Xinhua Technology's Performance Fluctuates Sharply: High Inventory and Receivables, Related Party Transactions Account for Nearly 40%

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“Harbor Business Observation” Xiao Xiuni

On February 25, 2026, Jiangsu Xinhua Semiconductor Technology Co., Ltd. (hereinafter referred to as Xinhua Technology) had its IPO application on the STAR Market accepted by the Shanghai Stock Exchange, with China Merchants Securities as the sponsor.

At this critical IPO milestone, the company’s performance during the reporting period showed significant fluctuations influenced by industry cycles, high dependency on upstream and downstream supply chain partners, pressure on asset structure, compliance issues, and risks related to governance and related-party transactions following equity changes—all of which have become major obstacles to listing on the STAR Market. These issues also reflect common pain points in the development of China’s electronic-grade polysilicon industry.

1

Volatile performance, single core product with declining prices

Tianyancha shows that Xinhua Technology was established in 2015. The company focuses on R&D, production, and sales of electronic-grade polysilicon for the semiconductor industry. As a key raw material at the source of the semiconductor manufacturing supply chain, its products are directly used in semiconductor wafers and silicon components, making it an important participant in domestic semiconductor material substitution.

From 2022 to 2024 and January-September 2025 (within the reporting period), the company’s revenue was 1.274 billion yuan, 946 million yuan, 1.11 billion yuan, and 1.336 billion yuan, respectively. Net profit attributable to the parent was 149 million yuan, 45.54 million yuan, 68.62 million yuan, and 123 million yuan. The gross profit margins were 23.81%, 15.63%, 22.44%, and 24.56%.

Market insiders note that the electronic-grade polysilicon industry combines the technology-intensive nature of the semiconductor industry with the cyclical characteristics of the photovoltaic industry. Xinhua Technology’s performance is tied to industry cycles, showing large fluctuations. In 2022, prices were at historical highs, boosting profits; in 2023, prices plummeted, halving profitability. Although there was some recovery later, the unpredictable industry cycle remains a persistent risk to performance.

Looking at the main product structure, the company’s product types are highly concentrated, almost entirely focused on electronic-grade polysilicon. During the reporting period, main business revenue was 1.02 billion yuan, 865 million yuan, 1.067 billion yuan, and 1.294 billion yuan, with gross margins of 20.55%, 16.84%, 23.10%, and 25.08%.

Among these, P-grade straight-growth polysilicon is the absolute revenue pillar, with revenues of 700 million yuan, 673 million yuan, 819 million yuan, and 1.071 billion yuan, accounting for 68.6% of main business revenue in 2022, rising to 82.78% by September 2025.

During the reporting period, the unit price of this core product declined for three consecutive years, with total decreases of -4.37%, -8.57%, and -4.88%. Although the company states that price declines are reasonable adjustments due to scale expansion and cost reduction, the product’s single focus and continuous price decline, combined with the cyclical nature of the semiconductor industry, leave the company without a performance buffer. If downstream demand for semiconductor wafers shrinks or prices fall further, revenue and profits could be directly impacted.

2

Highly concentrated supply chain and nearly 40% related-party transactions

Xinhua Technology’s operating model shows high concentration in both suppliers and customers, with strong dependence on leading upstream and downstream companies. This results in inherent weaknesses in bargaining power within the industry chain, and the high volume of related-party transactions and potential expansion risks raise questions about the company’s independent operation capabilities.

On the supplier side, during the reporting period, the company’s purchases from the top five suppliers totaled 657 million yuan, 505 million yuan, 616 million yuan, and 547 million yuan, representing 92.86%, 79.56%, 78.59%, and 76.78% of total procurement, respectively. Although concentration has slightly decreased, it remains very high.

Notably, the largest supplier is Zhongneng Silicon Industry, affiliated with GCL Group. From 2022 to 2024 and September 2025, the company’s total purchases from it reached 966 million yuan, accounting for 47.21%, 26.17%, 18.62%, and 13.89% of operating costs in each period. The company’s core raw materials—electricity, trichlorosilane, and some production line power—are highly dependent on Zhongneng Silicon Industry. This high supplier concentration risks supply stability and exposes the company to cost fluctuations influenced by a single entity.

