A Cool Look at the 3439-Fold Margin Surge: Why Is Basic Semiconductor Worth $1 Billion?

Market enthusiasm can spark a fire, but how long it burns depends on whether there's enough fuel. The fundamental semiconductor story is just beginning...

Coming soon on 2026/7/8, Basic Semiconductor (09971)Margin subscription oversubscribed by more than 3439 timesmargin funds1450.03 billion HKD. At the same time, this company has accumulated losses exceeding 9 billion yuan over the past three years, with revenue growth in 2025 year reaching only 4.1%.IPO market cap reached approximately 90 billion HKD。

Between the 3439-fold surge in margin trading activity and the persistently negative fundamentals lies a vast cognitive gap. To understand this divide, we must return to a fundamental question:What are investors really paying for?

1. Let's start with margin: What does this number mean?

3439-times margin financing is rare in the history of HK stocks. However, it is primarily driven by two factors:

First, the plate is indeed too small.This global offering represents only 9% of the total share capital, with the initial Hong Kong public offer accounting for 5%—approximately 136.94 shares. Based on the maximum issue price of 31.62 HKD, the fundraising from the public offer totals roughly 4330 thousand HKD. With such a tiny float meeting intense IPO subscription demand, a significantly elevated oversubscription multiple was almost inevitable.

Second, the market opportunity is indeed substantial.。A typical company, no matter how large its scale, cannot spark market enthusiasm. What truly ignites the market is Basic Semiconductor's strategic position: the silicon carbide (SiC) sector is at a cyclical inflection point driven by AI.

But the margin ratio is just the surface. To understand this capital frenzy, we must delve into the company's core.

II. What does Basic Semiconductor actually sell, and why does it matter?

To understand why the market values a loss-making company at nearly 90 billion HKD, we first need to clarify what it sells.

Basic semiconductor products are not complex—Silicon Carbide Power DevicesIn simple terms, this means"Switches" in the power conversion processWhether it's electric vehicles in motion, solar power being transmitted, or AI servers running, electricity must undergo conversion from source to endpoint—and every conversion incurs losses. Silicon carbide devices serve to make this conversion process more efficient.Lower loss, higher efficiency, smaller size。

The company has three business segments:

• Silicon Carbide Power Module(2025 annual revenue of 1.22 billion yuan, accounting for 39.3%): This is our core revenue driver, covering automotive and industrial applications with voltage platforms ranging from 650V to 1200V.

• Power Semiconductor Gate Drivers(Income: 1.03 billion yuan, accounting for 33.0%): This is currently the only profitable business segment and the sole contributor to positive gross margin.

• Silicon Carbide Discrete Devices(Income of 0.58 billion yuan, accounting for 18.8%): Includes products such as MOSFETs and Schottky diodes.

From a technical standpoint, silicon carbide offers three significant advantages over traditional silicon-based devices:High-voltage resistant, low-loss, high-temperature tolerant。In high-power, high-efficiency power conversion applications, these advantages are hard to replace—this is why silicon carbide is known as the "third-generation semiconductor."

Where is it used? Three scenarios covering today's hottest industry trends.

New Energy VehicleThis is the most mature use case for silicon carbide. SiC devices in motor controllers and onboard chargers effectively extend driving range. By the end of 2025, Basic Semiconductor modules had been installed in over 14 vehicles.

Photovoltaic Energy StorageIt is a traditional strength area. Both photovoltaic inverters and energy storage PCS require high-efficiency power conversion, with the penetration rate of silicon carbide continuing to rise.

AI Data CenterThe latest scenario truly igniting market imagination—and the core variable driving valuations in this cycle. AI computing clusters consume massive power, prompting data center power architectures to upgrade from traditional 54V DC to 800V high-voltage DC. Silicon carbide (SiC) devices, with their high-voltage tolerance, align perfectly with this trend; the higher the voltage, the more pronounced SiC's efficiency advantage becomes. According to Kaiyuan Securities, by 2030, AI infrastructure will account for nearly half of SiC demand. This expands SiC's market potential from a single driver—EV penetration—to three key variables: AI computing power, electrification, and energy transition.

Where does Basic Semiconductor stand in this market?

Company is in ChinaUniqueIntegrates full-chain capabilities in SiC chip design, wafer fabrication, module packaging, and gate drive.IDMEnterprise. Ranked sixth in China's silicon carbide power module market by 2024 annual revenue (with a 2.9% share) and third among Chinese companies.

The value of the IDM model lies in its ability to deliver stronger supply assurance and faster product iteration during industry upswings when capacity is tight. This sets it apart from most domestic design companies as a core competitive barrier. Its shareholder lineup—Bosch, Wingtech, GAC, and CRRC—serves as validation of its technical prowess and industrialization capabilities.

In short, Basic Semiconductor doesn't just make "chips"—it produces core devices for power conversion. Its products target three key growth areas: new energy vehicles, PV energy storage, and AI computing power. Among these, the incremental demand from AI data centers is the primary narrative driving its high valuation today. Meanwhile, its status as a scarce full-stack IDM with backing from industrial capital provides the fundamental support for this story.

