Produced by | Bullet Finance

Art Design by | Qianqian

Reviewed by | Songwen

Recently, ASR Microelectronics officially filed for a listing on the Hong Kong Stock Exchange, just over four years after its debut on the STAR Market in 2022. This full-protocol cellular baseband chip design company aims to fund its ongoing, high-cost R&D efforts through an 'A+H' dual-listing strategy.

After experiencing several years of consecutive losses, ASR Microelectronics managed to turn a profit in the first half of 2026. However, its net profit, excluding non-recurring items, still showed a deficit of 58.67 million yuan. The company is now at a pivotal stage, transitioning from expanding its scale to validating its profitability.

Persistent high R&D investments and a competitive strategy of sacrificing margins to gain market share are the main factors suppressing ASR Microelectronics' profitability. Its highly concentrated upstream and downstream structure limits its bargaining power, leaving it relatively passive in industry chain negotiations.

Despite holding 2.9 billion yuan in cash and continuing to raise funds, ASR Microelectronics, despite holding a leading market share, has failed to achieve a closed-loop profit in its core business. This, coupled with a prolonged period of its stock price trading below the issue price and two rounds of stake reductions by Alibaba Network, resulting in cashing out over 1.7 billion yuan, raises the question: Can ASR Microelectronics address its chip-related challenges through its Hong Kong Stock Exchange IPO?

1. High R&D Expenses Erode Profits, Cash Flow Remains Tight

Founded in April 2015, ASR Microelectronics is a rare domestic platform enterprise specializing in full-protocol cellular baseband chips ranging from 2G to 5G. It is listed alongside Qualcomm, MediaTek, HiSilicon, and UNISOC as one of only five global vendors of commercial multi-mode cellular baseband chips.

According to Frost & Sullivan data, ASR Microelectronics shipped 266 million cellular connectivity chips in 2025, capturing a 37.8% global market share, ranking first. Its market shares in the Cat.1 and Cat.4 segments reached 51.6% and 52.5%, respectively.

Behind its impressive market share, the company's revenue heavily relies on cellular baseband chips. As of 2025, chip product revenue accounted for 93.78% of the company's total revenue, serving as the primary income source, with cellular baseband chips comprising 93.81% of that.

Developing cellular baseband chips is challenging, with long R&D cycles and significant brand loyalty among end customers. Products launched for the first time face risks of extended promotion periods, customer rejection, and failed mass production. As a latecomer, ASR Microelectronics must maintain continuous high-intensity investment to catch up technically with international giants like Qualcomm and MediaTek.

Wind data shows that ASR Microelectronics' R&D expenses steadily increased from 1.028 billion yuan in 2021 to 1.299 billion yuan in 2025. Although this represents a significant decline from the historical peak of 2.111 billion yuan in 2020, the absolute scale remains substantial.

Heavy R&D investment has weighed down the income statement.

The prospectus shows that from 2023 to 2025, the company's operating revenue was 2.6 billion yuan, 3.386 billion yuan, and 3.817 billion yuan, respectively, with net losses of 506 million yuan, 693 million yuan, and 390 million yuan over the same periods.

ASR Microelectronics explained that its sustained losses are primarily due to substantial R&D expenditures invested in establishing and advancing multi-mode cellular baseband technology, AI computing technology, etc.

A turning point arrived in the first half of 2026, but the authenticity of its profitability remains questionable.

In the first half of 2026, ASR Microelectronics achieved operating revenue of 2.451 billion yuan, a 29.15% year-on-year increase. Net profit attributable to shareholders (net profit attributable to the parent company) was 84.2438 million yuan, turning a loss into a profit.

Despite the turnaround in net profit attributable to the parent company, the company's net profit, excluding non-recurring items, still showed a loss of 58.67 million yuan. During the reporting period, non-recurring gains, such as fair value changes and investment income from external investments, increased year-on-year, driving the company's net profit up by approximately 130 million yuan.

This indicates that ASR Microelectronics' core business still lacks sufficient profit-generating capacity, and the turnaround largely relies on non-recurring gains from external investments.

By business segment, cellular baseband chips remained the absolute mainstay, generating 2.022 billion yuan in revenue in the first half of the year, a 23% year-on-year increase.