On the customer side, concentration is also rising. During the reporting period, sales to the top five customers totaled 686 million yuan, 626 million yuan, 739 million yuan, and 953 million yuan, representing 53.84% to 71.34% of annual sales by September 2025.

The high customer concentration aligns with the downstream semiconductor wafer industry’s characteristics but also means the company’s performance heavily depends on a few key clients. Any operational adjustments, demand changes, or relationship shifts with these clients could directly impact revenue.

Furthermore, high customer concentration correlates with high related-party transactions. During the reporting period, related-party sales were 29.137 million yuan, 133 million yuan, 198 million yuan, and 189 million yuan, while disclosed related-party sales were 165 million yuan, 212 million yuan, 243 million yuan, and 315 million yuan. Total transactions accounted for 152 million yuan, 345 million yuan, 441 million yuan, and 504 million yuan, representing 15.23%, 36.44%, 39.78%, and 37.71% of operating income. These mainly involve sales to Hoshine Silicon Industry, TCL Zhonghuan, and their subsidiaries.

3

High inventory and receivables, potential cash flow and debt repayment risks

The electronic-grade polysilicon industry is capital-intensive and asset-heavy. During the reporting period, the company’s asset structure faced significant pressure, with fixed assets, inventories, and receivables all increasing unfavorably. Coupled with volatile operating cash flows and high debt levels, the company’s asset efficiency and financial stability are under severe stress.

Inventory and receivables growth further strain assets. At each period’s end, inventory value rose from 8.015 million yuan to 372 million yuan, accounting for 7.37% to 17.55% of current assets. The inventory provision balance surged from 3 million yuan to 95.92 million yuan, representing 20.49% of inventories.

Meanwhile, accounts receivable increased from 1.28 billion yuan to 5.2 billion yuan, making up 11.77% to 24.51% of current assets. Bad debt provisions rose from 1.95 million yuan to 8.51 million yuan. Turnover rates for receivables were 12.39, 6.03, 4.26, and 4.12 times.

The top five receivable amounts were 1.07 billion yuan, 1.37 billion yuan, 2.65 billion yuan, and 3.83 billion yuan, collectively accounting for 82%, 74.58%, 78.83%, and 72.47% of total receivables.

Financially, the company’s net cash flow from operating activities fluctuated sharply, with figures of 277 million yuan, 57.49 million yuan, 153 million yuan, and 65.71 million yuan. In 2023 and September 2025, cash flows declined significantly, with September 2025’s net cash flow below 7 million yuan. The company attributes fluctuations to changes in sales scale, inventory buildup, tax refunds, and VAT credits, but unstable cash flow directly hampers daily operations and liquidity.

Additionally, at each period’s end, total liabilities were 1.104 billion yuan, 2.463 billion yuan, 2.502 billion yuan, and 2.338 billion yuan, with asset-liability ratios of 40.05%, 43.87%, 43.3%, and 40.18%. The high debt levels and ongoing debt service costs, combined with volatile cash flows, challenge the company’s debt repayment capacity and financial liquidity. Future financing environment changes or worsening cash flows could impose significant financial pressure.

4

Increased fundraising for high-end capacity, with uncertainties in project implementation and market expansion

During the reporting period, R&D investment mainly focused on upgrading production processes and developing new products. R&D expenses were 57.23 million yuan, 52.88 million yuan, 71.74 million yuan, and 67.43 million yuan, with R&D expense ratios of 4.49%, 5.59%, 6.46%, and 5.05%. Although slightly rising, these are significantly below the industry average of 9.86%, 9.3%, 10.04%, and 10.33%, indicating a gap in R&D intensity.