3. Why Is It So Popular? Three Perspectives

The market's enthusiasm for basic semiconductors can be understood from three perspectives:

Layer 1: Industry cycle reversal.2025 was a bleak year for the silicon carbide industry, defined by fierce price wars. In 2026, global leaders like Infineon and STMicroelectronics led the way with price hikes, shifting the focus from "price competition" to "capacity acquisition." Basic Semiconductor's listing at this pivotal moment naturally sparked high market sentiment.

Layer 2: Surge in AI demand.As previously noted, AI data centers are unlocking a new growth trajectory for silicon carbide. Previously, SiC demand was tied to EV penetration rates with a clear market ceiling; now, the explosive growth in AI computing power has dramatically expanded the addressable market.

Level 3: Scarcity Boost.Basic Semiconductor is in China.UniqueAn IDM company integrating full-chain capabilities from SiC chip design and wafer fabrication to module packaging and gate driving. Listed on the Hong Kong stock exchange, it is "China's first pure-play SiC chip company"—with no direct comparable peers. Its scarcity alone commands a valuation premium.

In short, Basic Semiconductor doesn't just make "chips"—it produces core devices for power conversion. Its products target three key growth areas: new energy vehicles, PV energy storage, and AI computing power. Among these, the incremental demand from AI data centers is the primary narrative driving its high valuation today. Meanwhile, its status as a scarce full-stack IDM with backing from industrial capital provides the fundamental support for this story.

These three layers combine to form the fundamental support for market sentiment. But while sentiment is important, we must ultimately ask:Is it worth 90 billion?

4. Valuation Logic: Triple Support from Sector, Scarcity, and Growth

90 billion HKD is the key to understanding the pricing of Basic Semiconductor's IPO.

Let's start with the valuation metrics. The offering price range is 27.49 to 31.62 HKD, implying an IPO market cap of approximately 83.65 billion to 96.22 billion HKD, with a midpoint of around 90 billion HKD. Based on 2025-year revenue of 3.11 billion RMB, the static PS ratio stands at about 25x. On the surface, this appears to be a high valuation. However, capital markets do not price based solely on current profitability; instead, they reflect a comprehensive discount for industry trends and the company's competitive positioning.

This valuation is supported by three layers of industry logic.

Layer 1: The track is in the early stage of rising penetration.Silicon carbide power devices are not yet in a mature market; they are at an inflection point transitioning from "performance validation" to "scalable deployment." The global market size is projected to grow from 227 billion yuan in 2024 to 1106 billion yuan in 2029, with a CAGR exceeding 40%. China's market is expected to grow even faster, at an annual rate of 47%. In a high-growth赛道 with a rising ceiling, it is a fundamental principle of growth stock valuation that top-tier companies command higher valuation multiples.

Level 2: Scarcity forms the basis for valuation premiums.The HK market currently lacks pure-play SiC IDM names. Basic Semiconductor is China's only enterprise integrating chip design, wafer fabrication, module packaging, and gate drive capabilities across the full value chain. For investors seeking medium-to-long-term exposure to the SiC industry, Basic Semiconductor represents a scarce investment vehicle in the HK market. This scarcity itself provides valuation support.

Layer 3: AI unlocks a second growth curve for silicon carbide demand.This represents the most significant structural shift in this round of valuation. Traditionally, silicon carbide (SiC) demand has relied heavily on a single use case: electric vehicles. However, the upgrade of power architectures in AI data centers—from 54V DC to 800V HVDC—has opened up entirely new application scenarios for SiC. Source Securities projects that by 2030, AI infrastructure will account for nearly half of SiC demand. This means the potential market for basic semiconductors has expanded from being driven by a single variable—"EV penetration"—to a multi-dimensional model powered by "AI compute + electrification + energy transition." This fundamental shift in demand structure is the core rationale for reshaping the valuation framework.

From these three perspectives, the 90 billion HKD valuation is not based on current financial data but represents a comprehensive market pricing of industry trends and the company's strategic positioning.The silicon carbide industry is transitioning from a "price war" phase to one characterized by structural supply tightness.As a local IDM player, Basic Semiconductor is poised to further highlight its supply capacity advantages during periods of tight production. The 2025 year-on-year growth in sales of its silicon carbide power modules by 192.5% and the turnaround to positive comprehensive gross margins in the second half both provide marginal validation of this thesis.

Variables to monitor.The realization of the valuation thesis hinges on several key conditions: first, whether demand for silicon carbide from AI data centers materializes as expected; second, whether the company can effectively gain market share during the industry's "capacity rush" phase; and third, whether price stabilization and economies of scale drive gross margins back into positive territory. Additionally, the absence of cornerstone investors in this IPO suggests a relatively dispersed share structure at launch, meaning short-term stock price movements could be influenced by speculative trading dynamics.

Overall, the HK$90 billion valuation reflects how the market prices Basic Semiconductor's competitive position amid an industry inflection point. Whether this valuation holds depends on whether the company can translate industry trends into sustained revenue growth and improved profitability. For investors, the key question is not whether the current P/S multiple is high, but whether the company will secure a strong position in the silicon carbide landscape over the next three to five years.