HUA HONG SEMI Q2 revenue increased by 18.3% year-on-year, with capacity utilization reaching a new high in recent quarters | Financial Report Insights

Hua Hong Semiconductor achieved a good year-on-year revenue growth in the second quarter, with the 12-inch wafer business becoming the main growth engine, while net losses also narrowed.

On Thursday, Hua Hong Semiconductor released its second-quarter performance, specifically:

Financial performance: Revenue of $566.1 million, a year-on-year increase of 18.3% and a quarter-on-quarter increase of 4.6%; gross margin of 10.9%, up 0.4 percentage points year-on-year, down 1.7 percentage points quarter-on-quarter; net loss of $32.8 million, a year-on-year narrowing of 21.4%;

Capacity and operations: Monthly capacity of 8-inch wafers at 447,000 pieces, with a utilization rate of 108.3%; monthly capacity of 12-inch wafers at 1.305 million pieces, a year-on-year increase of 18.0%; overall capacity utilization remains high, indicating relatively stable demand.

Revenue Growth Mainly Relies on 12-inch Capacity Release

From the revenue structure, the 12-inch wafer business has become the main growth engine, among which:

In the second quarter, 12-inch revenue reached $333.8 million, a year-on-year surge of 43.2%, accounting for 59% of total revenue, up from 48.7% in the same period last year.

In contrast, traditional 8-inch business revenue was $232.3 million, a year-on-year decline of 5.4%, with its share dropping to 41%.

This change clearly demonstrates Hua Hong's strategic transformation path: migrating from mature 8-inch processes to more advanced 12-inch processes.

From the distribution of process nodes, the 90-95nm process performed the best, with revenue of $145.4 million, a year-on-year increase of 52.6%, accounting for 25.7% of total revenue. This is mainly benefited from the recovery in demand for products such as MCUs. The 65nm process also performed well, with revenue of $125.5 million, a year-on-year increase of 27.4%.

In contrast, mature process nodes performed mediocrely. Revenue from the 0.11-0.13μm process decreased by 6.8% year-on-year, and the 0.15-0.18μm process decreased by 4.7%, reflecting that demand in traditional application areas remains weak.

Clear Differentiation in Downstream Applications

From the perspective of downstream applications, consumer electronics remain the absolute mainstay, accounting for 83% of revenue, with a year-on-year growth of 21.8%. However, this growth reflects more of a competition for existing market share rather than incremental expansion, as the global consumer electronics market is still in an adjustment period.

More noteworthy is the revenue growth of communication applications, which increased by 59.3% to $161.2 million, with its share rising from 21.1% to 28.5%. This may benefit from the construction of 5G infrastructure and the recovery in demand for communication chips.

In contrast, growth in industrial and automotive applications was relatively moderate, increasing by 16.6% and 9.4%, respectively. Considering that automotive electronics are recognized as a growth track in the semiconductor industry, Hua Hong's performance in this area seems to lack highlights

Cash flow situation has improved, but still far from turning a profit

There are positive signals in cash flow. Operating cash flow was $169.6 million, a significant year-on-year increase of 75.1%, mainly due to revenue growth and improved working capital management. However, capital expenditures reached $385.6 million, far exceeding operating cash flow, indicating that the company is still in a period of heavy capital investment.

Free cash flow was negative $216 million. Although the loss narrowed compared to the same period last year, it still indicates that the company requires ongoing external financing support. As of the end of the second quarter, cash and cash equivalents amounted to $3.847 billion, providing a buffer for continued investment.

Despite good revenue growth, the gross margin in the second quarter was 10.9%, slightly improved from 10.5% in the first quarter. The net loss was $32.8 million, which is a reduction from the $41.7 million loss in the first quarter, but still far from turning a profit