| Meta | Content |
|---|---|
| Rating | Neutral (Avoid Chasing the Rally) |
| Target Price | RMB 20–25 (base-case fair range, midpoint ~RMB 22.5) |
| Current Price | RMB 26.28 (close on 2026-10-23, frozen price anchor) |
| Margin of Safety | -24% ((base-case fair lower bound RMB 20 − current price RMB 26.28) / current price; no margin of safety) |
| Time Horizon | 6–12 months |
| Market Cap | RMB 43.732 billion (1.664 billion total shares) |
| Report Date | 2026-10-26 |
Silan Microelectronics is China's largest power semiconductor IDM by revenue (2025 revenue of RMB 13.052 billion, higher than CR Micro's RMB 11.054 billion), with its 5/6/8/12-inch silicon lines and 4/6/8-inch compound semiconductor lines all at full capacity; revenue growth is genuine (2026H1 revenue +14.62%). But the profit-side "inflection" has not yet materialized: of 2026H1 net profit attributable to parent of RMB 516 million (+94.84%), non-recurring items such as mark-to-market gains on equity holdings accounted for 47.5%, while recurring profit grew only +0.67%; blended gross margin fell for five consecutive quarters to 18.56%. The current price of RMB 26.28 implies the market treats "price-hike pass-through + SiC/AI power supply volume ramp + upward shift in margin midpoint" as the base case, corresponding to ~117x TTM recurring PE; this report's base-case fair value is RMB 20–25, with the current price about 17% above the base-case midpoint — no margin of safety. Directionally we do not fight the industry cycle (the price-hike cycle and the AI demand inflection are both real), but we do not chase the price — the Q3 report on October 31 (whether Q3 recurring profit can reach RMB 140 million and quarterly gross margin can return to 18.5%) is the bull/bear watershed; if disproven, the stock would revert toward the base case and even the bear-case range (RMB 16–19).
Nature of the opportunity: a conditional opportunity, not mispricing at the current moment. There is a lag or gap between industry-side facts (Infineon/onsemi's two rounds of price hikes this year, automotive IGBT/SiC lead times exceeding 40 weeks, the company's lines at full capacity, and the two price hikes on March 1 and July 1) and the company's financials (Q2 recurring profit -8.8% YoY, quarterly gross margin of ~17.4% at a multi-year low). Over the next 6–12 months, the stock will be priced around "whether this gap narrows or widens."
Primary price drivers (ranked by importance):
Verifiable expectation gap: sell-side consensus (9 firms) has a median target price of RMB 38.8 and 2027E EPS of RMB 0.70, all on a net-profit-attributable basis and inflated by the RMB 245 million of non-recurring gains in 2026H1 — the source of those gains (holdings in Empyrean,昱能/Deye, etc.) is subject to announced partial sell-downs and will dry up from 2027. This report reconstructs earnings on a recurring basis; the divergence from the market centers on the "margin slope" and can be directly verified or disproven by the October 31 Q3 report.
Verification and falsification: verification catalysts — Q3 recurring profit elasticity, 8-inch SiC capacity ramp, AI power supply disclosure upgrade, a third round of price hikes; falsification conditions — Q3 recurring profit < RMB 120 million, full-year impairments > RMB 450 million, Silan Mingjia's full-year net loss > RMB 700 million, disclosed sell-downs by the National IC Fund, or peers pivoting to price cuts in 2027. Ratings and real-time odds are computed by the system uniformly across the three scenarios and prices; this report sets no artificial composite score.
Key evidence:
There is a second source of the gap between attributable and recurring profit: Silan Mingjia (LED + 6-inch SiC) posted an H1 net loss of RMB 324 million, of which ~43.44% was borne by minority shareholders (H1 minority interest -RMB 147 million), significantly amplifying the attributable figure. Two caveats on basis: first, the government subsidies excluded from recurring profit are recurring in nature (H1 after-tax RMB 37.85 million), so the true recurring earnings midpoint may be slightly above the recurring figure (~RMB 310–330 million per half-year); even on this basis, core growth is only ~15%–20%, a stark contrast to the +94.84% headline narrative. Second, the mark-to-market gains are beta — the company and Silan Venture Capital have announced plans to reduce their Empyrean stakes (each up to 0.25%); if tech stocks correct, this gain will dry up or even reverse from 2027. On gross margin structure, Q1 recovered to 19.79% before Q2 slumped to 17.41%, with the deterioration concentrated in a single quarter; Mingjia's H1 revenue +38% and reduced losses at fully-loaded 6-inch SiC are also signs of improvement — "not yet materialized" means the pass-through has not been verified in the financials, not that a trend deterioration is a foregone conclusion.
