New Stock Preview | Amlogic, a leading smart terminal SoC company, where is its next growth driver?

Title context: New Stock Preview | Amlogic, a leading smart terminal SoC company, where is its next growth driver? Text: After the semiconductor industry went through inventory adjustments and fluctuations in consumer electronics demand, the industry is now ushering in a new round of structural change. On one hand, the traditional smart terminal market is gradually recovering; on the other hand, AI is extending from the cloud to more terminals such as TVs, set-top boxes, smart homes, AIoT devices, and automobiles. For chip design companies, what truly deserves attention is no longer just "whether they can make a chip," but whether they can integrate chips, algorithms, software, connectivity capabilities, and the customer ecosystem, and form platform-based competitiveness through continuous iteration. As a fabless chip design company, Amlogic plans to issue H shares and list, with CICC and HAITONG INT'L as joint sponsors. If this offering is completed smoothly, it will form a capital structure with dual listings in "A+H." Under the major trend of AI integrating with smart terminals, can Amlogic leverage its SoC platform, IP accumulation, and customer ecosystem to truly transform its past scale advantages into the capability for sustained growth in the next stage? AI extends to terminals, chip competition enters the platform era It is understood that Amlogic was founded in 2003 and is one of the earliest manufacturers in the industry to independently master full-chain technology for smart terminal SoC chips. Its core business covers smart multimedia and display SoCs, AIoT SoCs, communication and connectivity chips, and smart automotive SoCs. According to Frost & Sullivan data, based on relevant revenue in 2024, the company ranked fourth globally among manufacturers focused on smart terminal SoCs, with a market share of 1.2%; in the home smart terminal SoC field, the company ranked first in mainland China and second globally, with a market share of 17.7%. Among these, from the perspective of business structure, smart multimedia and display SoCs remain Amlogic's current most core source of revenue. In 2025, the company generated revenue of RMB 4.949 billion from this business, accounting for 72.9% of total revenue. Among this, the company has formed relatively deep technical accumulation in the smart set-top box SoC field and continues to expand into application scenarios such as smart TVs and smart displays. In addition, driven by the gradual recovery of downstream demand and the commercialization of 6nm AI SoCs, gross profit from this business increased from RMB 1.389 billion in 2024 to RMB 1.769 billion, a year-on-year increase of 27.3%, and the gross margin also rose from 32.4% to 35.7%. According to disclosures in the prospectus, the improvement in gross margin was mainly driven by factors such as lower unit production costs, a decline in the revenue contribution of smart TV chips, and optimization of the cost structure. This means that Amlogic's current performance improvement is not solely relying on revenue scale expansion; product mix and cost control are also playing a role. Especially after the semiconductor industry experienced inventory adjustments, as downstream demand gradually recovers, mature products with large-scale shipment capabilities are expected to further release operating leverage. At the same time, the importance of the company's second-largest business, AIoT SoCs, has also increased. In 2025, AIoT SoCs generated revenue of RMB 1.640 billion, accounting for 24.2% of total revenue, a clear increase from 22.3% in 2023. More notably, this business has a relatively high profitability level, with a gross margin of 46.8% in 2025, significantly higher than that of smart multimedia and display SoCs. However, the AIoT business is still in a stage of continuous expansion, and its revenue growth and gross margin changes are not completely synchronized. It is understood that the company's AIoT SoC sales volume increased by 20.5% year on year in 2025, but due to changes in product mix, average selling prices declined, and the gross margin fell from 49.2% in 2024 to 46.8%. Therefore, from an investment logic perspective, the core observation point for the AIoT business in the future is not simply revenue growth rate, but whether its product mix and profitability can remain stable as product scale expands. In addition, communication and connectivity chips have also shown relatively rapid growth. In 2025, this business generated revenue of RMB 199.8 million, a year-on-year increase of 67.1%, and sales volume increased by 44.3% year on year, mainly driven by the rising penetration rate of Wi-Fi 6 chips. However, because Wi-Fi chip gross margins are relatively low, the gross margin of this business decreased from 26.4% in 2024 to 19.5%. As a result, Amlogic has now formed a relatively clear business echelon: smart multimedia and display SoCs constitute the revenue base, AIoT SoCs are gradually becoming an important source of incremental growth, and communication