The semiconductor industry is turbulent, and this small yet exquisite chip company demonstrates resilience amidst narrowing losses, with its AI layout quietly accelerating behind its main business.
Hengshuo Semiconductor (Hefei) Co., Ltd. (stock code: 688416.SH) was listed on the STAR Market in August 2022, focusing on the research and design of NOR Flash memory chips and MCU chips. As an important player in the domestic semiconductor industry, Hengshuo is striving for breakthroughs in a fiercely competitive market.
As of October 2025, the company’s stock price has risen by 68.23% since the beginning of the year, with a total market value of approximately 5.441 billion yuan, and a negative price-to-earnings ratio (TTM), reflecting market divergence regarding its future performance.
01 Financial Performance Insight: The Operational Truth Behind Narrowing Losses
Recent financial data shows a complex situation for Hengshuo: on one hand, losses have narrowed, while on the other hand, revenue growth still faces challenges.
In the first half of 2025, the company achieved operating revenue of 174 million yuan, a slight year-on-year decrease of 1.79%. The net profit attributable to shareholders was -70.7824 million yuan, a reduction in losses compared to the same period last year.
A detailed analysis of the profit structure reveals that the main reason for the reduction in losses is a significant decrease in asset impairment losses. In the first half of 2025, the company recognized inventory impairment provisions of 33.2994 million yuan, a significant reduction compared to 50.1719 million yuan in the same period of 2024.
In terms of cash flow, the net cash flow from operating activities turned positive at 40.3761 million yuan in the first half of 2025, a significant improvement from -89.0305 million yuan in the same period last year, indicating enhanced management capability of working capital.
However, the profitability of the company’s main business still faces challenges. In the first half of 2025, the main business profit was -49.6545 million yuan, an increase in losses compared to the same period last year. This is mainly due to a year-on-year increase of 29.79% in management expenses, along with a slight year-on-year decrease of 1.79% in operating revenue.
02 Industry Position and Competitive Advantage Analysis
Hengshuo holds approximately 3% of the domestic NOR Flash market, primarily focusing on consumer electronics and the Internet of Things (IoT) sectors. The company’s products have entered the supply chains of Xiaomi, OPPO, Lenovo, and others, holding a certain industry position in niche markets.
From a technical strength perspective, Hengshuo has achieved full coverage of advanced processes such as 55nm and 50nm, with key indicators like static current and read/write speed ranking among the industry leaders. The company’s 256Mb NOR Flash products were shipped in the third quarter of 2023, and the 512Mb products are currently under development.
In terms of customer structure, the company collaborates with leading enterprises such as Jieli Technology and Espressif Technology, and NOR Flash products are also supplied in bulk to AI toy manufacturer Haivivi (a partner in the ByteDance ecosystem). In the first quarter of 2024, the company’s NOR Flash products successfully entered the electronic cigarette market, becoming a new growth point.
In horizontal comparison, Hengshuo’s revenue growth rate in the first half of 2025 was among the lowest among comparable companies. During the same period, comparable companies such as Puran Co., Fengqian Technology, Xinhai Technology, Dongxin Co., Zhaoyi Innovation, Dongwei Semiconductor, and Zhongying Electronics had revenue growth rates of 1.19%, 32.84%, 6.80%, 28.81%, 15.00%, 46.79%, and -0.20%, respectively.
03 Future Growth Points: AI and Automotive Electronics Layout
Despite current operational challenges, Hengshuo’s layout in cutting-edge fields such as AI chips and automotive electronics may bring long-term value.
The company is actively entering the artificial intelligence market through its fundraising project, “Research and Development of Low-Power Hardware and Software Inference Systems for Edge AI,” which focuses on computing-storage integration technology aimed at developing low-power inference systems suitable for edge AI scenarios.
The company’s CiNOR computing-storage integrated AI chip is still in the research and development stage and has not yet achieved mass production sales. The company also plans to develop an offline-interactive solution that combines low-power edge AI and high-performance cloud-based large models, aiming to expand the edge market for AIoT.
