HG SEMI (06908) subsidiary Shenzhen GaHong Semiconductor receives RMB80 million capital increase.

HG SEMI (06908) announces that on October 29, 2026, the target company Shenzhen GaHong Semiconductor, Swift Power, Join Gain, Red Mont, the employee shareholding platform, Taizhou Huirong Jianeng Youchuang Investment, Orchid Enterprises, and the project company entered into a capital increase agreement with the investor Chizhou Hengchuang Linghang Venture Capital Fund Partnership (Limited Partnership), pursuant to which the investor has conditionally agreed to make a cash capital contribution of RMB80 million (or the equivalent in US dollars) to the target company to subscribe for US$1.3381 million of new registered capital of the target company, representing approximately 6.9085% of the enlarged registered capital of the target company, in order to increase its registered capital and capital reserve. Upon completion, the investor will own approximately 6.9085% of the enlarged equity interest in the target company, and the Group's equity interest in the target company (held through Swift Power, Join Gain and Red Mont) will be diluted from approximately 73.2745% to approximately 68.2125%. Pursuant to the capital increase agreement, the target company, Swift Power, Join Gain, Red Mont, the employee shareholding platform, Taizhou Huirong Jianeng Youchuang Investment, Orchid Enterprises, the investor and the project company will enter into a shareholders' agreement upon completion. Pursuant to the shareholders' agreement, the repurchase obligors will grant repurchase options to the investor and Taizhou Huirong Jianeng Youchuang Investment respectively, entitling the investor and Taizhou Huirong Jianeng Youchuang Investment to require the repurchase obligors to purchase all or part of their equity interests in the target company at the repurchase price in accordance with the terms of the shareholders' agreement. The Group commenced its GaN business in 2021 and established the Xuzhou plant. Over the past few years of development, the Xuzhou plant has achieved strategic breakthroughs in the development and manufacturing of GaN epitaxial wafers and device products. The Xuzhou plant commenced mass production of GaN epitaxial wafers in 2025, and the target group recorded revenue of approximately RMB29.6 million for the year ended December 31, 2025, compared with revenue of approximately RMB1.36 million for the year ended December 31, 2024, demonstrating a revenue growth trend. The Group will continue to step up efforts to improve the third-generation semiconductor GaN industry chain in order to accelerate research and development and expand the application of GaN-related products. For the Group, the capital increase represents an opportunity to introduce additional funds for the development of the target group and to support the Chizhou module packaging production line project. The Group has been actively seeking cooperation and investment with strategic partners, adhering to the principles of resource complementarity and win-win cooperation, to achieve upgrading of its industry chain. The Group is committed to continuously strengthening its research and development capabilities and introducing outstanding experts and talents in the semiconductor field to enhance production and research and development, with the aim of becoming a GaN full-industry-chain IDM enterprise integrating research and development, manufacturing, packaging, testing and sales. Regarding the semiconductor industry, according to the "2025 Overview" published by the Semiconductor Industry Association, China is the world's largest single-country market, and demand in China's semiconductor market has shown sound growth momentum across multiple sectors, including technological innovation, power devices, automotive electronics, artificial intelligence and the Internet of Things. Government support policies and industrial development strategies have also provided favorable development opportunities for China's semiconductor industry, particularly in new energy and new energy vehicle electronics, where China's investment has grown rapidly, and photovoltaic, wind power generation and energy storage, batteries, etc. are global industry leaders; China's electric vehicle market is undergoing rapid development, and market demand for related automotive intelligent driving chips, power chips, etc. is growing rapidly. According to the Autumn 2025 semiconductor market forecast update released by the World Semiconductor Trade Statistics (WSTS) organization, the global semiconductor market is expected to grow by more than 25% to US$975 billion. Growth is expected to be achieved in all regions and product categories. Driven by data center infrastructure demand and the emergence of initial artificial intelligence edge applications, memory and logic are expected to lead again, with both growing by more than 30% year-on-year. As an important member of the third-generation semiconductors, GaN can operate under high-frequency conditions while maintaining high performance and high efficiency, with lower losses compared with previously used silicon transistors. As third-generation semiconductors enter a window period, demand for third-generation semiconductor materials in different fields has surged, semiconductor products have also become more diversified, and the pace of iteration and innovation has continued to accelerate. Benefiting from huge market demand in consumer electronics, new energy and new energy vehicles, coupled with the major trends of industrial upgrading and process substitution, market demand for GaN power products is strong, and the GaN power market has become the fastest-growing category by output value in the third-generation semiconductor industry. Among these, new energy vehicles are the main growth driverChinese local brands account for more than 80% of the national electric vehicle market and are increasingly favored in exports. This trend brings enormous business opportunities to the entire supply chain, and in view of this, domestic electric vehicle manufacturers have also accelerated the promotion of third-generation semiconductor devices in the automotive field. Driven by national policy support and strong market demand, the GaN power product sector is expected to develop further rapidly. Therefore, the investor's capital increase represents a valuable opportunity for the Group to raise funds under the current difficult market environment in order to expand the Group's production capacity to meet growing customer demand and enhance the Group's research and development capabilities in developing next-generation products. The investment in the target group through the capital increase will be allocated to GaN chip projects to promote business growth. The proceeds from the capital increase, together with the Group's self-raised funds of RMB20 million, will be used for (i) the Chizhou module packaging production line project; and (ii) other purposes approved in writing by the investor. Chizhou City, Anhui Province, China, is actively positioning itself as a specialized manufacturing and packaging center in the Yangtze River Delta semiconductor network, with direct access to local specialized suppliers and downstream partners. The Chizhou municipal government is also actively providing subsidies and financial incentives to support the local semiconductor industry. The proposed relocation of the Group's module packaging production plant from the Xuzhou plant to Chizhou is a strategic operational arrangement. Chizhou City has already formed a mature semiconductor industry cluster focusing on power supplies and third-generation semiconductors, with complete upstream and downstream supporting resources, favorable industrial policies and competitive costs. The Chizhou module packaging production line project will help expand the Group's GaN product capacity, shorten supply chain delivery times, bring it closer to major downstream customers in the Yangtze River Delta, and optimize the Group's cost structure and long-term gross profit level.