Xinhua Technology plans to raise 1.32 billion yuan through its STAR Market IPO, mainly for capacity expansion, technological R&D, and working capital. The specific allocations are: 180 million yuan for the Inner Mongolia Xinhua’s “10,000-ton/year high-purity electronic-grade polysilicon project,” 240 million yuan for the “1,500-ton/year ultra-high purity polysilicon project,” 500 million yuan for the “1,500-ton/year zone-melting polysilicon project,” 200 million yuan for a high-purity silicon material R&D base, and 200 million yuan for working capital.

The core aim of this fundraising is to expand high-end electronic-grade polysilicon capacity, break through ultra-high purity polysilicon technology, and further enhance domestic substitution of semiconductor core materials. However, behind capacity and technology expansion lie multiple uncertainties: project implementation risks and market development challenges.

Market insiders highlight three main risks: First, technical barriers to mass production. Electronic-grade polysilicon is a high-technology product, and ultra-high purity polysilicon requires even more advanced technology. The new projects face technical hurdles, and whether they can achieve large-scale production and stable quality remains to be seen.

Second, customer certification cycle risks. Semiconductor wafer companies have strict supplier qualification standards, often taking 2-3 years. Whether the new capacity’s products can pass downstream customer certification and be market-ready is uncertain. Delays could lead to idle capacity and reduce investment returns.

Third, intensified industry competition. The domestic electronic-grade polysilicon industry is experiencing a capacity expansion boom, with many companies adding production. Excess capacity risks may lead to fierce market competition, potentially impacting prices and market share.

Xinhua Technology’s IPO process involves key changes in equity ownership, which not only introduce new governance variables but also add risks such as pending lawsuits, asset valuation disputes, labor arbitration, and unfulfilled contractual commitments. Unresolved earn-out clauses further pose potential risks to ownership structure and ongoing operations.

In August-September 2025, the company completed a divestment from GCL Group’s affiliated company, Zhongneng Silicon Industry, transferring 24.55% of its shares for 1.472 billion yuan, valuing the company at 6 billion yuan—less than 10% premium over previous financing rounds and below market expectations. Founder Zhu Gongshan of GCL Group fully exited.

Post-sale, the company became a company without a controlling shareholder or actual controller. The largest shareholders are Hefei Guocai No. 3 (25.55%) and China National Integrated Circuit Industry Investment Fund (20.62%), with no common control. The dispersed ownership structure risks reduced governance efficiency and increased conflicts among shareholders, hindering long-term strategic stability.

More critically, the divestment did not sever business ties with GCL Group. Zhongneng Silicon Industry remains the company’s largest supplier, providing power for Xinhua’s Xuzhou production line, with 10%-18% of operating costs still linked to procurement from it. This deep business relationship means related-party transactions persist.

During the reporting period, the company borrowed 77 million yuan from GCL Group and affiliates, mainly to repay GCL’s debts. Although principal and interest have been settled and internal controls improved, such transactions reveal previous internal control gaps. In a no-controlling-shareholder scenario, whether the internal control system can effectively prevent related-party fund occupation and unfair transactions remains a regulatory concern.

Additionally, the new controlling shareholder, Kaisheng Technology under China National Building Material Group, was involved in suspected smuggling of prohibited export goods, raising compliance concerns about the new shareholder’s record.

On the compliance front, the company faces unresolved issues and accounting disputes. Before the reporting period, Tianshan Mining illegally excavated within its mining rights. Although sentenced for illegal mining, initial civil compensation claims were not accepted. A subsequent lawsuit in 2024 remains unresolved, creating significant uncertainty over potential damages.

In 2025, employee Zou Hailiang died from work-related causes. His family filed labor arbitration claims seeking 254,600 yuan in compensation. Although the amount is small, it highlights labor management compliance issues.

Furthermore, the company’s earn-out clauses still carry potential revival risks. According to relevant agreements, buyback obligations involving Zhongneng Silicon Industry and other special shareholder rights terminate upon IPO application submission. However, if the application is rejected, withdrawn, or not approved, these rights automatically and retroactively revive, potentially leading to ownership restructuring and large buyback costs, adversely affecting financial stability and shareholder interests.