Behind the "20CM" Limit-Up Resumption: Galaxy Microelectronics Aims to Break into High-End Power Semiconductors via Merger

Galaxy Microelectronics (688689.SH), after a suspension of over half a month, resumed trading upon disclosing its restructuring plan. The company plans to acquire 100% equity of Hengtaike Semiconductor from three shareholders — Shanghai Zhineng Hengxin Industrial Electronics Co., Ltd., Gongqingcheng Mingnuo Investment Partnership (Limited Partnership), and Tianmu Yulin (Shanghai) Technology Co., Ltd. — via issuing shares, along with raising matching funds.

On resumption day, the stock hit the "20CM" limit-up, closing at CNY 55.88 per share, with a market cap rising to about CNY 7.2 billion. Turnover rate was only 1.21%, with limit-up buy orders reaching 291 million shares, 185 times the day's trading volume, corresponding to over CNY 1.5 billion in funds, indicating intense market demand.

Amid the power semiconductor industry's high boom cycle, the market has given a positive outlook to Galaxy Microelectronics' move to enter the medium-high voltage power semiconductor field through acquisition. However, the deal still faces multiple controversies: insider trading allegations from abnormal stock price surge pre-suspension, undetermined target valuation, and potential large goodwill pressure, leaving industry integration uncertain.

Product Line and Customer Management Complexity Increase: Integration Challenges Significant

Jiang Han, a senior researcher at Pangoal Institution, said the biggest integration challenge lies in refined management of product lines and customers. With over 700 products from Hengtaike, the total exceeds 1,000 categories, sharply increasing complexity in customer management and capacity allocation.

Second, core technology is highly tied to R&D teams. Without reasonable equity incentives and non-compete clauses, there is risk of technology loss and goodwill impairment.

Peer Gap-Filling: Entering Medium-High Voltage Track via Design-Manufacturing Synergy

Unlike cross-industry acquisitions with no synergy, Galaxy Microelectronics' acquisition of Hengtaike is a peer gap-filling, synergy-focused industrial merger. Post-deal, the company is expected to fill its medium-high voltage power semiconductor technology gap, plugging high-end product gaps and enhancing product matrix.

Galaxy Microelectronics, a semiconductor discrete device firm listed on the STAR Market in 2021, has long relied on small-signal devices and low-voltage power devices as its core business, but lagged in high-voltage MOSFET, IGBT, and SiC segments. Hengtaike is seen as key to breaking through technology bottlenecks.

According to the restructuring plan, Hengtaike is a national-level specialized and new "little giant" enterprise engaged in R&D, sales of power semiconductor products, applied in power supplies, Li-ion battery protection, brushless motors, new energy, e-cars (OBC, e-control), etc. Hengtaike owns medium-voltage SGT MOSFET and high-voltage SuperJunction technologies, with 150V-200V medium-high voltage SGT MOSFET reaching domestic top level, pin-to-pin comparable to Infineon's medium-voltage series.

The deal is described as a "Fabless design + IDM manufacturing" chain integration. Galaxy Microelectronics has mature chip manufacturing capacity but lacks high-end design capability; Hengtaike has top design technology but no own fab, long constrained by foundry capacity and cost fluctuations. There is complementary space at business level, but synergy realization depends on actual integration.

Zhang Jiaming, investment department GM of Guangzhou Ruizhi Venture Capital Management Co., Ltd., believes that for small companies, M&A can significantly shorten development windows, allowing them to form a full-chain synergy prototype through precise acquisition, enhancing overall strength.

However, he also noted integration risks as a major challenge. Differences in organizational structure, corporate culture, team integration, and R&D paths between two or more enterprises require refined management to minimize internal friction and form synergy for strategy execution.

Valuation and Funding Pressure: Final Pricing and Consolidation Pace Yet to Be Tested

The deal still faces multiple uncertainties. Risk warnings in the plan show Hengtaike will face competition from both international giants and domestic newcomers; if global macroeconomy weakens, downstream demand slows, or semiconductor industry sees deep, sustained downturns, Hengtaike's performance will be directly impacted.

A more core uncertainty is that the final valuation and consideration have not been finalized. As of the plan signing date, Hengtaike's audit and valuation are still in progress; the transaction price is not yet disclosed. The share issuance price is set at CNY 28.48 per share, with a 36-month lock-up for counterparty shares. Matching funds will be used for transaction fees, intermediary costs, project construction, and supplementing liquidity or repaying debt.

Unaudited data shows Hengtaike's 2024 and 2025 revenues were USD 206 million and USD 193 million respectively; net profit attributable to parent was USD 32.2325 million and USD 35.718 million, with stable profit growth. By end of 2025, Hengtaike's parent equity was only USD 416 million, with significant asset-light attributes.

Regarding valuation, Jiang Han noted that for asset-light semiconductor design firms, valuation hinges on intangible assets like IP cores and R&D teams. Traditional PE/PB models often fail due to profit volatility and upfront investment. He believes a multi-stage DCF model should be the foundation, cross-validated with relative valuation, incorporating qualitative factors like technology iteration risk and downstream cyclicality.

From Galaxy Microelectronics' fundamentals, net profit attributable to parent fell consecutively from 2022 to 2023. In 2024, revenue reached USD 909 million, up 30.75% YoY; net profit attributable to parent was USD 71.8742 million, up only 12.21%. In 2025, full-year revenue was USD 1.05 billion, up 15.46%; net profit attributable to parent was USD 79.9047 million, with growth slowing to 11.17%, further weakening overall momentum.

On the funding side, as of end-2025, Galaxy Microelectronics' cash was only USD 137 million, down 44.65% YoY; operating cash flow weakened year by year due to extended customer payment terms and increased inventory. In 2025, operating net cash inflow was USD 43.7501 million, down 34.73% YoY.

A source from a private equity firm said the acquisition is expected to boost earnings, but with both firms small and not industry leaders, achieving a "1+1>2" synergy remains uncertain. The biggest risk may be large goodwill from high-premium acquisition; if performance falls short, goodwill impairment will erode listed company profits.

Pre-Suspension Stock Price Abnormal Movement Raises Concerns: Insider Information Allegations Still Need Clarification

Additionally, abnormal stock price movement before the suspension has raised market suspicions of insider information leakage. On June 10-11, two days before the suspension announcement, Galaxy Microelectronics' stock suddenly surged, with cumulative gains of nearly 19% and heavy volume; during the same period, the semiconductor industry index rose only 2.70%, significantly deviating from the industry trend.

The company issued a statement saying that relevant parties involved in the transaction had no insider information leakage or insider trading violations.