Zhonghuan Shares: 12-inch products have become the baseline for multiple customers.

On August 6, Zhonghuan Shares released its 2021 semiannual report. The report showed that in the first half of the year, Zhonghuan Shares achieved operating revenue of 17.644 billion yuan, an increase of 104.12% year-on-year; and net profit attributable to shareholders of the listed company reached 1.480 billion yuan, up 174.92% year-on-year.

Image source: Screenshot from Zhonghuan Shares’ announcement

Regarding the key factors affecting the company’s performance during the reporting period, Zhonghuan Shares highlighted areas including the semiconductor photovoltaic business segment, the semiconductor materials business segment, the transformation toward modern manufacturing, and internal corporate governance.

Regarding the semiconductor materials business segment, the announcement noted that during the reporting period, the company’s production capacity expanded rapidly, its product mix was optimized and upgraded, and its production and sales volume increased by 65.8% year-on-year. The company has now become a domestically leading manufacturer of silicon polished wafers and epitaxial wafers with a comprehensive product portfolio. Leveraging its advantageous industrial layout, continuous improvements in process capabilities and utilization rates have further enhanced its commercial competitiveness. Taking advantage of the rapid growth in the semiconductor market, the company has signed long-term strategic cooperation agreements with several chip manufacturers, laying a solid customer base for its business development.

The announcement specifically mentioned that, in terms of customer development, the company is seizing incremental opportunities in specialized processes and achieving large-scale mass production. In particular, its 12-inch products have become the baseline for several key customers. Against the backdrop of tight global chip capacity, international silicon wafer manufacturers are expanding production at a slower pace than their domestic counterparts. As a result, the company is now enjoying more open opportunities to collaborate with international customers and has signed long-term supply agreements (LTAs) with numerous global clients, thereby strengthening its global competitiveness.

In terms of supply-demand balance, driven by demand—particularly in automotive electronics—orders for 8-inch and smaller wafers have exceeded expectations. While the company is accelerating the expansion of capacity at its Jiangsu large silicon wafer project, it is also planning to launch an expansion of its Tianjin plant and optimizing its asset structure to further enhance order-delivery capabilities and overall profitability. Meanwhile, orders from domestic customers for 12-inch products have surged. To meet this demand, the company is speeding up the commissioning of new production lines to unlock effective capacity and improve delivery rates.

In terms of project investment and construction, Phase I of the 8- to 12-inch large silicon wafer project has entered the final acceptance stage, and Phase II of the project has been launched ahead of schedule. Currently, monthly production capacity stands at 600,000 8-inch wafers and 70,000 12-inch wafers. It is expected that by the end of 2021, the project will achieve its targeted monthly production capacity of 700,000 8-inch wafers and 170,000 12-inch wafers.

In terms of technology R&D and customer certification, the R&D expense ratio for the reporting period was 9.7%, an increase of 4.9 percentage points compared to the same period last year. Our 8-inch products have now developed comprehensive capabilities and market competitiveness that are comparable to those of leading international manufacturers. New product R&D and certification have proceeded smoothly, and these products are gradually entering mass production. Our 12-inch products are currently in a phase of growth and breakthrough; products tailored for specialized processes have already been certified by several top-tier domestic customers and are now in stable mass production. Meanwhile, advanced-process products are accelerating their pace of catching up—logic products at 28nm and above have successfully completed verification with multiple customers and will enter a phase of accelerated growth in the second half of the year. Specialized products such as IGBTs, CIS sensors, PMICs, and DDICs have also undergone smooth certification processes.

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