Will yet another silicon carbide IPO test investor patience?

BASiC Semiconductor is the latest IPO hopeful to emerge from China’s chip sector, but its peers have had mixed fortunes, and one has just suffered a poor market debut

Key Takeaways:

• The company makes silicon carbide chips and products including power modules for electric cars and industrial uses
• It has reported a string of annual losses, dogged by negative gross margins as a rapid industry-wide expansion has slashed semiconductor prices

By Lee Shih Ta

China’s push to develop a self-sufficient chip industry is morphing into a scramble for investor cash.

As Hong Kong’s IPO market perked up this year, companies in China’s semiconductor sector have been lining up to seek market listings, including producers of silicon carbide (SiC), a key ingredient for smart chips used in advanced electronics.

The compound has been designated a strategic material in China’s industrial ambitions, vital for electric vehicles, energy storage systems and power relays. However, the rush to deliver the conductive material in substrate, wafer or power device form has caused a capacity surge that is squeezing profits and sowing uncertainty about the industry outlook.

Against this challenging backdrop, a producer of SiC devices, BASiC Semiconductor Co. Ltd., is making a second attempt at securing a trading spot on the Hong Kong Stock Exchange, recently submitting a refreshed IPO application.

Several SiC companies have beaten a path to Hong Kong this year, with differing results. SICC (2631.HK; 688234.SH), which produces substrates, achieved a dual listing there and was positively received by investors. Tianyu Semiconductor (2658.HK), focused on silicon carbide epitaxial wafers, made a weak debut last week, while another wafer specialist, Epiworld International, is bidding to join them on the Hong Kong market but has yet to achieve its goal.

BASiC Semiconductor develops and manufactures silicon carbide power devices for use in automotive and industrial electronics. Although its first IPO attempt was unsuccessful, this time the required approval from Chinese regulators is already in the bag, leaving auspicious timing as a final piece of the puzzle.

Most SiC companies specialize in a single production stage but BASiC operates as an integrated device manufacturer, aiming to control processes from end to end. Its scope covers chip design, wafer fabrication and packaging, extending to gate-driver devices and system testing. The strategy aims to enhance its appeal to customers in high-end markets for automotive inverters and energy storage modules.

Turnover has risen as a result, but the company remains stuck in a loss-making cycle.

Revenue jumped from 117 million yuan ($16 million) in 2022 to 299 million yuan in 2024, a compound annual growth rate of around 60%. In the first half of this year, revenue spurted 52.7% to 104 million yuan from the equivalent period of 2024. Among the various products, income from silicon carbide modules surged from 5.05 million yuan in 2022 to 49.78 million yuan in the first half of this year.

Selling at a loss

However, the integrated approach has not shielded the company from fierce price wars, as the silicon carbide industry has ramped up its output. Epitaxial wafer prices have plunged from over 8,000 yuan per unit in 2022 to below 2,000 yuan today, outpacing a drop in production costs.

In that context, the firm’s sales have persistently failed to cover manufacturing costs. The gross loss margin stood at 48.5% in 2022 and widened to 59.6% in 2023. It narrowed to 9.7% in 2024 but then slipped again to 28.8% in the first half of 2025. Across the product lines, discrete devices had the bleakest numbers with a gross loss margin of 194%, meaning the company lost money on every sale.

In response, the firm scaled back production of the price-pummeled devices last year, redirecting resources towards higher-value power modules and integrated system solutions. The loss margin on automotive and industrial power modules fell from 75.5% in 2022 to 27.9% in 2024 as they completed customer testing and gradually entered mass production. Meanwhile, higher factory utilization rates enabled depreciation and labor costs to be spread over larger volumes, narrowing the overall gross loss margin in 2024.

But the gap between income and production costs widened again in the first half, which the company blamed on a cyclical ramp-up. Mass deliveries were starting to kick in – with over 1,800 industrial modules and 2,000 power stacks shipped in the six months – but volumes were not big enough to dilute fixed costs. Moreover, some new production lines were still bedding in, dragging down overall gross margin, the company said.

Over the years, the company accounts have been awash with red ink. Losses from 2022 to 2024 exceeded 800 million yuan, while a net loss of 177 million yuan was logged in the first half of 2025, representing a year-on-year widening of 50.3%. Operating cash flow has likewise remained negative, although the annual deficit has gradually narrowed. The first half of 2025 saw a net outflow of 39.29 million yuan compared with a net inflow of 10.02 million yuan in the same period of 2024. But cash and cash equivalents stood at 180 million yuan at the mid-year point, after BASiC raised 223 million yuan in financing during the period.

Investor attitudes differ across the silicon carbide industry. Shares in SICC, an upstream producer focused on substrates, have risen around 27% since they were listed, trading at a price-to-sales ratio of about 16 times. Silicon carbide wafers did not go down as well with the market. When it began trading last week, epitaxial wafer producer Tianyu Semiconductor suffered a roughly 30% plunge, marking one of the worst Hong Kong debuts for a semiconductor stock.

Ambition alone is not enough to support elevated chip valuations, and investor patience is wearing thin for loss-making companies whose production capacity has yet to be fully realized. BASiC’s fate as a listed company would likely hinge on whether it can expand its market share for automotive and energy modules and tackle its cost curve.

If losses persist, the shares could find themselves vulnerable to attack. Therefore, pitching the IPO at a realistic price would help to rally investor support.

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