Behind the 20% Limit Surge Upon Resumption: Galaxy Microelectronics Plans M&A to Break into High-End Power Semiconductor Segment

Blue Whale News, June 29 (Reporter Xu Gangan) – Galaxy Microelectronics (688689.SH), which had been suspended for over half a month, disclosed a restructuring plan yesterday and resumed trading today. The company plans to acquire 100% of Hengtai Ke Semiconductor (HTK) from three shareholders – Shanghai Zhinenghengxin Industrial Electronics Co., Ltd., Gongqingcheng Mingnuo Investment Partnership (LP), and Tianmuyulin (Shanghai) Technology Co., Ltd. – through a share issuance, and simultaneously raise supporting funds.

On the resumption day, the company's shares hit the 20% daily limit, closing at 55.88 yuan per share, with a total market capitalization of about 7.2 billion yuan. The turnover rate was only 1.21%, and the buy queue at the limit was as high as 291 million shares, 185 times the day's trading volume, with corresponding funds exceeding 1.5 billion yuan, reflecting strong market buying interest.

Amid the high cycle of the power semiconductor industry, the market has given a positive outlook to this traditional discrete device manufacturer's move to enter the medium/high-voltage power semiconductor segment through M&A. However, the acquisition still faces multiple controversies: insider trading allegations due to abnormal stock price surges before suspension, undetermined target valuation, and potential large goodwill impairment in the future, all adding uncertainty to the industrial integration.

Jiang Han, Senior Researcher at Pangoal Institution, told Blue Whale News that the biggest integration challenge lies in fine management of product lines and customers. After merging HTK's over 700 products, the total will exceed 1,000, significantly increasing complexity in customer management and capacity allocation. Second, core technology is highly tied to the R&D team; without reasonable equity incentives and non-compete clauses, there may be technology loss and goodwill impairment risks.

M&A Aims to 'Fill Shortcomings,' but Technology Leap Still Faces Real Barriers

Compared with some listed companies' cross-border or non-synergistic M&A, Galaxy's acquisition of HTK is a typical industrial M&A that complements weaknesses and emphasizes synergy. After the transaction, the company is expected to quickly fill its medium/high-voltage power semiconductor technology gaps, fill high-end product blanks, and complete its overall product matrix.

As a semiconductor discrete device company listed on the STAR Market in 2021, Galaxy has long relied on small-signal devices and low-voltage power devices as its core business base, but has lagged in high-end areas such as high-voltage MOSFET, IGBT, and SiC. Disclosed technological breakthroughs have not yet translated into actual performance, limiting the company's penetration into high-end markets like automotive electronics.

Currently, global giants like Infineon, ON Semiconductor, and STMicroelectronics have built complete technology chains covering materials, processes, and manufacturing. Domestic IDM leaders like Silan Micro and Yangjie Technology have also achieved mass production of 8-inch high-voltage MOS and IGBT, with leading capacity continuously releasing, narrowing the window for latecomers.

Against this backdrop, HTK has become a key lever for Galaxy to break through technology bottlenecks. According to the restructuring plan, HTK is a national-level specialized 'little giant' enterprise mainly engaged in R&D, sales, and development of power semiconductor products, widely used in various power supplies, lithium battery protection, brushless motors, new energy, and E-car (OBC, electric control) fields. HTK possesses industry-leading medium-voltage SGT MOSFET and high-voltage Super Junction technologies. Compared with domestic competitors, HTK's 150V-200V medium/high-voltage SGT MOSFET has reached top domestic levels, directly Pin-to-Pin comparable and replaceable with Infineon's medium-voltage series.

This M&A is a typical 'Fabless design + IDM manufacturing' industry chain integration. Galaxy has mature chip manufacturing capacity but lacks high-end design capabilities; HTK masters top design technologies but has no own production lines, long constrained by foundry capacity and cost volatility. Both sides have complementary business potential, but whether synergy materializes depends on subsequent integration implementation.

Zhang Jiaming, General Manager of the Investment Department at Guangzhou Ruizhi Venture Capital Management Co., Ltd., told Blue Whale News that for small and medium companies, the biggest advantage of M&A is greatly shortening the development time window. Industry leaders often take decades to build a complete industry chain synergy system, while smaller companies can initially form a full-chain synergy framework through precise M&A, thereby comprehensively enhancing competitiveness in complex environments.