In the automotive electronics field, the company is actively laying out and developing automotive-related markets, with some products undergoing AEC-Q100 standard testing and certification. This certification is an important threshold in the automotive electronics field, and once passed, it will open up a larger market space for the company.
In terms of product lines, the company expects to launch the M0+ series products with better performance and cost-effectiveness in 2025, while the M3 series products, which have greater computing power and broader application scenarios, are progressing well in development, further enriching the company’s product line.
04 Progress of Fundraising Projects and Capacity Assurance
The net amount raised from Hengshuo’s IPO was 1.21 billion yuan, with a total of 456 million yuan in oversubscription funds. However, the progress of the company’s IPO fundraising projects has been relatively slow.
As of June 2025, the company has committed a total investment of 298 million yuan in projects, with a usage progress of 39.5% for IPO funds. Of the oversubscription funds, 137 million yuan was used to repay bank loans, and 273 million yuan was used to permanently supplement working capital.
In terms of capacity assurance, the company has a solid partnership with wafer foundries. Hengshuo’s NOR Flash products are procured from Wuhan Xinxin and SMIC, while MCU product wafer foundry services are also sourced from Wuhan Xinxin.
The company stated: “Currently, there are no issues with our capacity assurance, and we are actively communicating with wafer foundries regarding foundry costs, with some prices being reduced.” This is positively significant for the company in controlling costs and improving gross margins.
05 Valuation Analysis and Investment Risks
From a valuation perspective, as of early November 2025, Hengshuo’s price-to-book ratio (LF) was 4.29 times, and the price-to-sales ratio (TTM) was 11.1 times. Due to the company’s continued losses, the price-to-earnings ratio is negative, providing little reference value.
Based on the company’s current business layout and development prospects, its main investment risks include:
– Industry competition risk: The NOR Flash and MCU markets are highly competitive, with pressure from domestic manufacturers such as Zhaoyi Innovation and Dongxin, as well as international giants.
– Technology iteration risk: AI chip development requires continuous high investment, and the technology roadmap is not yet fully mature, posing risks of research and development outcomes falling short of expectations.
– Customer concentration risk: The company’s products are primarily aimed at the consumer electronics market, which has significant cyclical characteristics and large demand fluctuations.
– Inventory impairment risk: As of the end of the first half of 2025, the company’s inventory book value was 334 million yuan, accounting for 25.82% of net assets, posing certain impairment pressure.
06 Future Outlook: Challenges and Opportunities Coexist
Looking ahead, Hengshuo faces a situation of both challenges and opportunities.
The company’s equity incentive plan released in 2024 sets ambitious revenue targets: 459 million yuan, 581 million yuan, and 856 million yuan for 2024, 2025, and 2026, respectively, with trigger values of 367 million yuan, 428 million yuan, and 566 million yuan. This reflects the management’s confidence in the company’s future growth.
In the short term, the cyclical characteristics of the semiconductor industry remain evident, and the company needs to respond to challenges posed by changes in market demand. In the first half of 2025, due to intense market competition, the sales prices of the company’s main products were at a low level, putting pressure on gross margins.
In the medium to long term, the company’s layout in the AI chip field may bring long-term value. Although AI chips are still in the research and development stage, the global AI chip market is rapidly growing, and the company’s early layout in research and development will provide important competitive advantages for future development.
From an industry trend perspective, the semiconductor memory chip market has been continuously expanding over the past three years, driven by 5G communication, artificial intelligence, and the Internet of Things. The global NOR Flash market reached 3.72 billion USD in 2023 and is expected to exceed 4.5 billion USD by 2025. In the future, high-performance computing, smart vehicles, and edge AI devices will drive technological iteration, with automotive-grade storage chips becoming a core growth point.
Hengshuo is like a ship adjusting its course; although it is still navigating through the turbulent waters of losses, it has begun to sail towards the promising new seas of AI and automotive electronics. The company’s true value may not only be reflected in its current financial data but also hidden in its technological reserves and market layout.
(Note: This article is based on publicly available information and does not constitute any investment advice. The market has risks, and investment should be cautious.)