New Stock Outlook | The "double whammy" of cycles and competition has put pressure on performance for years. How well is Shanghai Fullhan Microelectronics (300613.SZ) maintaining its high growth in H1?

The global AI industry is evolving rapidly, and the transition of edge AI from concept to mass production has become a certainty. During this crucial window, edge AI companies are accelerating their entry into the capital market to seize mass production shares and strategic positions with the help of capital leverage. Among them, companies such as Horizon Robotics (09660), BLACK SESAME (02533), AXERA (00600), and Panjit (06675) have listed on the Hong Kong Stock Exchange. At the same time, A-share leaders in the edge SoC space, including Shanghai Fullhan Microelectronics (300613.SZ), SigmaStar Technology (301536.SZ), and Amlogic (688099.SH), are intensively submitting applications to the Hong Kong Stock Exchange, aiming for a dual A+H platform listing. As a global leader in edge intelligent vision processing chips, Shanghai Fullhan Microelectronics is accelerating its journey towards listing in Hong Kong. It was noted that on April 29, Shanghai Fullhan Microelectronics submitted its listing application to the main board of the Hong Kong Stock Exchange, with Huatai International serving as the sole sponsor. It is worth mentioning that Shanghai Fullhan Microelectronics had previously submitted documents to the Hong Kong Stock Exchange on October 28, 2025. According to the prospectus, based on shipment volume in 2025, Shanghai Fullhan Microelectronics is expected to dominate the global market for edge intelligent vision processing chips and in-vehicle ISP chips; and according to the same period's revenue calculations, the company ranks second in the global market for intelligent vision processing chips. However, this leading market position has not translated into effective growth momentum, as Shanghai Fullhan Microelectronics has faced significant pressure on its performance in recent years. Data shows that from 2023 to 2025, the companys revenues were 1.822 billion, 1.790 billion, and 1.688 billion yuan respectively, showing a continuous downward trend; during the same period, net profits were 252 million, 232 million, and 120 million yuan, reflecting a "halving" of net profit within just two years. A turning point occurred in the first half of 2026, with the company expecting its net profit attributable to shareholders to be between 270 million to 350 million yuan during the reporting period, which represents a year-on-year growth of 1072.72% to 1420.19%. The significant recovery in performance in the first half of the year raises the question of whether the downward cycle has officially ended. The answer to this question is key not only for assessing the fundamental quality of Shanghai Fullhan Microelectronics but also significantly determines whether its IPO will attract market funds. The combination of a downward cycle and intensified competition has led to a continued decline in the average selling price of its two major product lines. Founded in April 2004, Shanghai Fullhan Microelectronics has developed three major IC product lines through more than twenty years of accumulation and refinement using a fabless model: intelligent video, intelligent IoT, and intelligent mobility. The intelligent video line includes SoC chips for consumer imaging systems (used in security monitoring and network cameras, supporting face and crowd detection), image processing chips (responsible for high-definition security camera image collection), and mixed-signal camera system-level chips (used for decoding output in entry-level security recording devices). The intelligent IoT line covers IoT camera chips (empowering AI recognition for home cameras and video doorbells), smart display chips (driving smart speaker screens and televisions), and home control and cloud storage system chips. Additionally, the intelligent mobility line focuses on automotive chips including in-car image processing chips for advanced driving assistance, core imaging chips for dash cams, and high-speed transmission chips for in-car video. From the revenue structure, Shanghai Fullhan Microelectronics shows a clear pattern of "core leading, dual wings collaborating." In 2025, intelligent video accounted for 59.5% of revenues, maintaining dominance, while intelligent IoT and intelligent mobility accounted for 20.1% and 16.6% respectively as the two wings, with the remaining 3.8% contributed by customized solutions and other businesses. It has been found that the continuous decline in revenue for Shanghai Fullhan Microelectronics from 2023 to 2025 is primarily due to the drag from its intelligent video and intelligent IoT businesses. In the middle of 2024, although intelligent mobility revenue surged by 26.09% to 237 million yuan, intelligent video revenue slightly decreased by 1.2% to 1.204 billion yuan, and intelligent IoT revenue fell by 11.39% to 278 million yuan, resulting in an overall revenue decline of 1.76% for the company during that period. In 2025, the revenue decline rate for Shanghai Fullhan Microelectronics accelerated. Even though intelligent mobility revenue grew by 17.89% year