and connectivity chips are in a stage of scale expansion. Among these, the diversified product matrix helps reduce the impact of fluctuations in a single terminal market on overall operating performance, while also providing new business support points for the company's subsequent growth. From the perspective of competitive barriers, Amlogic's core advantage is not limited to the performance parameters of a single chip, but lies in its system-level SoC R&D capability formed over the long term. The company has established a self-developed IP system covering multiple subsystems such as NPU, video codec, audio decoding, display control, storage, security, WAN/LAN, and I/O, and continues to advance R&D in advanced processes and AI capabilities. For SoC design companies, self-developed IP and platform-based development capabilities have high reuse value. On one hand, they can reduce the cost of repeated development in the new product R&D process; on the other hand, they can also shorten the product migration cycle between different application scenarios. Amlogic's expansion from smart set-top box SoCs to smart TVs, AIoT, and communication connectivity is essentially a process of continuous extension of its existing technology platform. Betting on edge AI, laying out a second growth curve If smart multimedia and display SoCs determine Amlogic's current performance foundation, then AIoT, connectivity chips, and edge AI-related technologies will determine the company's medium- to long-term growth space to a greater extent. With the continued development of generative AI and edge computing technologies, AI applications are gradually migrating from the cloud to the terminal side. Devices such as smart TVs, cameras, smart homes, and smart office equipment continue to increase their demand for local computing, visual processing, voice interaction, and AI inference capabilities, and the functional boundaries of terminal SoCs are also expanding accordingly. For Amlogic, its technical accumulation in multimedia processing, display, AI, and connectivity has a certain foundation for synergy. In recent years, the company has continued to launch SoC products with AI capabilities and has improved chip performance and energy efficiency through advanced processes. The commercialization of 6nm chips in 2024 is also an important milestone in the company's product and technology upgrades in recent years. In terms of R&D, it is understood that from 2023 to 2025, the company's R&D expenses were RMB 1.283 billion, RMB 1.353 billion, and RMB 1.552 billion, respectively, and the R&D expense ratios were 23.9%, 22.8%, and 22.9%, respectively. While revenue scale continues to expand, the company still maintains a relatively high intensity of R&D investment and remains in a technology-intensive investment stage. From the perspective of use of proceeds, the company still regards R&D as the focus of future capital allocation. According to the prospectus, the company plans to use approximately 70% of the net proceeds from the global offering for R&D and growth over the next five years, including advanced chip technologies; another approximately 10% for building a global customer service system, approximately 10% for strategic investments and acquisitions, and the remaining funds for working capital and general corporate purposes. This fund arrangement is basically consistent with the company's current development path, that is, continuing to strengthen core SoC R&D capabilities and expanding product commercialization capabilities through strategic investments, customer service system development, and ecosystem layout. In the long run, if AIoT, edge AI, and connectivity chips can achieve large-scale commercial deployment, the company's revenue structure is expected to become further diversified. Overall, Amlogic has now formed a product system with smart multimedia and display SoCs as the core and AIoT and communication connectivity chips developing in coordination, and has built certain platform-based SoC competitive barriers based on long-term R&D accumulation. More importantly, AIoT and edge AI are driving the smart terminal industry into a new technology iteration cycle, providing new industry opportunities for Amlogic's existing technology platform to extend into more application scenarios. However, from revenue contribution to profit contribution, and then to cash flow contribution, the growth of new businesses still needs to undergo continuous commercialization verification. Therefore, for Amlogic, what truly deserves attention in the future is not revenue growth in a single year, but whether AIoT and connectivity chips can continue to achieve large-scale volume ramp-up, whether advanced processes and AI SoCs can further enhance product competitiveness, and whether the company can continue to improve profitability quality and working capital efficiency during business expansion. If the above capabilities can be gradually delivered, Amlogic's business boundaries are expected to further extend from traditional smart terminal SoCs to platform-based, AI-enabled smart terminal chip solutions.