Bai'ao Chemical initiated the construction of a semiconductor equipment production site, which is expected to commence operations in 2026 with an annual output value potentially exceeding 10 billion.

After transitioning into the semiconductor field through the acquisition of Xinhuilian, Baiao Chemical (603360.SH) is accelerating the implementation of its strategic layout.

Last night, Baiao Chemical released a series of announcements, including the construction of a semiconductor equipment production site by its subsidiary Xinhuilian in the Xidong New Town Business District of Wuxi, capital increases to its controlled subsidiaries, and its layout in the Pearl River Delta. Additionally, the company's board appointed Liu Hongjun (Chairman of Xinhuilian and the new actual controller and Chairman of Xinhuilian) as co-general manager and nominated him as a non-independent director, responsible for managing the company's semiconductor business segment.

Industry chain insiders told Caixin that the production site project invested by Baiao Chemical in Wuxi will include semiconductor equipment production lines of Xinhuilian and Xinhuilian New, with an annual designed shipment capacity of about 150 units each, and a total annual output value exceeding 10 billion yuan. This project not only enables Xinhuilian and Xinhuilian New to possess large-scale production capabilities for advanced semiconductor equipment but also further enhances the domestic semiconductor industry's level of independent control.

According to the announcement, Baiao Chemical's subsidiary Suzhou Xinhuilian Semiconductor Technology Co., Ltd. ("Xinhuilian") plans to sign an agreement with the Management Committee of Xidong New Town Business District in Wuxi, stipulating that the committee will provide approximately 100,000 m² of industrial space for Xinhuilian's initial use. Xinhuilian can later choose to purchase or lease based on actual needs, and will build R&D and production sites within this space, as well as a FAB pilot line for semiconductor production line equipment verification and process development.

The company stated in the announcement that the signing of this agreement is conducive to the rapid implementation and long-term development of Xinhuilian's production site project, reducing initial operating costs, alleviating financial pressure, improving capital efficiency, and enhancing the company's regional market competitiveness.

Meanwhile, Xinhuilian will also use its own funds to increase capital by 180 million yuan to its subsidiary Suzhou Xinyonglian Semiconductor Technology Co., Ltd. ("Xinyonglian"), which is engaged in lithography machine business, to accelerate its technology R&D, market expansion, and capacity building related to lithography machines.

Information shows that Xinhuilian mainly operates in yellow light process equipment such as coater developers and lithography machines, as well as wet cleaning equipment and automation equipment for semiconductor production lines. Its spin-off, Xinhuilian New (Suzhou) Technology Co., Ltd. ("Xinhuilian New"), focuses on wafer bonding equipment.

In fact, as early as the beginning of last year, Baiao Chemical initiated a series of investments and collaborations with Xinhuilian. In October last year, Baiao Chemical, through its subsidiary, signed investment agreements with Xinhuilian and Xinhuilian New, increasing capital by 700 million yuan to control Xinhuilian, and as the lead investor, invested 100 million yuan in Xinhuilian New, becoming its significant shareholder.

By H1 2024, Xinhuilian's lithography machine business revenue reached 176 million yuan, with a gross margin of 89.01%. The R&D of its coater developer equipment has entered the prototype trial and verification stage, but due to a lack of related capacity, this business has not yet generated revenue. In terms of Xinhuilian New's wafer bonding equipment, it successfully shipped 2 hybrid bonding devices (including W2W & D2W) in November last year, which also set a new precision level for this series of equipment in China.

According to industry chain insiders, the construction of Xinhuilian's Wuxi production site project enables Xinhuilian and Xinhuilian New to possess large-scale production capabilities for semiconductor equipment, including yellow light process equipment, wet cleaning equipment, automation equipment for semiconductor production lines, and Xinhuilian New's wafer bonding equipment, with a total annual capacity of over 300 units and an annual output value potentially exceeding 10 billion yuan.

Additionally, the company announced on the same day that, based on strategic development directions and future business layouts, Xinhuilian plans to invest 30 million yuan of its own funds to establish a wholly-owned subsidiary, Xinhuilian (Foshan) Semiconductor Technology Co., Ltd. (tentative name), to layout semiconductor industry supporting services in South China, completing the market layout in both the Yangtze River Delta and the Pearl River Delta.