New Stock Preview | AI Scaler, the industry leader, has accumulated losses of approximately 250 million over the past three years. What is the value of Xihua Technology?

After BLACK SESAME (02533) became the first 18C chip company to knock on the door of the Hong Kong Exchange in August 2024, the semiconductor design sector of Hong Kong stocks experienced a significant acceleration in 2026 - BIREN TECH (06082), ILUVATAR COREX (09903), SIZHICI Technology (01879), BASICSEMI (09971) all successfully completed listing in the 18C manner within the year. AXERA (00600) also increased its edge AI track through the main board channel of Hong Kong stock. At the same time, companies such as Sihua Technology, Moshi Intelligent, and Denglin Technology have submitted applications and are waiting in line. In addition to this, the filling of leading A+H heads such as OmniVision Integrated Circuits Group, Inc. (00501), GigaDevice Semiconductor Inc. (03986), Montage Technology (06809), SG Micro Corp (03661), etc., Hong Kong stocks are gradually building a relatively complete chip design layout from GPU, edge AI, silicon light to automotive rules, and power. As the layout expands, the competition in the segmented track continues to heat up. It is observed that after submitting applications for the first time on December 3, 2025, Sihua Technology, which is driven by the dual wheels of "intelligent display + vehicle regulation control", knocked on the door of the Hong Kong Exchange main board for the second time on June 5 of this year, with Agricultural Bank International as the exclusive sponsor. The confidence to accelerate the listing process of Sihua Technology is derived from its dominance in the Scaler chip field. According to Frost & Sullivan data, based on the shipment volume in 2025, Sihua Technology not only ranked first in the world in the ASIC architecture Scaler segmented track, but also ranked first in the entire Scaler industry; and its AI Scaler revenue has ranked first in the Chinese market for four consecutive years since 2022. However, under the halo of market leaders, the realization of profitability remains a reality test facing the company. The prospectus shows that from 2023 to 2025, the company's revenue increased from 150 million yuan to 346 million yuan, achieving sustained rapid growth; however, the adjusted net losses during the same period were approximately 129 million yuan, 68.735 million yuan, and 51.07 million yuan, respectively. Although the amount of losses has narrowed year by year, signaling a positive trend of reducing losses, the total cumulative losses over the three years are still around 250 million yuan. This has brought the market's attention to one point: whether Sihua Technology can continue its high-growth momentum, and when will the break-even point be reached? This not only concerns the strategic turning point at the operational level of the company, but also determines the core variable of whether the company can raise the valuation center after listing on the Hong Kong stock exchange. With an increase in valuation of nearly 20 times in 11 rounds of financing, the post-investment valuation of the third round of C3 is about 3.74 billion yuan In 2018, Chen Xi, an entrepreneur from Tsinghua University, registered Sihua Technology in Shenzhen, and the following year, he established the first research and development center in Shanghai, anchoring the image processing and touch chip track, starting with technology and scale verification in the field of consumer electronics wearable devices. After stabilizing the consumer end in 2020, the company extended to the high barrier vehicle regulation MCU track, obtaining ISO 9001, ISO 26262 functional safety process certification, and the highest level qualification of ASIL-D, preparing in advance for entry into the automotive supply chain. In 2021, Sihua Technology launched the core explosive product AI Scaler series, and completed the production of the high, medium, and low-end series in 2022. This pushed the company to achieve the global shipment volume of the ASIC architecture Scaler segmented track first place in 2025. At the same time, the development of the company in the vehicle regulation side has also steadily progressed. In 2023, the general MCU was mass-produced, TMCU landed in 2024, the first SCCU was mass-produced, and it became the first manufacturer in China to mass-produce the hand-off detection (HoD) solution. The German TUV ISO 26262 functional safety certification has been successfully upgraded from level 2 to level 3, marking the company's accelerated move towards advanced autonomous driving. By 2025, Sihua Technology has independently developed chips with a cumulative shipment volume of over one million, and the company is also accelerating its layout in international markets and entering the field of intelligent identification for higher development. The development history of Sihua Technology is not only its own growth history but also a microcosm of domestic side AI chip seeking breakthroughs under the siege of giants. It follows the strategic logic of "first do consumer electronics to verify technology and scale conquer vehicle regulation certification to establish barriers create a leading position in the Scaler segment with AI Scaler extend to advanced autonomous driving and intelligent identification". The rise of Sihua Technology is backed by the strong support of the primary market capital. It is found that from the Pre-A round in 2020 to the C3 round