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The semiconductor industry is experiencing a surge like never before, reaching astonishing heights in revenueAs of the third quarter of 2024, the collective revenue of the top ten global foundries hit a record $34.9 billionAt the forefront of this remarkable achievement is TSMC, maintaining a dominant 64.9% market shareBut it’s not just the giants that are making waves; three mainland foundries, namely SMIC, Hua Hong Semiconductor, and Jinghe Integrated Circuit, have also made significant strides, generating $3.3 billion in revenue and positioning themselves as formidable competitors to the second-ranked Samsung.

Despite the revenue growth across these companies, a significant disparity in net profit becomes apparentIn sheer size, SMIC emerged as the unquestionable leader in the foundry space for the third quarter of 2024, achieving a net profit of 2.706 billion yuanMeanwhile, Hua Hong and Jinghe struggle to match this financial prowessHowever, Jinghe Integrated Circuit is displaying an extraordinary performance, diverging from the profit declines that plagued its competitorsIn fact, for the first three quarters of 2024, Jinghe's net profit saw a staggering increase of 771.96%. This is notable, especially given that during the same period, both SMIC and Hua Hong experienced downward trends in profit growth.

Furthermore, Jinghe Integrated Circuit has made waves in both primary and secondary market activitiesBy the end of November 2024, the company had repurchased a whopping 60 million shares, equating to 3.09% of its total stockThis bold maneuver has dramatically increased its market capitalization by over 20 billion, reaching nearly 60 billion yuan within just two months.

Reflectively, in 2023, following its public listing, Jinghe’s performance significantly deteriorated, with net profits plummeting over 100%. However, now they appear to be on an impressive reboundWhat has triggered this remarkable comeback?

One pivotal aspect influencing Jinghe’s turnaround is its remarkable increase in cash flow, soaring by 950%. The focal point of Jinghe Integrated Circuit’s operations lies in the production of DDIC (Display Driver IC) chips, which are essentials for screens on televisions and smartphones

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While many companies, including Weir Group, Huawei's HiSilicon, and others, produce DDIC chips, they typically operate more as assembly plantsThe actual production of DDIC chips relies heavily on foundries like SMIC, Hua Hong, and Jinghe Integrated Circuit, with the latter standing as the unequivocal leader in the fieldAs the DDIC market stabilizes, Jinghe's performance reflects this recovery clearly.

On the demand front, the post-2023 slump gave way to a noticeable uptick in demand for DDIC chips, particularly from downstream applications like TVs and monitorsIn terms of pricing, the market saw a decline due to intense competition among various manufacturers leading to a price war, which brought down the average price of DDIC chipsConsequently, Jinghe's gross profit margin suffered, dipping from 45% in 2021 to 21.61% in 2023. However, there is a glimmer of hope as major design firms such as Lian Ying, Dun Tai, and Qi Jing Guang Dian have begun to deplete their inventories, resulting in a gradual narrowing of price dropsFor the third quarter of 2024, Jinghe's gross profit margin bounced back to 25.26%, reflecting a significant recovery.

As the market transitions into a period of simultaneous volume and price increases, Jinghe has reached a noteworthy production utilization rate of 110% in the first half of 2024. Moreover, operating cash flow surged to 1.961 billion yuan, marking a colossal 948% year-on-year increaseIn light of heightened market demands, Jinghe Integrated Circuit is planning a capacity expansion of 30,000 to 50,000 pieces per month throughout 2024, indicating additional growth potential on the horizon.

Shifting gears to technological advancements, the 28nm chip also stands as a significant milestoneIn the semiconductor landscape, while TSMC makes headlines for groundbreaking chip processes, many regard mature processes, like the 28nm technology, as outdatedHowever, further analysis reveals that 76% of chips in circulation today utilize mature processes of 28nm or greater

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This technology serves as a crucial boundary between mature and advanced processing, representing one of the toughest production technologies to masterHistorically, only SMIC in mainland China was equipped to handle 28nm chip productionHowever, an announcement on October 9, 2024, from Jinghe Integrated Circuit revealed that they have successfully verified the functionality of 28nm logic chips, shattering SMIC's previous monopoly in this domain.

This accomplishment indicates that Jinghe has achieved significant breakthroughs across the full spectrum of chip sizes, with an eye on mass production to followThis a milestone that could propel their revenues to surpass the 10 billion yuan mark in the futureAs a company founded in 2017, Jinghe's rapid ascent is particularly remarkable.

The location plays a pivotal role in Jinghe’s success, with Hefei being heralded as a “paradise” for integrated circuit companiesEsteemed customers and key players such as BOE, Visionox, and Shiya Technology have established bases here, creating a robust supply chain that benefits Jinghe immenselyThis advantageous positioning could even outpace the advantages presented by SMICFurthermore, Hefei is home to major electric vehicle manufacturers, including BYD, NIO, Volkswagen, and JAC, providing Jinghe with a significant competitive edge in the growing electric vehicle semiconductor market.

Additionally, Jinghe Integrated Circuit has been quietly investing in the burgeoning electric vehicle market during its sluggish profit yearsThe semiconductor content in electric vehicles can be double to triple that of traditional internal combustion engine vehicles, with an average electric vehicle housing between 1,000 to 3,500 microchipsThe global automotive semiconductor market is projected to reach $73.5 billion by 2025, with a year-on-year growth rate of 11.8%. Recognizing this potential, Jinghe is gearing up to tap into this market as a secondary growth avenue, while still maintaining its core focus on display chips.

In a notable move on September 25, 2024, Jinghe, alongside partners like Agricultural Bank Investment and Industrial and Commercial Bank of China, announced a capital infusion of 9.55 billion yuan towards its subsidiary, Anhui Xincheng Integrated Circuit

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