on year to 280 million yuan and intelligent IoT revenue returned to growth with a year-on-year increase of 21.86% to 339 million yuan, the decline in intelligent video revenue by 16.61% to 1.004 billion yuan led to an overall revenue drop of 5.69% to 1.688 billion yuan for the company. A deeper analysis reveals that the key reason for the persistent decline in revenue for Shanghai Fullhan Microelectronics is the continuous weakening of product prices. According to the prospectus, the average selling price of Shanghai Fullhan Microelectronics intelligent video products has continuously decreased from 15.3 yuan in 2023 to 10.8 yuan in 2025; simultaneously, the average selling price of intelligent IoT products has decreased from 11.6 yuan in 2023 to 8.8 yuan. Despite continuous growth in sales of the companys intelligent video and intelligent IoT products, the persistent decline in average product prices has not been effectively countered, leading to significant impact on these two major businesses. The growth of intelligent mobility, on the other hand, can be attributed to sustained sales growth amidst stable product prices. It is noteworthy that the continuous price decline for intelligent video and intelligent IoT products stems from the industry's downward cycle and worsening competitive landscape. On the demand side, the company's largest downstream client, Hangzhou Hikvision Digital Technology, has been continuously de-stocking and reducing purchases, directly impacting the companys shipment volumes. On the supply side, Hisilicon has returned to the market through module manufacturers, initiating a price war with pricing 10%-15% lower than its competitors. To protect its market share, Shanghai Fullhan Microelectronics has been forced to follow suit with corresponding price reductions, leading to a "volume growth, revenue decline" predicament. The chain reaction of the price war is also reflected in the gross margin. From 2023 to 2025, the company's gross margin decreased from 37.6% to 36.6%, marking a continuous decline for three consecutive years. On this basis, coupled with the rigid expenses for R&D and sales, this has accelerated the shrinkage of Shanghai Fullhan Microelectronics profit, resulting in a significant drop of 48.28% in net profit to 120 million yuan in 2025. The short-term growth outlook is strong, but the high customer concentration poses a challenge to long-term development. From the analysis above, it is evident that as a global leader in edge intelligent vision processing chips and in-vehicle ISP chips, Shanghai Fullhan Microelectronics' continuous performance decline is primarily attributed to the downward cycle of the industry and the deterioration of market competition. However, in the first half of 2026, this downward trend encountered a turning point. Data shows that in the first quarter of 2026, Shanghai Fullhan Microelectronics reported revenues of 559 million yuan, a year-on-year increase of 75.53%, with net profit at 83.131 million yuan, a growth of 147.5 times compared to 559,800 yuan in the same period of 2025. Moreover, on July 31, Shanghai Fullhan Microelectronics announced a performance forecast for the first half of 2026, estimating revenues between 1.4 billion to 1.5 billion yuan, representing a year-on-year growth of 103.48% to 118.01%; the net profit attributable to shareholders is expected to be between 270 million and 350 million yuan, reflecting a year-on-year growth of 1072.72% to 1420.19%. Clearly, the company's performance in the second quarter is accelerating, with net profit attributable to shareholders increasing by 224.79% to 321.03% quarter-on-quarter. Behind this acceleration in performance is the sequential impact of four factors: "price, volume, structure, and base." In the first half of 2026, global storage prices surged significantly, and PCB and passive components experienced simultaneous shortages and price hikes. The company, leveraging its strong binding on storage support in IPC/NVR solutions, adjusted pricing for its three major product lines. Meanwhile, downstream clients, facing tight production capacities, prioritized supply, showing good acceptance of the price increases. This ensured that margin gains, rather than costs, were captured in the price transmission. Simultaneously, the sales volumes for the three major segmentsintelligent video, intelligent mobility, and intelligent IoTgrew significantly, and along with price increases, the company maintained delivery amid upstream and downstream pressures, enabling a concentrated release of pent-up demand in Q2, resulting in a historic quarterly high. On a deeper level, structural increments are driven by positive market feedback for AI-ISP chips (with built-in NPU, low-light/wide-dynamic-range reasoning), which have been widely adopted in industrial Siasun Robot & Automation applications, servicing Siasun Robot & Automation, robotic dogs, and home care scenarios. Coupled with the introduction of the first Android host and the second-generation wearable chip, this opens up new markets for edge AI beyond traditional security IPC stock. The marginal profit structure has been elevated. Furthermore, the net profit attributable