease of 352.40%. At the same time, as of the end of the third quarter of 2024, the Shanghai silicon industry has made a total provision of about 46.5581 million yuan for various impairment losses.

In terms of capital management, Shanghai's silicon industry continued to be under pressure. As of September 30, 2024, its monetary funds decreased by RMB1.453 billion from the end of the previous year to RMB5.848 billion, while accounts receivable increased by RMB348 million from the end of the previous year to RMB916 million.