Key evidence:
Counter-evidence is equally specific: the first round of price hikes effective March 1 failed to prevent Q2 quarterly gross margin from falling 2.4 percentage points QoQ and Q2 recurring profit of RMB 113 million from falling -8.8% YoY; the company's IR department explicitly told media in June 2026 that "the core driver of price increases remains cost-side pressure" — the steady state of cost-push pricing is cost pass-through rather than margin expansion, and costs of gold and other precious metals are still rising. Direct competitor StarPower's 2026H1 net profit of -76.4% shows the price war in automotive modules is not over. Thus the accurate formulation of C2 is: the volume logic is solid (full capacity + 40-week lead times), while the price logic is unproven (Q3 recurring profit ≥ RMB 140 million and gross margin ≥18.5% are confirmation thresholds; < RMB 120 million is the falsification threshold).
Key evidence:
Definitions must be precise: the claim that "high-barrier markets account for nearly 85%" is limited in the original wording to finished ICs and devices and includes large white goods; the Gen-II SiC qualification is with "a top domestic major" in the AI power supply scenario, not a top-tier automotive customer; the main H1 growth drivers were actually MEMS (+60%, off a base of ~RMB 210 million) and standard discrete devices, while the highly anticipated automotive + PV IGBT & SiC (+11%) and IPM (+9%) both underperformed overall growth (+14.62%). Industry demand is real (see the demand-inflection chain in the industry chapter), and the company's positioning and capacity are real (8-inch SiC expanding from 5,000 to 10,000 wafers/month, Gen-V trench SiC launching in H2), but the mid-range assumption of a 2026–2028 revenue CAGR of 12%–19% (2027E RMB 16.5–17.5 billion) depends on the automotive segment's growth recovering from +11% to 25%–30% from H2 onward — an inference to be verified, not an established fact.
Key evidence:
Back-solving the current price of RMB 26.28 (under given exit multiples and discounting assumptions; not a unique path) roughly requires 2028 recurring profit of RMB 1.1–1.5 billion, recurring net margin of 6.5%–8.7%, and normalized ROE of 8%–10% — i.e., tripling or quadrupling recurring earnings within three years. The revenue side has demand math to support it (AI power supply CAGR of 42%, IPM guidance of 20–30% growth, rising automotive SiC penetration), but the margin slope is pure assumption, achieved historically only during the 2021–2022 supercycle — and 2025H2 just provided a failed precedent of "recurring profit collapsing from RMB 269 million in H1 to RMB 103 million." The asset side does provide support (PB percentile ~20%, replacement cost far above book — Jihua's planned 12-inch investment of RMB 20 billion plus Jihong's 8-inch SiC Phase I of RMB 7 billion), but the PB/ROE trade-off ranks last among comparables (PB ~18% above the peer median, ROE only about a quarter of Yangjie Technology's). Conclusion: separate quality from price — the business has genuine positioning, but buying at the current price is effectively a bet on a 25%-probability bull scenario; the odds are neutral to negative (+38.9% to the bull midpoint, -33.4% to the bear midpoint, probability-weighted fair value ~RMB 24.6, with the current price 6.8% above it).
Key evidence:
Three qualifications keep this thesis precise: ① Of the +61% two-year increase in interest-bearing debt, ~RMB 1.8 billion corresponds to capital shifted out for the Jihua/Jihong deconsolidation contributions and the change in consolidation scope — not entirely a sign of operating deterioration; ② The guarantee counterparties' fundamentals are currently improving (Jike H1 net profit +RMB 93 million, turning profitable; 12-inch output +32% at full capacity; Jixin and Meikale both turned positive in H1); guarantee calls or forced re-consolidation are a tail scenario conditional on "industry weakening + declining 12-inch foundry prices," and no buyback or backstop clauses appear in public disclosures; ③ Mingjia's losses are a real drag on reported profit (attributable burden of ~RMB 180 million for the half year), but fully-loaded 6-inch SiC + revenue +38% means its loss-reduction path is itself one source of 2027 recurring-profit elasticity. The two-sided nature of this "deconsolidation + external capital" model must be seen in full: in an industry upcycle it is asset-light expansion and capacity security; in a downturn it becomes related-party dependence and a contagion channel.
| Metric | FY2023 | FY2024 | FY2025 | 2026Q1 | 2026H1 (latest) |
|---|---|---|---|---|---|
| Revenue (RMB 100M) | 93.40 | 112.21 | 130.52 | 35.19 | 72.62 (+14.62%) |
| Net profit attributable to parent (RMB 100M) | -0.36 | 2.20 | 3.99 | 2.09 | 5.16 (+94.84%) |
| Recurring net profit (RMB 100M) | 0.59 | 2.52 | 3.72 | 1.58 | 2.71 (+0.67%) |
| Gross margin | 22.21% | 19.09% | 18.83% | 19.79% | 18.56% (Q2 single quarter 17.41%) |
| Attributable net margin | -0.38% | 1.96% | 3.05% | 5.93% | 7.10% (incl. non-recurring) |
| Operating cash flow (RMB 100M) | 3.17 | 4.43 | 14.98 | 0.25 | 2.92 (-12.08%) |
| Free cash flow (RMB 100M, OCF−CapEx) | — | -12.39 | -1.34 | — | -3.48 |
| Cash + cash-like (period-end, RMB 100M) | — | — | 50.36 | 57.18 | 41.75 (as of 2026-06-30, incl. RMB 52M restricted) |
| Interest-bearing debt (period-end, RMB 100M) | — | 60.68 | 87.43 | 94.84 | 97.59 (as of 2026-06-30) |
| Debt-to-asset ratio | — | 44.25% | 52.10% | — | 53.28% |
| Net debt/EBITDA | — | — | — | — | ≈3.0x (2025 EBITDA estimated ~RMB 1.88B) |
| R&D expense (RMB 100M / % of revenue) | — | 10.84/9.66% | 11.72/8.98% | — | 5.68/7.82% |
Note: 2023 CapEx and 2023 year-end balance-sheet items were unavailable due to missing 2024 annual report cache (marked "—"); balance-sheet stocks are taken from the latest period (2026-06-30).