in 2026, the company has gone through 11 rounds of financing, raising approximately 766 million yuan through new share issuance. Based on the global leading position of AI Scaler and the expected volume of vehicle regulation MCU, its post-investment valuation has soared from 187 million yuan to 3.74 billion yuan, an increase of nearly 20 times in just five years. And the 3.74 billion yuan valuation obtained in the C3 round will be the core reference anchor point for this Hong Kong stock IPO pricing. After 11 rounds of financing, Sihua Technology has established a shareholding structure where the founder leads with the presence of diversified financial and industrial capital. The company's controlling shareholder Chen Xi and his spouse Wang Hong collectively hold 61.29% of the voting rights, firmly steering the direction of this "Tsinghua system" company. In the institutional camp, Huifriend Holdings sits firmly in the institutional leader position with a 6.09% stake. Hongtai Fund and Hongyi Honghao under LEGENDHOLDING hold 4.97% and 2.78% of the shares, respectively, forming the backbone of financial capital. In addition, the Lu Xin Wan Neng, with a strong local state-owned asset color, holds 1.85% of the shares, while Shenzhen Lihe Corporation (LiheHongxin, with a stake of 2.42%) continues its connection with the Tsinghua system. Famous private equity firm Jinglin Investment also holds 1.92% of the shares through Jinglin Jingying. In addition, the whole vehicle company Chery Technology holds approximately 0.94% of the shares. The reduction in operating expenses as a percentage of revenue has helped accelerate the reduction of losses, and the gross profit margin has experienced a "roller coaster" ride According to the prospectus, Sihua Technology has two main business segments, namely intelligent display chips and solutions, with the main products being AI Scaler and STDI chips; and intelligent sensing control chips and solutions, with main products including TMCU, general MCU, touch chips, and intelligent cockpit solutions. In 2025, the revenue share of intelligent display chips and solutions was 76.3%, and this business segment remains the "ballast stone" of Sihua Technology. The intelligent sensing control chips and solutions, as a growth curve, accounted for 23.7% of the revenue in 2025. The continued rapid growth of revenue at Sihua Technology can be attributed to the dual-wheel drive of the two major business segments. The revenue of display chip products increased from 134 million yuan in 2023 to 238 million yuan in 2024, and further increased to 264 million yuan in 2025; while the revenue of sensing control chip products showed a fluctuating upward trend, with revenues of 15.619 million, 6.448 million, and 82.163 million yuan from 2023 to 2025, respectively. Specifically, the growth of revenue from display chip products is mainly due to three factors: first, the replacement of the architecture slot, ASIC Scaler has significant cost and power consumption advantages compared to FPGA Scaler, and the company was the first to enjoy the scale production of ASIC Scaler to benefit from the replacement dividend; Second, seizing the aftermarket for mobile screen repair, AI Scaler quickly gained volume in this massive market based on its high cost-effectiveness; third, deep binding with major customers, the company signed a joint research agreement with customer A (distributor) as early as 2020, locking in orders with a "customer financing, company effort" model, and this customer contributed as much as 66.5% of the revenue during the reporting period. The increase in revenue from sensing control chip products is mainly due to the accelerated volume of SCCU (intelligent cockpit control chip) in 2025, with this single product contributing more than 20% of the revenue in 2025. It is worth noting that in 2024, Sihua Technology's TMCU and general MCU had entered nine of the top ten domestic automobile OEMs (Chery, BYD Company Limited, Chongqing Sokon Industry Group Stock, Ideal, etc.), and these two products also experienced some volume increase in 2025, supporting the growth of revenue from sensing control chips. While revenue continues to grow, a key factor in the acceleration of reducing losses at Sihua Technology is the rapid decrease in the percentage of operating expenses as a scale effect. According to the prospectus, the three expenses of Sihua Technology as a percentage of total revenue decreased from 130.8%, 65.3%, to 50.9% from 2023 to 2025, showing a clear downward trend. In particular, research and development expenses decreased significantly from 83.1% in 2023 to 27% in 2025. The cliff-like decline in research and development expense ratio is the most critical lever to reduce losses. The decrease in the R&D expense ratio is explained by Sihua Technology in the prospectus as the result of terminating one pipeline operation + resource centralization mainline, so the reduction in research and development expenses is the result of voluntarily cutting pipelines to save costs and not just a scale effect. It is worth noting that while Sihua Technology has achieved sustained revenue growth and accelerated reduction of losses, it still faces multiple potential challenges such as the price war in the AI Scaler product, pressure on the gross profit margin of general MCU, and the concentration of customers and suppliers. If these risks are not effectively mitigated or improved, they may to some extent suppress the IPO valuation level of Sihua Technology.