In-Depth Analysis of Yandong Micro's Widening Losses: Strategic Choices Amid Cyclical Downturn Pressures

Based on comprehensive data obtained, I will provide an in-depth analysis of the strategic dilemmas and industry cyclical pressures behind Yandong Micro’s widening losses.

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According to the 2025 annual performance forecast released by Yandong Micro, the company expects a full-year net loss of RMB 340 million to RMB 425 million [0]. Notably, the company turned profitable in H1 2025, with a net profit of RMB 127,605,300 [1], indicating a significant performance reversal in H2.

Drivers	Specific Performance	Impact Level
Macroeconomic Pressure	Weak demand for consumer products	Pressure on revenue side
Intensified Market Competition	Falling product prices, narrowing gross profit margin	Erosion of profit side
Increased R&D Investment	221% surge in 12-inch project investment	Growth on expense side
Increased Labor Costs	Raised compensation for R&D personnel	Growth on expense side

Yandong Micro’s H1 2025 R&D expenses reached

, representing a year-on-year surge of , with total R&D investment accounting for as high as of operating revenue [1]. This ratio is extremely high in the semiconductor design industry, reflecting the company’s strategic choice to maintain high-intensity R&D investment amid the industry’s cyclical downturn.

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China’s semiconductor industry exhibited significant

in 2025 [2]:

Segment	Prosperity Performance	Performance of Representative Enterprises
Chip Design	High Prosperity	Cambricon, Hygon Information
Memory Chips	High Growth Driven by AI Computing Power	Longsys, Biwin Storage
SoC Chips	Short-Term Pressure, Long-Term Optimism	Bestechnic, Rockchip
Analog Chips	Cyclical Recovery + Domestic Substitution	Sirui Micro, SG Micro
Discrete Devices/Power Semiconductors	Turning Point Emerged	Wingtech +7215%, Silan Micro +1304%, Yandong Micro +960%

Yandong Micro’s core business is

, focusing on:

• 6-inch SiC Chip R&D
  : Completed key process optimization for SiC MOSFET [1]
• 12-inch Integrated Circuit Production Line
  : Concurrent development of multiple process nodes including 28nm, 65nm, 55nm, and 40nm
• Silicon Photonics Process Platform
  : Took the lead in mass production of silicon photonics process platform, released SiN Silicon Photonics PDK 1.5 [1]

From the perspective of the discrete devices segment, Yandong Micro achieved a

in H1 2025, significantly benefiting from the recovery of the power semiconductor industry [2]. However, market pressure on consumer products has significantly dragged down the company’s performance.

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The semiconductor industry features rapid technological iteration and fast development of advanced process nodes, exposing enterprises to multiple risks [1]:

• Continuous Emergence of New Application Scenarios
  : Sustained new demand for discrete devices and analog integrated circuits
• Rapidly Evolving Demand from Wafer Foundry Clients
  : Increased requirements for product diversity and stability
• Development of High-Stability Devices Toward Higher Performance
  : Continuous increase in technical thresholds

Against the backdrop of current semiconductor domestic substitution, Yandong Micro’s R&D investment is strategically necessary [2]:

Core Logic of Domestic Substitution:
├── External technological sanctions force independent controllability
├── Increased policy support for first-of-a-kind (set) products
├── Continued investment from the National Integrated Circuit Industry Investment Fund
└── Global semiconductor equipment market is expected to reach USD 111.88 billion in 2025

Project	Investment Scale	Progress Status	Strategic Significance
28nm 12-inch Integrated Circuit Production Line	Continuous Investment	Main workshop and CUB capped	Breakthrough in advanced process nodes
65nm 12-inch Production Line	Continuous Investment	Actively Advancing	Expand production capacity
6-inch SiC Chip	RMB 12 million	Completed Process Optimization	New Energy/Photovoltaic Applications
Silicon Photonics Process Platform	Strategic Layout	Achieved Mass Production	Cutting-Edge Technological Breakthrough

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Indicator	Value	Industry Positioning
P/E Ratio	183.22x	High valuation reflects growth expectations
P/B Ratio	5.36x	Moderate
ROE	2.94%	Low, significant profitability pressure
Current Ratio	1.23	Adequate liquidity
Quick Ratio	0.57	Short-term solvency requires attention
Beta	0.78	Lower than market volatility

• Financial Stance
  : Conservative (high depreciation/capital expenditure ratio) [0]
• Debt Risk
  : Medium Risk [0]
• Free Cash Flow
  : Negative (RMB -681 million), indicating the company is still in the investment expansion phase

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The dilemma faced by Yandong Micro is essentially a

:

Revenue Side: Falling prices of consumer products → Narrowing gross profit margin
Expense Side: Surge in R&D investment → Rising expense ratio
Cash Flow: Negative free cash flow → Capital expenditure pressure

• Optimize product structure to increase the proportion of high-margin products
• Strictly control the pace of non-core R&D projects
• Strengthen cost control and improve operational efficiency

• Focus on mass production ramp-up of 28nm/65nm 12-inch production lines
• Accelerate customer acquisition and order procurement for silicon photonics products
• Promote automotive electronics certification for products such as SiC MOSFET

• Build a differentiated competitive advantage of “Foundry+IDM”
• Deeply integrate into the domestic substitution industrial chain
• Establish technological moats and scale effects

From the perspective of R&D investment structure [1], the company should focus on:

• Improve the
  commercialization conversion rate
  of R&D investment
• Strengthen
  collaborative development
  with strategic customers
• Optimize the
  risk-return ratio
  of the R&D project portfolio

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• Elastic Target
  in the recovery cycle of the power semiconductor industry
• Production Capacity Breakthrough
  brought by the commissioning of 12-inch advanced process production lines
• Technological First-Mover Advantage
  from mass production of silicon photonics process platform

• Industry Cycle Risk
  : Cyclical fluctuations in the semiconductor industry may further pressure performance
• R&D Investment Return Risk
  : Delays in key projects or lower-than-expected yields may affect investment returns
• Talent Attrition Risk
  : Turnover of core technical talents may affect R&D progress
• Cash Flow Pressure
  : Sustained high capital expenditures may lead to financing needs

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Yandong Micro’s widening losses are the result of

. Amid the historic opportunity window of domestic substitution, the company has chosen to counter-cyclically increase R&D investment. While this pressures short-term profits, it focuses on long-term technological accumulation and competitive advantage building.

1. The losses have
   cyclical characteristics
   , with price pressures on consumer products being the direct trigger
2. The
   strategic necessity
   of R&D investment outweighs short-term financial pressures
3. 28nm/65nm 12-inch production lines and silicon photonics platforms are the core growth engines for the next 2-3 years
4. Attention should be paid to the
   commercialization progress of R&D achievements
   and production capacity ramp-up efficiency

From a long-term perspective, against the backdrop of domestic substitution and AI-driven semiconductor industry recovery, Yandong Micro’s R&D investment layout has

, but investors need to pay attention to the timing of the performance inflection point.

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[0] Jilin AI - Yandong Micro Company Profile and Financial Analysis Data

[1] Yandong Micro 2025 Half-Year Report (https://ydme.com/pic/image/250902/170830_770.pdf)

[2] Dongfang Fortune Securities - AI-Driven New Industry Cycle, Domestic Substitution Enters Critical Stage (https://pdf.dfcfw.com/pdf/H301_AP202512241807078581_1.pdf)