Reasons for metric changes (items with YoY ≥ ±20%, all with company explanations): ① 2025 operating cash flow +238.44% — "mainly due to increased cash received from sales of goods and rendering of services vs. the prior-year period"; ② 2025 long-term borrowings +119.95% (RMB 2.60B → 5.73B) — the company proactively added leverage to support Jike Phase III / Jihua / SiC line construction, with 2026 borrowing plans capped around RMB 9.0 billion; ③ 2025 minority interests -47.01% — "buyback of the minority stakes held by the National IC Industry Investment Fund in Silan Jixin and Jihua Investment," with RMB 1.076 billion paid for the year; ④ 2026H1 fair-value change gains +RMB 230 million (vs. -RMB 23 million prior-year period) — price/valuation changes in Empyrean,昱能/Deye, Lianxun Instruments, after-tax net gains ~RMB 194 million; ⑤ 2026H1 net investing outflow of RMB 4.038 billion and net financing inflow of RMB 2.895 billion (+462.79%) — driven by Jihua's external-shareholder deconsolidation and the company's capital injection into it; ⑥ 2026H1 asset impairments -RMB 227 million — "mainly due to increased inventory write-down provisions in the period," with provisions expanding continuously from 2023→2026H1 (-0.94→-3.08→-3.35→-2.27 for the half year, RMB 100M); ⑦ 2026Q1 operating cash flow -93.81% — "sharp increases in payments for goods/services and employee compensation."
Revenue RMB 7.262 billion (+14.62%), with Q2 single quarter at RMB 3.743 billion (+6.4% QoQ); attributable net profit RMB 516 million (+94.84%), recurring profit RMB 271 million (+0.67%) — the split between headline and substance is the core fact of this earnings report. Three structural observations: ① the -RMB 147 million minority interest loss continues to be driven by Mingjia's losses; ② inventory impairments of RMB 227 million are still eroding gross profit; ③ contract liabilities +51.27% for the half year (absolute amount only RMB 21 million, limited signal value). By product: IPM RMB 2.033 billion (+9%), automotive + PV IGBT & SiC RMB 1.596 billion (+11%), MEMS +60%, LED revenue RMB 377 million (+8.97%) but gross margin -3.11%. Versus expectations: management's full-year revenue guidance of RMB 15.5 billion (+19%) was only 46.9% completed in H1, requiring H2 YoY growth of +22.7% to hit — progress is slow (the 2025 plan completion rate of 93.23% also suggests the guidance basis skews optimistic); sell-side consensus 2026E attributable net profit is ~RMB 849 million, 60.8% of which was completed in H1 — but nearly half relied on mark-to-market gains; completion of this report's own full-year recurring forecast (RMB 510–590 million) is ~49%, a normal level. Conclusion: revenue aligns with the industry-cycle direction, but profit quality is below the headline; the pass-through of price hikes from Q3 onward is the only variable that can change the narrative.
Business model: IDM with heavy assets—design + wafer fabrication + packaging/testing fully internalized, running silicon-based 5/6/8/12-inch and compound semiconductor 4/6/8-inch lines in parallel. Revenue is non-subscription with no recurring contract revenue and weak pricing power (gross margin declined for five consecutive periods, relying on share gains and cost reduction rather than price increases), but the company enjoys stickiness with downstream major white-goods customers through its "full Silan solution + nearly 10 years of IPM failure-rate data." Manufacturing overhead (depreciation + energy) at the 8-inch line accounts for 52.82% of manufacturing cost; heavy-asset depreciation is the largest squeeze on profits.
Cash content of earnings: OCF/net profit for 2024/2025/2026H1 was 2.01/3.76/0.57 respectively—the first two years showed cash collection significantly better than book profit (bill endorsements + payables expansion), while 2026H1 weakened for the first time (increased inventory build and employee payments, reduced tax rebates); FCF/net profit has remained negative (-5.63/-0.34/-0.67), with CapEx (RMB 1.68/1.63/0.64 billion) continuously absorbing all operating cash flow. Book profit is almost impossible to convert into freely disposable cash—this is a deliberate choice during the capacity expansion period, but it means shareholder returns depend on external financing. Recurring earnings test: H1 non-recurring gains/losses of RMB 245 million accounted for 47.5% of net profit attributable to parent (≥15% threshold); core earnings (RMB 271 million excluding non-recurring items) differ substantially from attributable net profit. Cross-checking the company's ex-non-recurring basis: among the excluded items, government subsidies are rolling in nature (RMB 37.85 million after tax per half-year), so the ex-non-recurring figure slightly understates recurring earnings, but this does not change the characterization of "razor-thin profitability in the core business."