'Despite significant advantages, small and medium companies also face many risks, with integration risk being the biggest challenge. Differences in organizational structure, corporate culture, team integration, and technology R&D paths between companies often exist. Only through fine management, deep integration of multiple advantages, and minimizing internal friction can true synergy be formed and overall strategy implemented,' Zhang said.

Valuation Fog and Capital Pressure: M&A Game Yet to Be Priced

Behind the industry's high boom, market competition has become fierce, and the potential risks of this M&A cannot be ignored.

Galaxy's plan warns that HTK will face dual competitive pressure from international giants and domestic newcomers. Additionally, if the global macro economy weakens, downstream demand growth slows, or the semiconductor industry experiences deep and persistent downturns, HTK's operating performance will be directly affected.

More critically, the final valuation and consideration for the transaction have not been determined. As of the plan signing date, HTK's audit and evaluation are still in progress, and the transaction price has not been disclosed. The issuance price for shares is set at 28.48 yuan per share, with a lock-up period of 36 months. The raised funds will be used for transaction taxes and fees, intermediary costs, target project construction, and supplementing working capital and repaying debt.

Unaudited data show HTK's revenue in 2024 and 2025 was 206 million yuan and 193 million yuan respectively; net profit attributable to parent was 32.2325 million yuan and 35.718 million yuan, maintaining stable growth. As of end-2025, HTK's parent company equity was only 416 million yuan, indicating a significant light-asset nature.

When discussing the valuation of M&A targets, Jiang Han told Blue Whale News that the valuation of light-asset semiconductor design companies focuses on intangible assets such as IP cores and R&D teams. Traditional PE/PB models often fail due to large earnings volatility and high upfront investment. In his view, a reasonable valuation should be based on a multi-stage DCF model, supplemented by relative valuation for cross-validation, while incorporating qualitative factors like technology iteration risk and downstream application cyclicality. To determine if there is a premium bubble, one should not simply refer to book net assets or short-term profits, but comprehensively evaluate the target's technological scarcity in its niche, commercialization progress, and transaction payment structure for a more prudent judgment.

From the listed company's fundamentals, Galaxy's net profit attributable to parent declined year-on-year in both 2022 and 2023. In 2024, revenue was 909 million yuan, up 30.75% YoY; net profit was 71.8742 million yuan, up only 12.21% YoY, with profit growth significantly lagging revenue. In 2025, growth momentum further slowed, with revenue of 1.05 billion yuan, up 15.46% YoY; net profit was 79.9047 million yuan, with YoY growth falling to 11.17%, overall weak growth.

On the capital side, financial pressure has increased. As of end-2025, Galaxy's cash was only 137 million yuan, down 44.65% YoY. Meanwhile, operating cash flow weakened year by year due to longer customer payment cycles and increased inventory. Last year, net operating cash inflow was 43.7501 million yuan, down 34.73% YoY.

'Whether this M&A can realize cyclical gains depends not on transaction closing but on consolidation timing and synergy delivery,' said a private fund insider. 'HTK itself has stable revenue and profit; post-closing consolidation can directly boost the listed company's earnings. But both companies are small-scale, not industry leaders. Whether they can achieve '1+1>2' synergy remains uncertain. The biggest risk is high premium acquisition leading to large goodwill; if performance falls short later, goodwill impairment will directly eat into profits.'

The insider further noted that the market's enthusiasm for semiconductor companies' M&A into high-end segments tests not short-term cyclical timing but long-term performance delivery and integration effectiveness post-M&A.

Additionally, abnormal stock price movements before the suspension have raised widespread market doubts about insider information leakage.

Before the suspension announcement, Galaxy's shares surged sharply on June 10-11, with two-day cumulative gains of nearly 19% and significantly higher volume; the semiconductor industry index rose only 2.70% in the same period, showing a clear deviation. The company stated that there is no insider information leakage or insider trading related to the transaction.

Regarding market concerns, Blue Whale News contacted Galaxy's board secretary office on June 29 but received no reply by press time.