Analysis of Yuexin Semiconductor’s Negative Gross Margin IPO and Industry Overcapacity
1. Overview of Yuexin Semiconductor’s Financial Status
As Guangdong Province’s first 12-inch wafer fab, Yuexin Semiconductor’s IPO prospectus reveals an extremely severe financial situation.
From 2022 to 2024, the company’s gross margins were -20.46%, -110.28%, and -66.51% respectively
, and it further recorded a negative gross margin of -57.01% in the first half of 2025 [1][2]. This consecutive three-year large negative gross margin is rare in semiconductor industry IPOs, not only significantly deviating from the industry average but also highlighting the dual predicaments the company faces in cost control and pricing power.
In terms of business scale, Yuexin Semiconductor currently operates two 12-inch wafer fabs: Phase I focuses on 0.18um to 90nm processes, Phase II extends to 55nm, and Phase III covers more advanced nodes such as 55nm, 40nm, 28nm, and 22nm [3]. According to the company’s plan, the monthly capacity will reach 80,000 wafers after the completion of all Phase III projects. However, the fixed cost depreciation pressure brought by large-scale capacity expansion forms a vicious cycle with the persistently low capacity utilization rate, becoming the core factor eroding gross margins.
2. The Nature of Structural Overcapacity in the Industry
Yuexin Semiconductor’s predicament does reflect the structural overcapacity problem existing in China’s semiconductor industry, but it is not a universal phenomenon across the entire industry.
From the overall data, the wafer foundry capacity share of mainland China has reached 21%, surpassing South Korea’s 19% to rank second globally, but
mainland China only accounts for 5% of global wafer demand
[4]. This serious mismatch between supply and demand has led to fierce price competition in the mature process segment. Yole Group predicts that by 2030, the global wafer foundry capacity utilization rate will hover around 70%, becoming the new normal of the industry [4].
However,
this overcapacity has significant structural characteristics
. The standard logic process segment (such as DDIC, low-end CIS) is indeed facing severe downward price pressure and has fallen into “red ocean competition” [5]. But specialty process segments such as high-voltage BCD, automotive-grade IGBT/SiC, and embedded memory MCU still belong to the “blue ocean with tight supply and demand” [5]. The differentiation trend within the industry means that it is inaccurate to judge overcapacity solely based on capacity scale.
3. Deep-seated Reasons for Yuexin Semiconductor’s Predicament
Yuexin Semiconductor’s negative gross margin is caused by multiple factors:
1. Risk of Single Customer Structure.
Currently, 77% of the company’s revenue comes from the consumer electronics sector, which is precisely the downstream segment with the weakest recovery in this cycle [3]. In contrast, although high-value sectors such as industrial and automotive electronics have higher gross margins, the company’s penetration rate in these sectors is still insufficient.
2. Pressure from Technology Upgrade Climb.
Moving from 55nm to 28nm processes requires overcoming many technical difficulties, and improving the yield rate of new processes takes time. When the yield rate has not reached the optimal stage, the unit product cost remains high, directly eroding the gross margin space.
3. The “Prisoner’s Dilemma” of Capacity Utilization.
Semiconductor manufacturing is a highly capital-intensive industry with a very high proportion of fixed costs. Against the background of industry overcapacity, foundry prices are under pressure, and insufficient capacity utilization leads to the inability to effectively amortize unit fixed costs, forming a vicious cycle of “the more you lose, the harder it is to raise prices; the harder it is to raise prices, the more you lose.”
4. Industry Cycle Position and Prosperity Judgment
It is worth investors’ attention that
the current semiconductor industry is in a clear recovery channel
. According to data from Jibei Consulting, the total revenue of listed companies in China’s wafer foundry industry in the first three quarters of 2025 was approximately 76.326 billion yuan, and the gross margins of leading enterprises such as SMIC and Hua Hong Semiconductor have shown month-on-month improvement [6]. SMIC’s capacity utilization rate reached 95.8% in the third quarter of 2025, and Hua Hong Semiconductor’s was as high as 109.5%, showing an overloaded operation state [7].
At the industry level, the global wafer foundry industry output value is expected to grow by 20% in 2025, and the wafer foundry price increase trend has spread from advanced processes to mature processes [7]. Hua Hong Semiconductor, SMIC, and others have raised prices for specialty processes such as BCD by about 10%, which provides an opportunity for foundries focusing on specialty processes to repair their gross margins [7].
5. Conclusions and Investment Implications
Yuexin Semiconductor’s negative gross margin IPO does partially reflect the structural overcapacity in the mature process segment of the industry, but this is an inevitable process of industry structural adjustment, not a systemic crisis.
The industry is shifting from “comprehensive expansion” to “strategic layout”; the number of newly built wafer fabs globally in 2025 dropped sharply from 42 in 2024 to 18, which is clear evidence of the industry’s spontaneous adjustment [5].
For Yuexin Semiconductor, the key to breaking through lies in:
whether it can seize the blue ocean opportunities in specialty processes, accelerate the transformation from consumer electronics to high-value sectors such as industrial and automotive electronics; whether it can achieve yield breakthroughs in advanced mature processes such as 28nm; and whether it can optimize its cost structure with the help of policy dividends such as the “Guangdong Province Strong Core Project”
[3]. Against the background of the industry’s rising prosperity and tight supply and demand in specialty processes, if the company can achieve a differentiated breakthrough, the negative gross margin situation is expected to gradually improve.
References
[1] 新浪财经 - “毛利率低至-66.51%，粤芯半导体75亿募资背后的亏损困局” (https://finance.sina.com.cn/jjxw/2025-12-26/doc-inheaqmt2884860.shtml)
[2] 新浪财经 - “粤芯半导体带着-50%毛利率冲刺IPO实属罕见背后价格迷云与大客户” (https://finance.sina.com.cn/stock/observe/2025-12-26/doc-inhecipr0878817.shtml)
[3] 与非网 - “广东首家12英寸晶圆厂冲关IPO” (https://www.eefocus.com/article/1934095.html)
[4] 新浪财经 - “全球晶圆代工产能排名：中国超越韩国，跃居第二” (https://finance.sina.com.cn/tech/roll/2025-07-08/doc-infetqht5970758.shtml)
[5] 电子工程专辑 - “42座到18座！全球晶圆厂急刹车的背后，中国’泛成熟制程’的强势崛起” (https://www.eet-china.com/mp/a441805.html)
[6] 新浪财经 - “集微咨询发布《2025中国晶圆代工行业上市公司研究报告》” (https://cj.sina.cn/articles/view/1862172703/6efe801f001022nn0)
[7] 新浪财经 - “晶圆代工涨价潮起：是短期脉冲还是长期趋势？” (https://finance.sina.com.cn/stock/t/2025-12-28/doc-inheivts5791893.shtml)