Return on capital: ROIC was approximately 0.64% in 2025 and approximately 3.2% annualized in 2026H1, far below WACC (approximately 9.5%)—returns during this heavy-asset expansion period have not yet covered the cost of capital, making it a "capital-consuming grower." During the 2022 supercycle, ROE reached 15.3%, indicating leverage potential exists, but realizing it requires gross margin to return above 22%.
CapEx quality: CapEx/depreciation of 1.17–1.34, with spending directed toward Jihua's 12-inch line (RMB 20 billion planned, already deconsolidated), Jihong's 8-inch SiC line (Phase I RMB 7 billion, 25.18% equity stake), and automotive packaging Phase II—primarily growth CapEx; maintenance spending is not separately disclosed (estimated at approximately RMB 1.25 billion/year using depreciation × 0.9). Fundraising project progress: the 360,000-wafer 12-inch fundraising project (RMB 1.6 billion) had an investment progress of 0 as of H1, with scheduled readiness in December 2026; the SiC fundraising project's RMB 750 million has been fully invested but is "not yet profitable."
Moat and red flags: Moat = the only full-size-range domestic IDM capacity + IPM certification barriers + automotive-grade systems (ISO26262 ASIL-D). Red flags: persistently negative FCF with expansion funded by debt (interest-bearing liabilities +61% over two years); non-recurring items at 47.5% of attributable net profit; top-five customer concentration rising consecutively from 16.41%→21.16%→25.27% without company explanation; related-party procurement at 29.85%.
Consistency between words and actions: partially delivered; plans tend to be optimistic. ① The 2025 revenue plan of approximately RMB 14 billion vs. actual RMB 13.052 billion (93.23% completion, self-disclosed in the annual report); ② The fourth exercise period of the 2021 stock option incentive (tied to 2024 performance) failed its assessment and 4.52 million options were cancelled—unfulfilled even under real monetary constraints; ③ Capacity commitments broadly delivered but with timing delays: Silan Mingjia's SiC "full production by 2025" was pushed to "full production by 2026," while Jihong's 8-inch SiC commitment of line connection by 2025Q4 was delivered on schedule (official production start July 2026); ④ The 2026 guidance of RMB 15.5 billion was 46.9% complete at H1; given its historical attainment rate, caution is warranted.
Shareholder friendliness: neutral to improving. Payout ratio rose from 30.3% for FY2024 to 33.4% for FY2025 (RMB 133 million), implementing the "2024–2026 Shareholder Return Plan," but cumulative dividends of RMB 200 million over the past three years merely equal one year of average net profit over that period; no share buyback-and-cancellation of listed shares; the November 2023 private placement of RMB 4.96 billion (issue price RMB 20/share) was dilutive, while in 2025 the company spent another RMB 1.076 billion buying back the Big Fund's minority stakes in subsidiaries (unlisted shares, but objectively enhancing the quality of attributable profit).
Risk signals: Concentrated actor and director Luo Huabing, part of the actual controller's group, sold 300,000 shares in July 2025 (plan cap 500,000), setting a precedent of cash-out by the actual controller's camp; controlling shareholder pledge has fallen to approximately 0.5% (low, no concern); Big Fund Phase I/II combined holding of 5.22% is in an exit cycle (the Fund already intensively divested peers such as Anlogic and NSIG in early 2026).
| Segment (2025 / 2026H1) | Revenue share | Gross margin | YoY | Business logic in one line |
|---|---|---|---|---|
| Integrated circuits (IPM/MCU/MEMS/analog) | 39.2% / 42.2% | 31.58% / 30.47% | +19.93% / +16.36% | Complete solutions for inverter white goods + computing power supplies; deepest certification barriers |
| Discrete devices (IGBT/SiC/MOSFET) | 50.8% / 48.9% | 12.22% / 11.17% | +17.32% / +14.50% | Largest by scale but the main battleground of price wars; automotive volume offsets price cuts |
| Light-emitting diodes (LED) | 6.1% / 5.4% | 1.91% / -3.11% | -0.41% / +8.97% | A drag amid capacity clearing; Mini LED is an option |
| Others (materials/trusted services etc.) | 3.9% / 3.5% | 16.89% / 20.77% | +18.09% / +8.87% | Small share, fluctuates with utilization rates |
The profit engine is integrated circuits, not the larger discrete devices segment: Based on the 2025 core-business basis, integrated circuits contributed approximately RMB 1.616 billion of gross profit, about 64% of core-business gross profit (39.2% revenue share × 31.58% gross margin), while discrete devices contributed only about RMB 810 million (31%), and LEDs contributed near zero. The gross margin structure gap (31.58% vs. -3.11%, over 34 percentage points apart) stems from fundamentally different businesses: IPM/analog packages design, process, and packaging know-how for OEMs sensitive to failure rates (moderately strong bargaining power); discrete devices are standard products competing on cost, and LEDs are an oversupplied red ocean. The earnings elasticity of investing in Silan Micro is essentially a bet on discrete devices (automotive IGBT/SiC) gross margin recovering upward from 12% plus Mingjia's loss reduction, while the revenue base (IPM) already provides a stable gross profit pool.
