The scarce one-stop specialty process platform in China has three progressive growth curves. Xinlian Integration focuses on power semiconductors, sensing signal chains, and connections. It has MEMS platforms, power chip platforms (IGBT, MOSFET, SiC) and high-power BCD platforms (analog ICs, MCUs, etc.).

The Xinlian integration team has been working in the MEMS field for more than ten years and has rich experience in R&D and mass production. MEMS revenue in 2021/22 was 0.4/0.33 billion yuan respectively. The main products include MEMS microphones, pressure sensors, accelerometers, gyroscopes, ultrasonic sensors, etc.

Vehicle power modules have significant advantages. In 2023, IGBT chip shipments are the highest in China, and 8-inch SiC mass production is imminent. Xinlian integration focuses on the three major fields of automotive, industrial control, and high-end consumption. The share of automotive applications increased from 26% in 2022 to 48% in 1H24.

1) 1H24 Chiplink Integrated ranks fourth in passenger car power module shipments in China. The installed capacity of 1H24 passenger car power modules in China reached 6.16 million sets, an increase of 57% over the previous year. BYD Semiconductor and CRRC Semiconductor surpassed Infineon and ranked first and second. 2) 1H24, Xinlian integrated ranked fifth in the installed capacity of SiC power modules for passenger cars in China, and silicon carbide revenue increased 300% + year over year. According to the announcement, up to 1H24, the company has continued to receive Tier 1 designations from mainstream car manufacturers at home and abroad. The 8-inch SiC device product verification progress has exceeded expectations, and it has received 17 Design Wins and 30+ Design Ins.

High-voltage BCD technology is leading the world, improving automotive chip capabilities from power devices to analog ICs, and constructing a third growth curve.

1) Featured processes emphasize specialty IP customization capabilities and semiconductor wafer manufacturing processes with diverse technical categories. As of 2023, ChipConnect's 8-inch silicon-based production capacity is 0.17 million wafers/month, with an average annual capacity utilization rate of over 80%; 12-inch silicon-based 0.01 million wafers/month; and 6-inch SiC MOSFETs over 5,000 pieces/month. 2) 1H24 ChipConnect has released 4 new process platforms that meet the G0 level of vehicle regulations, and continues to develop 90nm and 55nm technology nodes for the BCD process. As of 2023, the company's high-power BCD process technology covers 0.18 μm-0.09 μm technology nodes, and the process level has reached international leadership; the power-driven HVIC (BCD) platform provides complete vehicle specification OEM services.

First coverage, giving a “buy” rating. We forecast the company's revenue for 2024-2026 at 6.7, 8.1, and 11 billion yuan.

We believe that the company has a large amount of revenue from silicon-based IGBT foundry and has a forward-looking layout of SiC and analog IC production lines, and is expected to seize development opportunities and achieve rapid revenue growth in the future. Refer to the average PS valuation of comparable companies in 2026, and give the company a “buy” rating of 3.1 X PS, corresponding to a market value of 33.7 billion yuan. Compared with the current market value, there is room for 32% increase compared to the current market value

Risk warning: risk of not being profitable; risk of product development and technology iteration; high concentration of major raw material suppliers and raw material supply risk.