to shareholders for Shanghai Fullhan Microelectronics in the first half of 2025 was only 23.02 million yuan, representing a low base. This amplified the aforementioned resonance into a tenfold year-on-year multipleessentially, the business is recovering from a very low base, compounded by a cyclical upturn and the launch of new products, rather than being a purely linear explosion. Based on the impressive performance in the first half of 2026, Shanghai Fullhan Microelectronics has a relatively high certainty of short-term performance, supported by the following logical factors: First, the rebound in the security IPC industry has improved order visibility to 3-6 months. After the de-stocking process in the first half of 2025, downstream clients' inventories have reduced to a near low of 3-5 years, and in the context of tight storage, they are gradually replenishing stocks. This is not a one-off pulse, but a continuous ramp-up in line with production schedules, suggesting that security video revenue could continue to see visibility into Q3 of this year. Second, within the intelligent mobility product line, the 8-megapixel CMS has become a selling point for a well-known domestic brands high-end models, and MIPI-APHY has been adopted by a domestic private automaker's innovative model, while German luxury brands have also begun validation, effectively supporting revenue growth in the short term. Third, the sustainability of price advantages during the storage cycle is crucial to the performance of Shanghai Fullhan Microelectronics. According to the latest guidance from Amlogic, the contract price for DDR2 is expected to increase by 55% to 60% in the second quarter of 2026, and by 35% to 40% in the third quarter. The current supply situationwhere Huabang is gradually exiting the DDR2 market and Jinghao is taking overwill not reverse in 2026. UBS has even predicted a broad shortage of DRAM to last into the first quarter of 2027. With the continued progress in pricing mechanisms throughout 2026, Shanghai Fullhan Microelectronics may be able to maintain a relatively high gross margin level. Thus, it is clear that the short-term growth outlook for Shanghai Fullhan Microelectronics is solid, driven by security inventory replenishment, automotive focal points, and favorable pricing trends in storage. This suggests the companys high prosperity for the first three quarters of 2026 can be anticipated. However, this certainty comes with an "expiration date" as price increases linked to storage cycles are not purely endogenous technical premiums; once DDR2 price increases plateau by the years end, the existing high-priced inventory could turn from profit leverage into a potential impairment burden, directly impacting performance releases in the fourth quarter of 2026 and into the following year. This is also a key reason why Shanghai Fullhan Microelectronics current stock price has not surged. In the medium to long term, the key factors determining the intrinsic value of Shanghai Fullhan Microelectronics include the following three aspects: First, whether the share of the automotive segment can rise from 16.5% to the target line of 25%. While the ramp-up of long-term automotive orders has been slow, its certainty remains high; if this business line exceeds 25%, it will become the first growth pole offsetting the impact of security, further weakening the dominant weight of "intelligent video + Hikvision procurement pace" on revenue cycles. Second, whether the company's first Android host chip can achieve volume production is crucial. This chip is expected to enter tape-out in the second quarter of 2026, with engineering samples anticipated in the fourth quarter. This marks the companys first foray beyond visual co-processor into the main chip battleground against Qualcomm, Rockchip Electronics, and Allwinner Technology. Its competitive edge lies in self-developed AI-ISP and imaging BOM cost advantages targeting the sub-market of strong imaging industry terminals/mid-to-low tier tablets/edge boxes." Achieving volume production would mean that the intelligent IoT line transitions from RTOS control to the Android ecosystem, further expanding its growth space. Third, the companys positioning in AI glasses/Siasun Robot & Automation sectors needs to shift from being an "option" to a "mainstream" focus. The company currently ships only a few tens of thousands of humanoid Siasun robots, contributing relatively limited revenue, and will need the acceleration of terminal volume to reach a pivotal inflection point. Based on these factors, even though Shanghai Fullhan Microelectronics has expanded multi-dimensional new growth curves within its existing business landscape, the actual realization of these potentials remains uncertain at this early cash-in stage. Furthermore, the high customer concentration poses a fundamental constraint on the company's long-term development, as the revenue from its top five clients accounted for a staggering 82.5% in 2025, with a single client representing 56.3%. Optimizing the customer structure has become a threshold that Shanghai Fullhan Microelectronics must cross to transition from a "cyclical rebound" to "long-term steady development."