Accounting red flags (pattern + severity + textual evidence):
Cross-period consistency (metric + multiple periods + consistency of management explanations):
Current market data (frozen anchor at 2026-10-23 close): Share price RMB 26.28, market cap RMB 43.732 billion, total shares 1.664 billion; YTD -18.4%, last 60 days -26.1%, drawdown from 52-week high approximately 26.8%; average daily turnover approximately RMB 1.81 billion (approximately 4.1% of market cap, ample liquidity). Certainty multiples: PE(TTM) on attributable net profit 67.3x (1/3/5-year percentiles 0%/0%/31%—earnings are in a cyclical + ramp-up + one-off distortion period; PE percentile is for reference only); approximately 117x on an ex-non-recurring basis; PB 3.54x (5-year percentile approximately 21%–27%, statistical window methodology differences); PS(2025) 3.35x; EV/EBITDA (2025 estimate) approximately 26x. Growth basis: 2026E ex-non-recurring 74–86x / 2027E ex-non-recurring 44–55x (attributable basis 51.5x/37.5x respectively); EV/Sales(2026E) approximately 3.3x.
Peer comparison (2026-10-25 data):
| Company | PE(TTM) | PB | ROE(2025) | Recent gross margin | Difference vs. Silan Micro |
|---|---|---|---|---|---|
| Silan Micro | 67.3x | 3.54 | 3.29% | 18.56% (2026H1) | Subject itself: #1 revenue, last in profitability |
| CR Micro | 67.4x | 3.00 | 2.92% | 26.6% (2026H1) | IDM + foundry dual engine, no LED/MEMS drag |
| StarPower Semiconductor | 89.1x | 2.52 | 5.95% | 21.08% (2026Q1) | Single track of automotive modules; epicenter of price war |
| CRRC Times Electric | 15.2x | 1.48 | 9.75% | — (high on consolidated basis) | Rail transit cash cow + high-voltage IGBT monopoly |
| Yangjie Technology | 29.7x | 4.24 | 13.75% | 36.81% (2026Q1) | Benchmark in earnings quality; no price war |
| NCE Power | 42.7x | 3.72 | 9.51% | 28.75% (2026Q1) | Fabless asset-light, net margin 20%+ |
Market-implied expectations: In one sentence, "the current price requires the company to achieve X, while reality is Y"—the current price requires 2028 ex-non-recurring net profit of RMB 1.1–1.5 billion (3–4x the TTM ex-non-recurring RMB 374 million), ex-non-recurring net margin of 6.5%–8.7%, and normalized ROE of 8%–10%; reality is ROE of 3.29%, ROIC of 0.6%–3.2%, Q2 ex-non-recurring -8.8% YoY, and gross margin still near new lows. Two-way test of the demand math: the revenue side holds (AI server power supplies 2026–2030 CAGR ≈ 42%, IPM guidance +20–30%, automotive SiC penetration rising—RMB 16.8 billion revenue by 2028 has a path); what does not hold is the margin slope—historically achieved only during the 2021–2022 supercycle, and premised on "price-increase retention," whereas the company itself characterizes this round of price increases as cost-driven.
Three-layer value (EPV): Asset value (floor reference) ≈ book value per share of RMB 7.4 (book basis; replacement cost is significantly higher but unfinished/unprofitable lines are excluded from the floor); EPV (zero growth, FCFF basis) ≈ RMB 2.5/share (normalized NOPAT approximately RMB 790 million = EBIT of RMB 930 million with gross margin adjusted to 21% × 85%, minus maintenance CapEx ≈ depreciation × 0.9, WACC 9.5%, net debt of -RMB 3.36/share)—the growth option accounts for approximately 90% of the current price (calculated on a consistent basis). Under the valuation discipline for structural inflection points, EPV is the floor, not the final verdict: whether to pay for growth returns to the ramp-up scenarios and implied-expectation math—this report's answer is "pay for the revenue side; current margin assumptions are priced too fully."