As projects progressively entered the delivery and acceptance phase, the chip customization business saw a continuous expansion in order scale, generating approximately 324 million yuan in revenue in the first half of the year, a 157% year-on-year increase, becoming a new growth driver.

However, while revenue and reported profits recovered, cash flow did not improve.

In the first half of 2026, ASR Microelectronics' net cash flow from operating activities was -377 million yuan. Due to cash paid for purchasing goods and accepting labor services exceeding cash received from selling goods and providing services, the net cash outflow from operating activities expanded by 111 million yuan year-on-year.

Looking back historically, in 2023, 2024, and 2025, ASR Microelectronics' net cash flows from operating activities were -678 million yuan, -412 million yuan, and -456 million yuan, respectively.

Regarding changes in R&D expenses and other issues, Bullet Finance sent inquiries to ASR Microelectronics but had not received a response as of press time.

2. Sacrificing Margins for Market Share, Pricing Power Concerns Persist

To capture market share in a chip market dominated by established giants, ASR Microelectronics not only enhances product performance through substantial R&D investment but also adopts a price advantage strategy to penetrate the market.

According to the prospectus, from 2023 to 2025, the average selling price of ASR Microelectronics' wireless connectivity chip products dropped from 12.6 yuan to 10 yuan. The company explained this as "continuously launching more affordable new products to meet evolving market demands."

Not until the first half of 2026 did the average selling price of its wireless connectivity chip products rise to 11.3 yuan, driven by increased market demand, higher client procurement rates, and greater sales contributions from high-end products like 5G chips.

This strategy of sacrificing margins for market share has secured market position but at the cost of gross profit margins.

From 2023 to 2025, ASR Microelectronics' gross profit margins were 24.35%, 23.19%, and 24.95%, respectively. In the first half of 2026, the company's comprehensive gross profit margin was approximately 29.43%, up about 4.72 percentage points year-on-year.

Gross profit margins remaining below 30% are influenced not only by market competition but also by the company's product mix.

ASR Microelectronics has an excessively high proportion of low-margin products. According to its 2025 financial report, chip products accounted for over 93% of revenue, but their gross profit margin was only 24.04%.

In contrast, the gross profit margin for chip customization business can reach 33.1%, and for IP licensing business, it is as high as 99.02%. However, these two businesses contribute relatively low revenue and cannot significantly improve the overall profit structure in the short term.

Among them, the IP licensing business has been continuously shrinking, with revenue dropping from 123 million yuan in 2023 to 20 million yuan in 2025, and accounting for only 0.64% of revenue in the first half of 2026. The company continues to focus its main operations on self-developed chip business.

(Chart / Wind)

Additionally, the industry chain risks arising from a highly concentrated upstream and downstream structure amplify concerns over pricing power. Of course, this is also a common characteristic of many Fabless (fabless semiconductor) companies under the trend of specialized division of labor in the semiconductor industry chain.

Chip design companies generally bind to a few leading clients due to high certification thresholds and long order cycles. Once engaged, client stickiness is strong, but conversely, the loss of a single client can have a significant impact.

The prospectus shows that during the reporting period, sales to the top five clients accounted for 80.1%, 82.1%, 82.6%, and 79.9% of total revenue in each period. Sales to the largest client accounted for 42.7%, 37.1%, 37.6%, and 36.9%, respectively.

On the procurement side, as a fabless semiconductor company, ASR Microelectronics relies on external foundries for chip manufacturing. Globally, there are few wafer foundries and packaging and testing suppliers that meet its technical, quality, and service requirements.

Take wafer manufacturing, for example: the advanced process node market is highly concentrated, with basically only TSMC and Samsung as options below 7nm, leaving Fabless companies with little bargaining power. In the mature process node market, while multiple foundries like SMIC, UMC, and Hua Hong exist, the costs of process adaptation and capacity locking make it difficult for Fabless companies to switch suppliers easily.

During the reporting period, procurement from the top five suppliers accounted for 75%, 77.6%, 71.4%, and 74.8% of total procurement in each period. Procurement from the largest supplier accounted for 52.4%, 51.5%, 45.5%, and 51.1%, respectively.

