"Intelligent Security Business" Gross Margin Declines for Fourth Consecutive Quarter, Starchip Technology Seeks to Transition from Steady Growth to Rapid Growth

On March 19, Xingchen Technology (301536.SZ), a company focused on security chip design, held its 2025 performance briefing.

During the meeting, Xingchen Technology Secretary Xiao Peijun stated that starting in 2026, the company will enter a phase of concentrated achievement realization from R&D, and business development will shift from steady growth to rapid growth.

On the afternoon of March 18, investor relations representative He Ye told Times Weekly that starting in 2026, and possibly over the next 3 to 5 years, the company is expected to enter a “harvest period.”

However, Times Weekly found that Xingchen Technology’s primary business, “Smart Security,” has experienced four consecutive declines in gross profit margin, and its second-largest business, “Smart IoT,” has also seen a continuous downward trend since 2022.

“Smart Security” Gross Margin Declines for Four Consecutive Years

Tianyancha shows that Xingchen Technology was founded in December 2017, located in Xiamen, Fujian Province. It was listed on the ChiNext Board of the Shenzhen Stock Exchange in March 2024. The company focuses on R&D, design, and sales of edge AI SoC chips, covering three core areas: smart security, smart IoT, and smart automotive, operating under a fabless model.

Image source: Tianyancha

AI SoC, specifically designed for AI tasks, offers high-efficiency parallel computing capabilities. It integrates specialized modules for AI computing into traditional SoC architectures, suitable for machine learning, deep learning, and other high-computation-density tasks.

On the evening of March 9, Xingchen Technology disclosed its 2025 annual report, claiming to be “the world’s largest visual AI SoC supplier,” with a market share of 26.7% based on 2024 shipment volume.

Visual AI SoC is a type of AI SoC optimized for vision-related AI tasks, integrating NPU (Neural Processing Unit, an embedded neural network processor designed for digital multimedia processing), capable of efficiently handling image and video AI computations.

Overall, Xingchen Technology achieved revenue of 2.972 billion yuan in 2025, a year-on-year increase of 26.28%; net profit attributable to the parent was 308 million yuan, up 20.33%; non-recurring net profit was 252 million yuan, up 39.20%. However, gross profit margins for its two main businesses are both declining.

In 2025, the “Smart Security” business generated 1.935 billion yuan in revenue, up 21.87%, accounting for 65.10% of total revenue, maintaining above 65% share over the past three years. However, its gross profit margin has declined for four consecutive years: 46.40% in 2021, 38.64% in 2022, 34.41% in 2023, 33.42% in 2024, and 32.38% in 2025.

The second-largest business, “Smart IoT,” grew at 38.63% to 658 million yuan in revenue, accounting for 22.14% of total revenue, but its gross profit margin dropped sharply by 6.72 percentage points to 37.63%, continuing the downward trend since 2022. Its gross profit margins from 2021 to 2025 were 45.01%, 48.75%, 45.39%, 44.35%, and 37.63% (in 2023 and earlier, the second-largest business was categorized as “Video Intercom”).

He Ye explained in an interview on March 18 that the decline in gross margin is related to industry price wars. “The semiconductor industry is very weight-driven; to achieve volume, some margin sacrifice is necessary. The security business is being forced to lower prices by competitors; for IoT, Xingchen Technology is a latecomer, so it adopts more aggressive strategies to gain market share.”

The company remains optimistic about future business development.

At the performance briefing on March 19, Chairman and CEO Lin Yongyu pointed out that since the second half of 2025, storage prices have surged and supply has tightened. Low-end security products are gradually exiting the market due to cost sensitivity, while mid-to-high-end market share continues to concentrate among leading companies. The company “leverages scale advantages and supply chain resilience to further consolidate its market position, confident in seizing opportunities and strengthening its advantages amid this supply adjustment.”

Xiao Peijun also stated that starting in 2026, the company will focus on realizing R&D results, with the benefits of early R&D investments gradually materializing. Business development will shift from steady growth to rapid growth, forming a positive cycle of “R&D investment → results transformation → efficiency improvement → revenue growth.”

“By 2026, the company’s product structure will be fully upgraded to advanced processes. The first automotive laser radar chip is expected to be launched in Q2 2026 and achieve small-scale mass production, with large-scale volume starting in 2027.” He Ye added that all new products are positioned in mid-to-high-end, high-margin fields, which will effectively drive product prices and gross margins upward.

Expert in Financial Management

Currently, Xingchen Technology is preparing for a Hong Kong listing.

On September 26, 2025, the company submitted an application to the Hong Kong Stock Exchange and published the application materials on its website. As of March 19, Times Weekly checked the HKEX website and found that the listing process is still “in progress.”

In its prospectus, Xingchen Technology stated five reasons for listing in Hong Kong: continuous large-scale investment in cutting-edge technology development, enriching the edge AI SoC portfolio to build diverse growth paths, increasing investment in overseas marketing and technical support, exploring global investment and acquisition opportunities, and attracting global talent.

He Ye told Times Weekly that about 60% of the funds raised in Hong Kong will be used for R&D, focusing on two key future businesses: embodied intelligent robots and laser radar chips; about 30% will be used for M&A, leveraging the international platform to invest in high-quality targets globally.

Notably, despite the company’s fundraising needs in Hong Kong, its cash flow appears relatively ample.

In its 2025 annual report, Xingchen Technology announced plans to use no more than 4 billion yuan of its own funds to purchase wealth management products, compared to no more than 2 billion yuan in 2024. The company will also use no more than 50 million yuan of idle raised funds for cash management.

The benefit of “financial management” is that non-recurring gains and losses significantly contribute to profit in 2025. The company’s investment income and fair value change gains totaled 53.89 million yuan, accounting for 17.47% of net profit, making financial income an important part of profits.

Behind this, Xingchen Technology is also active in borrowing. As of the end of 2025, the company had short-term loans of 412 million yuan and long-term loans of 433 million yuan, significantly up from 331 million yuan and 373 million yuan at the start of 2025. This led to total interest expenses of 30.28 million yuan for the year, with financial expenses soaring from -1.11 million yuan to 19.10 million yuan.

In response, sponsor representative Kong Yadi said at the earnings presentation that on one hand, the borrowing interest rates are relatively low, and borrowing enhances liquidity, allowing for increased financial returns. On the other hand, borrowing is also a way to maintain good relationships with partner banks.

Given the company’s better-than-expected performance, Huajin Securities has raised its 2026 revenue forecast from 3.554 billion yuan to 3.998 billion yuan, and net profit attributable to the parent from 576 million yuan to 614 million yuan. “We forecast revenues for 2027-2028 to be 5.175 billion and 6.419 billion yuan, respectively, with net profits of 794 million and 930 million yuan.”

On March 19, Xingchen Technology opened lower and declined, closing down 4.60% at 75.41 yuan per share, with a total market value around 31.8 billion yuan.