Three scenarios and odds (figures also entered into the thesis structured fields):
| Scenario | Probability | Fair range | vs. current price | Key swing factors |
|---|---|---|---|---|
| Bear | 28% | RMB 16–19 | -27.7% to -39.1% | Price increases disproven (Q3 < RMB 120 million) + Mingjia losses continue + 2027 price war returns; anchor PB 2.2–2.5× 2026E BPS ≈ RMB 7.8, reference company 5-year market cap low of approximately RMB 28.8 billion (≈ RMB 17.3/share) |
| Base | 47% | RMB 20–25 | -4.9% to -23.9% | Partial price-increase pass-through + SiC/8-inch ramp-up: 2027 ex-non-recurring RMB 800 million–1 billion × 32–38x (A-share power semiconductor peer median / mature-cycle historical center anchor, independent of current price) + PB 2.9–3.2× 2027E BPS dual anchor |
| Bull | 25% | RMB 33–40 | +25.6% to +52.2% | AI power SiC revenue RMB 2 billion+, automotive main-drive ramp-up, gross margin 23–24%, Mingjia turning profitable: 2027 ex-non-recurring RMB 1.2–1.4 billion × 42–48x (peer up-cycle range anchor) |
Probability-weighted fair value is approximately RMB 24.6, with the current price 6.8% above it, implying expected return of approximately -6.4%; the current price sits in the upper right of the base-case range, with the overall distribution skewed downward (negative odds but not extreme). Comparability of the bear case with external coordinates: the most bearish external sell-side target is RMB 26 (Investing.com aggregated lower bound, anonymous institution, no complete bear-case logic, attributable basis), above this report's bear case of RMB 16–19—our bear case is anchored independently on price-increase disproof + PB bottom; we do not adopt the sell-side lower bound as a boundary.
In-house earnings forecast (performance reconciliation anchor): FY2026E revenue RMB 14.9–15.2 billion (2%–4% below the company's RMB 15.5 billion guidance), ex-non-recurring attributable net profit RMB 510–590 million (attributable basis RMB 800–900 million, including the RMB 245 million of non-recurring items already locked in H1); FY2027E revenue RMB 16.5–17.5 billion (+12%–15%), ex-non-recurring RMB 800 million–1 billion. Drivers: volume (full utilization + SiC ramp-up + 8-inch recovery) has strong certainty; price (retention ratio of price increases) and margin slope are the biggest uncertainties; sell-side consensus 2027 attributable net profit of RMB 1.165 billion (attributable basis, sample of 3) is above our ex-non-recurring forecast—the divergence lies in margin assumptions.
Valuation conclusion: modestly overvalued (separating quality from price). The business has genuine positioning and a demand runway (above-average quality, weak earnings quality), but the current price already embeds the base-case assumption of a "successful inflection"; base-case fair value RMB 20–25, margin of safety -24%. Strategically, do not fight industry cyclicality, nor pay for optimistic assumptions: wait for the 10-31 validation or a price pullback into the base-case range before reassessing.
Industry size. Global power semiconductors were approximately USD 75.5 billion in 2025, with China at approximately USD 29.1 billion, or 38.6% of the global total (Omdia, as cited in China Resources Micro's 2025 annual report and Securities Times), and the China market is projected to reach USD 38.1 billion by 2028, implying a 2025–2028 CAGR of ~9.4%. By segment: ① SiC power devices at USD 5.33 billion in 2026E (TrendForce, of which automotive USD 3.98 billion, 74.7%), with Yole projecting USD 11 billion by 2031 (CAGR ~20%); ② MEMS at USD 15.4 billion globally in 2024 (Yole), rising to USD 19.2 billion in 2030E (CAGR ~3.7%), with IMU chips at CAGR ~8.5%; ③ Mini LED backlight TVs with China shipments of 9.23 million units in 2025 (+122%) and penetration above 25%, with TrendForce projecting 25 million units globally in 2026; ④ AI compute server power supplies: China market of RMB 19.8 billion in 2026E → RMB 81.4 billion in 2030E (CAGR ~42%, Leadleo Research figures, as cited by East Money, to be verified). The global semiconductor market was USD 792 billion in 2025 (WSTS, +25.6%), with SIA projecting it to exceed USD 1 trillion in 2026; power semiconductors account for roughly 8%–10% — the power semiconductor "pond" is a large market growing mid-to-high single digits, with structural highlights in the two steep-growth sub-segments of SiC and AI power supplies.
Value chain and value distribution. Upstream: polished silicon/epitaxial wafers (12-inch dependent on NSIG and Shin-Etsu/SUMCO etc.), SiC substrates (TankeBlue, SICC, Wolfspeed — substrate prices halved over three years, now entering a cost-benefit period), equipment and photoresists (import-dependent, domestic substitution underway) — IDMs have relatively weak bargaining power over upstream. Three midstream models: IDM (Silan, China Resources Micro, CRRC Times Electric, Yangjie) / Fabless + foundry (NCE, early-period StarPower) / pure foundry (Hua Hong — 2026Q1 gross margin 17.63%, a 16.6pct drawdown from peak; manufacturing is under the heaviest pressure in the price war). IDMs internalize manufacturing + packaging/testing margins at the cost of profit erosion in downturns. Downstream: white goods OEMs (Midea/Gree/Haier, with over 250 million Silan IPMs deployed in 2025), automotive Tier 1s/OEMs, PV and storage inverters, server and compute power supply manufacturers, consumer electronics. Gross margins are mainly retained in the "design + specialty process" segments: Silan's IC segment gross margin of 31.58% vs. discrete devices at 12.22% and LED at 1.91% — within a single company lies a microcosm of value distribution across the value chain.
