Loongson Technology, known as the 'first domestic CPU stock,' released its financial report for the first half of 2024.

The data shows that Loongson Technology achieved a revenue of 0.22 billion yuan in the first half of the year, a year-on-year decrease of 28.68%; the net loss attributable to shareholders was -0.238 billion yuan, compared to -0.104 billion yuan in the same period last year, doubling the loss.

Loongson Technology stated that the performance change is partly due to the impact of the macroeconomic environment, the electronic government market, and the important customers in the company's traditional advantageous industrial control field who have not yet resumed normal procurement. On the other hand, the company has adjusted its sales strategy, reducing the sales of complete machine-type solutions due to the increase in chip sales revenue.

By business segment, Loongson Technology's chip-related revenue in the first half of the year was 0.163 billion yuan, an increase of 8.51% compared to the same period last year; revenue from solution-based business was 56.1734 million yuan, a decrease of 64.14% compared to the same period last year.

In the chip business, the sales of information chips rebounded in the first half of the year, and the gross margin of the information business showed an upward trend.

The revenue from information chips in the first half of this year reached 0.109 billion yuan, surpassing the full-year revenue from information chips last year, an increase of 186.98% year-on-year. Due to the increase in sales volume, the fixed cost allocation for individual products decreased, and the gross margin for information chip products gradually increased to 21.55%, an increase of 11.05 percentage points year-on-year.

Loongson Zhongke stated in its financial report that the company is "firmly seizing the window of market adjustment, significantly improving the cost-effectiveness and software ecosystem of (information chip) products."

In terms of desktop CPUs, Loongson 3A6000 and other new generation products have entered the small-scale market stage, and related solutions are being launched and entering the small-scale promotion stage. Currently, ODM companies represented by ASUS are participating in the development of the new generation Loongson 3A6000 mainboard and supporting the launch of desktop computers, all-in-one computers, laptops, and NUCs.

Loongson Zhongke stated that compared to the previous generation 3A5000 product, the overall cost-effectiveness of 3A6000 has improved significantly, and "the enthusiasm of downstream manufacturers for sales has noticeably increased, and the sales volume of desktop CPU chips has greatly increased compared to the same period last year."

In terms of server CPUs, Loongson Zhongke supports downstream manufacturers in the development of Loongson 3C5000/3D5000 dual and quad-socket servers, which have now entered the market promotion stage. The server community OS such as LoongXi and Euler, as well as brand OS such as Kylin and Uos, continue to improve their support for the Loongson server platform, and more cloud computing and cloud storage solution providers have been added. Servers based on Loongson CPUs have been selected for the server procurement packages of China Mobile and other operators.

The industrial control business was once an important direction for Loongson Zhongke to break away from the government market and achieve strategic transformation. However, in the first half of the year, the revenue from industrial control chips was 54.1504 million yuan, a year-on-year decrease of 51.86%, with a gross margin of 52.47% and a year-on-year decrease of 15.56 percentage points.

Loongson Zhongke stated that the decline in the industrial control business was due to the temporary stagnation of procurement caused by internal management issues of some important customers.

In the first half of this year, Loongson Zhongke supported customers in small-scale shipments of embedded board solutions based on 2K0300; supported printer customers in the development of black and white single function, four-in-one all-in-one machines, scanners and other series of models based on 2P0500, which are about to be launched in the market; supported customers in the development of NUC machines based on 2K2000 and 3A6000, which have been preliminarily applied in energy and intelligent manufacturing companies.

Regarding research and development progress, in terms of graphics processors, Loongson Zhongke has continued to invest in the Loongson second-generation graphics processor core that supports graphics rendering and general computing, and has completed the front-end verification work of the LG200 GPU core in the 2K3000 platform and delivered samples. The financial report shows that the development work of Loongson's first independent graphics card/AI acceleration card chip 9A1000 has been fully launched.

In the first half of the year, the sample chips of Loongson 3C6000 series processors were successfully developed; the design of Loongson 2K3000 processor chip was completed and delivered for mass production. In terms of embedded processors, the development of Loongson 2K0300 SOC chip was successful and has entered the market with the solution; the code design of Loongson 2P0300 was completed.

In the first half of the year, Loongson Zhongke recorded a loss of 40.0517 million yuan for inventory impairment, and a loss of 38.9692 million yuan for bad debt of accounts receivable.

Loongson Zhongke stated that the company formulated procurement and production plans based on existing customer orders and forecasts of future market demand. However, as of the end of the first half of this year, the inventory book value was high, and the book value of the inventory after provision was 0.97 billion yuan, which greatly affected the company's liquidity.