New Stocks Preview | Can Shanghai Fullhan Microelectronics (300613.SZ), the leading intelligent visual chip company, break through the "profitability dilemma" after its listing on the Hong Kong Stock Exchange?

As a pioneer in the Chinese visual IC industry, Shanghai Fullhan Microelectronics (300613.SZ) is about to complete its "A+H" dual listing layout on the main board of the Hong Kong Stock Exchange. According to Frost & Sullivan's report, by 2024, it will rank first in global revenue in the intelligent visual processing chip market, and will rank first in shipments in the two key markets of end-side intelligent visual processing chips and automotive-grade ISP chips. However, despite its leading position, the financial data revealed in the prospectus sounds the alarm. The company's revenue has been declining in recent years, and its net profit has shrunk sharply, especially in the first half of 2025, when the net profit plummeted to 1.8 million yuan, a decrease of nearly 98%. The huge contrast between the company's market leader status and the collapse of its profitability raises the question of whether Shanghai Fullhan Microelectronics is holding a winning hand under pressure, or whether its business model is facing deep structural challenges. Strong market leadership, AI empowerment builds core moat As a not-so-ordinary chip design company, Shanghai Fullhan Microelectronics' technical barriers and market position accumulated over more than twenty years in the industry are the cornerstone of understanding its value. It is understood that Shanghai Fullhan Microelectronics adopts the industry mainstream "fabless" (without a wafer factory) business model, focusing on the design and sales of integrated circuits, while outsourcing wafer manufacturing, packaging, and testing, among other heavy asset processes. This model allows the company to concentrate its resources on technical innovation. The company's product architecture covers a complete range from the end side (such as security cameras, automotive-grade cameras) for image signal acquisition and preliminary processing, to the side (such as network video recorders, NVRs) for video storage, decoding, and management of the complete visual processing chain, forming a strong full-stack solution capability. Currently, the company's business is mainly composed of three core product lines: in which intelligent video is Shanghai Fullhan Microelectronics' traditional core area and main source of revenue, contributing 67.3% of total revenue in 2024. Its product matrix includes system-level chips for network cameras, image signal processing chips, and hybrid video recorder system-level chips, widely used in network security cameras, digital/network video recorders (DVR/NVR), and other professional scenarios. The intelligent IoT business line is dedicated to promoting the popularization of AI chips in daily consumer scenarios, with products including low-power IPC SoCs and intelligent display SoCs, mainly applied in home cameras, video doorbells, AI glasses, smart home appliances, and other rapidly growing consumer electronics fields. In the field of intelligent transportation, Shanghai Fullhan Microelectronics has also layouted in both the aftermarket and the pre-equipped market, which requires higher technical standards to follow AEC-Q100 and ISO 26262. Its automotive-grade products, such as automotive-grade ISP chips, are applied in key automotive vision systems such as driver monitoring systems, panoramic monitoring image systems, and camera monitoring systems. Now, the AI wave is bringing historic opportunities for the visual chip industry. According to Frost & Sullivan's forecast, the global market for intelligent device AI SoCs is expected to grow from $438 billion in 2025 to $1.09 trillion in 2029, with a compound annual growth rate of up to 25.6%. Facing this opportunity, Shanghai Fullhan Microelectronics has clearly put forward the core strategy of "AI for All". This strategy aims to provide high-performance, highly efficient, and cost-effective AI visual ICs to the market through technological innovation, thereby promoting the widespread application of AI in various fields. The company's future plans and the use of funds raised from this IPO clearly demonstrate its determination to translate its strategy into practical actions. According to the prospectus, the raised funds will focus on expanding the research and development team, expanding the AI product portfolio and application scenarios. Shanghai Fullhan Microelectronics is fully grasping the opportunity of AI-driven industrial upgrading. However, despite Shanghai Fullhan Microelectronics' solid market position and clear future strategy, the challenges revealed by its recent financial performance and the hidden structural risks are also glaringly exposed in its financial statements. Short-term performance pressure, customer and supply chain concentration risks highlighted Despite its strong technical capabilities, Shanghai Fullhan Microelectronics' financial statements reveal a structurally fragile business model that is highly exposed to the dual risks of customer concentration and compressed profit margins. In recent years, Shanghai Fullhan Microelectronics' financial performance has shown a clear downward trend. It is understood that between 2022 and 2024, the company's total revenue has decreased from 21.1 billion yuan to 17.9 billion yuan, with a further 14.1% year-on-year decline in the first half of 2025. The performance on the profit side is even more severe, as net profit has fallen from 3.78 billion yuan in 2022 to 2.32 billion yuan in 2024. This trend worsened in the first half of 2025, with net profit plummeting from 83 million yuan to 18 million yuan, a decrease of over 97%. The prospectus attributes this to a decrease in purchases from the largest customer and intense price competition. It is worth noting that the impact of this price war is not just talk, but is clearly reflected in the average selling price (ASP) of the products: In the company's core intelligent video sector, ASP has dropped from 15.4 yuan in 2022 to 11.1 yuan in the first half of 2025; while in the intelligent IoT sector, the decline has been even more severe, from 15.5 yuan to 8.6 yuan, directly explaining the collapse of profitability. The increasing research and development expenditure and shrinking revenue have further squeezed profit margins. Data shows that in the first half of 2025, while revenue declined, the company's research and development expenses as a percentage of revenue increased from 20.7% in the same period last year to 24.8%. Under negative operating leverage, the decline in revenue was rapidly magnified, leading to a sharp drop in profits. At the same time, the high dependence on a single customer constitutes the company's main operational risk. According to the prospectus data, in 2024, the top five customers contributed a total of 88.4% of the company's revenue. Of these, the dependence on the largest customer is particularly pronounced, with a revenue share of 66.7%. In the first half of 2025, due to the excessive dependence on customer A, the decline in purchase volume from this largest customer led to a structural risk of declining revenue and profits for the company. It is understood that in the fiscal years 2021 through 2024 and the six months ended June 30, 2025, sales from the largest customer accounted for 75.3%, 71.4%, 66.7%, and 55.0% of total sales, respectively. Similar to the customer structure, the company's supply chain also exhibits a high degree of concentration. In 2024, purchases from the top five suppliers accounted for 80.6% of total purchases. Because the company adopts a fabless model, it heavily relies on upstream wafer foundries and packaging and testing service providers. Any interruption in production by key suppliers, capacity constraints, or supply restrictions due to geopolitical factors could have a significant impact on Shanghai Fullhan Microelectronics' production and delivery capabilities. Conclusion In summary, Shanghai Fullhan Microelectronics' industry position and technical strength as a global leader in intelligent visual chips are its core value. However, the company is currently facing multiple challenges such as a sharp decline in profitability, high customer concentration, and escalating market price wars. In listing in Hong Kong at this critical juncture, Shanghai Fullhan Microelectronics intends to harness the power of the capital market to provide ample "ammunition" for its next stage of strategic transformation. Today, Shanghai Fullhan Microelectronics is at a crossroads that will determine its future direction. On one hand, the wave of artificial intelligence and the Internet of Things provides unprecedented market opportunities for its core business; on the other hand, its own profit bottlenecks and high dependence on a single customer pose severe internal challenges. To assess Shanghai Fullhan Microelectronics' long-term value, it is crucial to evaluate whether its management can successfully leverage the opportunity of this IPO, efficiently execute its established strategy, and truly translate its leading technological advantages into sustainable and diversified profit growth capabilities. On this path to breaking through, challenges and opportunities coexist.