Supply-demand and competitive landscape. Demand drivers: AI data center power architecture transition (rack power jumping from 10–20kW to 100kW+, 800V HVDC expected to deploy at scale in 2027), volume ramp of 800V platforms in NEVs, inverter penetration + domestic substitution in white goods, and robotics. Supply side: global CR3 ≈ 36.7% (Infineon 20.2%, onsemi 9.5%, ST 7.0%, Omdia 2024 base), CR5 about 50%; China's supply side is expanding aggressively (Silan Jihua's 12-inch line with RMB 20 billion investment, Jihong's 8-inch SiC line with RMB 7 billion, CRRC Times Electric's SiC Phase III, StarPower's in-house SiC line); low-end MOSFET/IGBT capacity remains oversupplied, while the SiC substrate segment is accelerating its shakeout due to Wolfspeed's bankruptcy protection. Current status: 8-inch mature-node and high-voltage devices are in tight supply-demand balance (TrendForce projects this to last 6–12 months; its "global 8-inch capacity turning negative growth through 2027H1" refers to overseas exits by TSMC/Samsung, coexisting with China's structural capacity expansion), with automotive lead times at 40+ weeks; the industry shifted from a price war into two rounds of price increases in 2026 (+10%–25%), but stratification is evident — high-end categories that avoided the price war (automotive/AI power/high-voltage) see margin recovery first, while mid-to-low end remains mired in involution. Barriers to entry: automotive qualification cycles of 3–5 years (ISO26262 ASIL-D), asset-heavy IDMs (capital expenditure in the tens of billions RMB), specialty process know-how, and accumulated field-failure-rate data from end products.
Cycle and regulation. Cycle position: early upturn within a mature industry (2025H2–2026 recovery) + growth-stage SiC penetration. Leading indicators: ① frequency and magnitude of price increase letters (nearly 20 companies in two rounds of adjustments in 2026, onsemi's second round effective 10-10); ② utilization rates (Silan at full loading across the board, Jike's 12-inch output +19%); ③ lead times (automotive 40+ weeks); ④ SiC substrate prices stabilizing (after a three-year halving and shakeout); ⑤ degree of inventory impairment convergence (Silan still +11.9% in 2026H1, not yet converged); ⑥ white goods production scheduling and NEV sales. Regulation and policy: Big Fund Phase III (registered capital RMB 344 billion, exceeding Phases I and II combined) directed toward upstream manufacturing and equipment/materials; the "15th Five-Year Plan" calls for "extraordinary measures" in full-chain IC breakthroughs; a four-ministry document on high-power charging infrastructure explicitly states "accelerating domestic substitution of high-voltage SiC modules"; the central government's "comprehensive rectification of involutionary competition" is improving price order — the policy backdrop is mostly favorable. Tail risk: escalation of Western export controls affecting equipment maintenance and capacity-expansion deliveries (listed as a risk in the company's annual report), low probability but high severity.
Quantified demand-inflection chain (structural): Driver variable trajectories — AI data center power demand at ~82% three-year CAGR (Jiwei Consulting, 2026-10-22) × step-up in unit consumption — per-rack 10–20kW → 100kW+, SiC value share in solid-state transformers approaching half, AI server power device usage several times that of general-purpose servers × penetration ramp — China's compute server power supply market at RMB 19.8 billion (2026E) → RMB 81.4 billion (2030E), 800V vehicle penetration at 33% and SiC penetration within 800V vehicles at 77% (Guosen Securities, 2026; the original statistical basis of the 30.9% share of SiC MOSFETs in main-drive unverified) × company share — Gen-II SiC already shipping in volume for AI compute power supplies (share undisclosed), 250 million IPMs deployed in 2025 (+47%), automotive + PV IGBT & SiC revenue of RMB 3.273 billion (+43%). The chain's strength lies on the industry side (hard data on both volume and price), while the weakness is on the company-side share links (AI power supply and main-drive SiC shares both undisclosed) — this is precisely why C3 confidence is constrained.
Company positioning in the industry: No. 1 in China power semiconductor revenue (RMB 13.052 billion > China Resources Micro's RMB 11.054 billion); global ranking differs by source — industry media citing Omdia report sixth globally in 2024 with ~3.3% share (tenth in 2023 at 2.6%, secondhand figures, to be verified), while Jiwei Consulting's "Top 100 China Semiconductor Companies (2024)" ranks it eighth; share trend is rising. Sources of moat: the only domestic IDM covering 5/6/8/12-inch silicon lines plus 4/6/8-inch compound semiconductor lines, No. 1 in white goods IPMs domestically (Omdia 2021: 2.2% global IPM share, eighth globally / first domestically, historical figure pending update), and complete automotive qualification system certifications.