According to the prospectus, the company's largest supplier, founded in 1987 and headquartered in Taiwan, China, primarily engages in application-specific integrated circuit manufacturing and is listed on the Taiwan Stock Exchange and the New York Stock Exchange. Given industry background and cooperation information, the market widely speculates that the largest supplier is TSMC.

Notably, in the first half of 2026, ASR Microelectronics' second-largest client also became its third-largest supplier, from whom it purchased 128 million yuan worth of memory chips. This role overlap objectively increases the complexity of supply chain management and raises market concerns about supply chain coordination and transaction fairness.

Currently, since ASR Microelectronics' wafer procurement mainly comes from leading overseas wafer foundries, risks such as tight upstream wafer foundry capacity or geopolitical and trade friction could impact cost levels. Meanwhile, with high concentration among major downstream clients, the extent to which the company can pass on cost pressures downstream remains to be verified.

3. Pursuing IPO Again with 2.9 Billion Yuan in Cash, Alibaba Divests 1.7 Billion Yuan in Two Rounds

Beyond the multiple challenges in operational fundamentals, the capital market layer is also fraught with undercurrents.

ASR Microelectronics listed on the STAR Market of the Shanghai Stock Exchange on January 14, 2022, with an issue price of 164.54 yuan per share. However, its stock price has remained sluggish since listing and is still trading below the issue price.

As of the close on September 29, 2026, ASR Microelectronics' stock price was 93.54 yuan, with a total market capitalization of 39.128 billion yuan. The stock performance to some extent reflects the market's reevaluation of the profitability and valuation logic of chip design companies.

ASR Microelectronics has a relatively dispersed shareholding structure. The actual controller is Dai Baojia, who collectively controls 22.32% of the company's voting rights through direct shareholdings and as a concerted actor with entities like Ningbo Jiexinruimi Enterprise Management Partnership (Limited Partnership) and GreatASR1 Limited.

The company's largest shareholder is Alibaba (China) Network Technology Co., Ltd. (hereinafter referred to as 'Alibaba Network'), currently holding a 10.58% stake.

As the most significant external investor, Alibaba Network's consecutive reductions in its stake over the past year have drawn market attention.

In December 2025, ASR Microelectronics announced that Alibaba Network had reduced its stake in the company by 3% from October 9, 2025, to December 17, 2025, at an average reduction price ranging from 73.42 yuan to 99.46 yuan, raising 1.056 billion yuan.

On September 10, 2026, ASR Microelectronics announced that Alibaba Network had reduced its stake by a total of 7,765,764 shares, representing 1.8565% of the company's total share capital, through block trades and centralized bidding transactions from August 17, 2026, to September 10, 2026, raising 703 million yuan. The two rounds of reductions totaled approximately 1.759 billion yuan in cash raised.

Notably, with 4,783,261 shares still pending reduction, Alibaba Network prematurely terminated this reduction plan. The following day, on September 11, ASR Microelectronics officially submitted its listing application to the Hong Kong Stock Exchange.

According to the prospectus, the proceeds from this Hong Kong Stock Exchange IPO will be used to enhance R&D capabilities and expand product portfolios, drive long-term growth through strategic investments or acquisitions, expand sales networks, and replenish working capital.

Notably, ASR Microelectronics raised a total of 6.883 billion yuan from its initial public offering on the STAR Market. After deducting issuance expenses, the net proceeds were 6.546 billion yuan, exceeding the original plan by 4.166 billion yuan.

By the end of June 2026, the company's asset-liability ratio stood at 25.02%. It had 2.915 billion yuan in monetary funds recorded on its books, while its short-term borrowings and non-current liabilities due within one year amounted to approximately 595 million yuan in total. This financial situation indicates that the company has a substantial amount of cash readily available.

Given this scenario, some investors have raised questions about the rationale behind the Hong Kong Stock Exchange IPO. They point out the company's current situation of a sluggish stock price and abundant cash reserves, and bluntly state that it is "unfair to successful applicants in the A-share offering." In response to these concerns, the management of ASR Microelectronics clarified that the size and price of the proposed issuance would be determined through book-building, in line with international practices. This approach would fully consider the interests of existing shareholders, the acceptability of investors, and the risks associated with the issuance.

(Chart / SSE Roadshow)