Loongson released its financial report for the third quarter of 2024 today (October 29) after the market close, as reported by the "Science and Technology Innovation Board Daily" on October 29.

The disclosed data shows that the company achieved revenue of 0.308 billion yuan in the first three quarters, a decrease of 21.94% year-on-year; the net profit attributable to shareholders was -0.343 billion yuan, with losses expanding by 0.136 billion yuan compared to the same period last year.

Looking at a single quarter, in the third quarter of this year, the company's revenue was 88.19 million yuan, a 2.05% year-on-year increase; the net profit attributable to shareholders was -0.105 billion yuan, with a loss similar to the same period last year, reduced by nearly 60 million yuan compared to the previous quarter.

Regarding the reasons for the performance changes in the first three quarters of this year, Loongson stated that on one hand, the performance was affected by the macroeconomic environment, the e-government market, and the fact that some key clients in the traditional advantageous industrial control area have not fully resumed normal purchasing. On the other hand, as the competitiveness of Loongson chip products improves, chip sales revenue has increased accordingly. The company adjusted its sales strategy, reducing the sales of complete machine solutions.

Of note, the financial report shows that Loongson incurred an asset impairment loss of 42.46 million yuan in the first three quarters of this year, compared to only 1.16 million yuan in the same period last year; at the same time, the credit impairment loss in the first three quarters of this year reached as high as 34.62 million yuan, exceeding the 9.93 million yuan in the same period last year.

Loongson Information Technology, in a recent institutional survey, stated that the gross margin of its IT business in the first half of the year was 21.55%, showing an increase compared to last year, and is expected to continue growing. One reason is that the current bulk shipments of bridge chips were produced during the period of the tightest capacity in 2021, resulting in higher costs. After the completion of the version upgrade of the bridge chips, it will contribute to the gross margin. On the other hand, the current chip sales volume is not high enough. Once the policy market is fully operational, an increase in chip sales volume will reduce the allocation of fixed costs, and the gross margin is also expected to increase.

Loongson Technology stated that it hopes the overall gross margin of Loongson's business can be restored to around forty-five percent.

In terms of ecological development, open-source HarmonyOS, as well as domestic operating systems such as Thundersoft, Kylin, Euler, are already able to support Loongson. At the basic application level, office software such as WPS, WeChat, QQ, DingTalk, Tencent Meeting have also supported Loongson. In addition, Loongson has achieved application compatibility with different versions and branches of Linux.

In the server business market, Loongson Information Technology recently stated that its chip products have high cost performance, a large relevant market space, and no ecological barriers, thus possessing a competitive advantage.

Currently, Loongson Information Technology's server chip products mainly include the 16-core 3C5000 and 32-core 3D5000. Servers equipped with these chips have entered the market promotion stage. The support for Loongson server platforms from communities like Longxi, Euler, as well as operating systems like Kylin and Thundersoft, continues to improve. There are increasing numbers of cloud computing and cloud storage solution providers related to Loongson servers.

In May of this year, servers based on Loongson CPUs were shortlisted in the server procurement package of China Mobile and other operators. According to China Mobile's announcement of the 'China Mobile 2024 PC Server Product Centralized Procurement (Package 21) Shortlist of Candidates,' Langchao Loongson 3C5000 CPU servers won the bid for 2400 units. Loongson Information Technology stated that this is a significant breakthrough for Loongson in helping the operator industry achieve autonomy and controllability.

Regarding the development progress of server chips, Loongson Information Technology stated that its next-generation server chip 3C6000 is currently in the sample stage, and it is expected to achieve mass production and be formally released in Q2 of 2025. Some 3C6000 samples and mainboard sales may be available in the fourth quarter of this year. The performance of the 16-core 32-thread 3C6000/S can be benchmarked against Xeon 4314. The 32-core 64-thread 3D6000 (3C6000/D) with dual silicon packaging can be benchmarked against Xeon 6338, while the 60/64-core 120/128-thread 3E6000 (3C6000/Q) with four silicon packaging is expected to complete packaging before the end of the year.

In terms of shareholder changes, among the top ten circulating shareholders, China Asset Management's Star50 ETF, E Fund's Star50 ETF, and National Social Security Fund Portfolio 114 increased their holdings of Loongson in the third quarter; Shenzhen Xinlong reduced its holdings by approximately 0.24 million shares in Q3. Among the top ten major shareholders, only China Asset Management's Star50 ETF increased its holdings by around 0.05 million shares.