The decisive factor for a power IDM lies not in the current income statement, but in the combination of capacity layout, utilization, and capital structure — the dimension most easily missed by generic frameworks.
Production line panorama (2026H1 basis): 5/6-inch (Silan Integration) at full loading, with 2.771 million wafers output in 2025 (+17.84%); 8-inch (Silan Jixin) at full loading, 680,000 wafers in 2025, H1 turned profitable (net profit RMB 1.58 million); 12-inch (Silan Jike, 27.45% equity stake) at full loading, 637,000 wafers in 2025, revenue RMB 3.187 billion (+24%) and turned profitable (net profit RMB 93 million), with 2026H1 output of 394,500 wafers (+32%); 6-inch SiC (Silan Mingjia) at 10,000 wafers/month, near full loading; 8-inch SiC (Silan Jihong, 25.18% stake) at 5,000 wafers/month, officially in production in July 2026, expanding to 10,000 wafers/month; packaging side: IPM capacity of 40 million units/month, Chengdu base with annual capacity of approximately 480 million units. Utilization is the primary beneficiary variable of this cycle: full loading across all lines means revenue elasticity to price increases and mix upgrades is transmitted almost in full.
Mismatch between depreciation and profit: 2025 depreciation and amortization of RMB 1.393 billion (about 3.7x non-GAAP net profit), with 8-inch line manufacturing overhead at 52.82% of cost; depreciation will continue to rise after new lines (Jihong, Jihua, Mingjia SiC) are transferred to fixed assets — an IDM's profit inflection naturally lags its revenue inflection by 2–4 quarters; this is the industrial basis for the C2 "transmission lag" judgment.
Off-balance-sheet structure: Jike (12-inch, 27.45% stake), Jihua (12-inch analog, planned RMB 20 billion, 29.55%), and Jihong (8-inch SiC, 25.18%) — all three-tier vehicles introduced external capital (Big Fund, Xiamen SOEs, etc.), with the listed company binding capacity through minority stakes + related-party procurement + guarantees. Three consequences of this structure: ① consolidated CapEx and depreciation pressure is deferred, making the reporting entity "asset-light"; ② related-party procurement accounts for 29.85% of total procurement (Jike's H1 procurement of RMB 1.858 billion) — capacity is deeply tied to the listed company, and interest alignment depends on arm's-length pricing; ③ when the industry weakens, contagion channels exist via guarantee obligations/forced capital injections (total guarantees of RMB 2.911 billion). Evaluating Silan requires reading both the consolidated statements and the "off-balance-sheet capacity genealogy" — looking at either side alone leads to systematic misjudgment.
Overall rating: Neutral (confidence 0.50, 6–12 months). Silan Micro is a combination of "genuine positioning + weak profit realization + already full pricing": the industry's volume-price resonance and the AI/SiC demand inflection are real, and the company's capacity and qualification positioning are real, but profits have failed to verify for two consecutive half-year periods (2025H2 non-GAAP collapse, 2026Q2 non-GAAP -8.8% YoY), while the current price of RMB 26.28 already prices in "normalized margins"; the base-case fair value is RMB 20–25, with no margin of safety. Strategy: avoid chasing highs; holders should use the 10-31 Q3 report as the decision point (Q3 non-GAAP ≥ RMB 140 million and gross margin ≥ 18.5% → upgrade to cautiously bullish and re-anchor to the bull-case range; Q3 non-GAAP < RMB 120 million → downgrade and accept reversion toward the base case or even RMB 16–19); those without positions should wait for the price to enter the RMB 20–25 range and for price-increase transmission to be verified before re-evaluating.
Risk and catalyst summary (written record): Upside momentum — Q3 non-GAAP elasticity materializing, 8-inch SiC reaching 10,000 wafers/month, launch of Gen-V trench SiC, AI power supply status upgrading from "testing" to "volume shipments," a third round of price increase letters, the 2027 operating plan and higher dividend payout ratio; downside risks — Q3 transmission falsified, tech-sector correction triggering profit-taking on unrealized stock gains (H1 unrealized gains of RMB 194 million are beta), Mingjia's full-year net loss exceeding RMB 700 million, Big Fund's 5.22% stake disclosure of share reduction, return of a price war in 2027 (StarPower's H1 net profit -76% as a cautionary precedent), inventory impairment breaking RMB 450 million, and export control escalation affecting equipment maintenance. All of the above conditions have been included in the monitoring checklist; any trigger initiates re-rating.
Data and citation notes: Financial data are taken from the company's periodic reports (latest period being the 2026 semi-annual report, balance sheet stock as of 2026-06-30); price and market cap are uniformly frozen at the 2026-10-23 closing anchor (RMB 26.28); industry size and penetration data sources are annotated item by item, with Leadleo's AI power supply figures, Omdia's global ranking (media secondhand), and the 30.9% main-drive SiC share (original statistics not located) flagged as pending verification; sell-side consensus coverage is thin (3 EPS estimates), noted where used.