Strong performance masks underlying concerns: Behind the impressive annual report of GigaDevice, inventory pressure exists. How long can the storage dividend last?

Ask AI · Why Did Gigadevelop Innovation’s Share Price Fall Against the Trend Despite Its Strong Performance Growth?

(Image source: Visual China)

Blue Whale News March 31 (Reporter Shao Yuting) On the evening of March 30, GigaDevice Semiconductor (603986.SH/3986.HK) officially released its 2025 annual report.

After several years of deep adjustment in the semiconductor industry, the release of this annual report injected a shot of confidence into the market. Data show that the company achieved full-year operating revenue of RMB 8B, breaking the RMB 9 billion mark for the first time, up 25.12% year over year; the net profit attributable to shareholders reached RMB 9.2B, with a year-over-year increase as high as 49.47%.

However, a closer look at the financial report reveals that although GigaDevice’s 2025 performance growth was strong, its business structure is both good and bad. Storage chips saw both volume and price rise, driving profits, while the surge in analog chips contributed little; the gross margin of MCUs fell slightly, and the sensor business declined. As memory market prices dropped sharply, the company’s high inventory also created considerable pressure on its cash flow. To cope with industry volatility, the company deepened related-party transactions with CXMT and locked in orders of more than RMB 5.6 billion in advance to secure production capacity.

The day after this impressive set of results was released, the company’s share price was pulled back, with both A-shares and H-shares falling. On March 31, GigaDevice’s A-share closing price was RMB 238.10 per share, down 6.94%, with a total market value of RMB 1.65B; its H-share closing price was HKD 343 per share, down 8.34%, with a total market value of HKD 166.93B.

That said, GigaDevice’s current share price is already at a historically high level. As of March 31, 2026, the company’s trailing P/E ratio for A-shares is approximately 101.29x, and its forward P/E ratio is also above the 100x mark; its price-to-book ratio is about 8.37x. Meanwhile, the semiconductor industry’s average P/E ratio is about 53x and the average price-to-book ratio is about 7.6x, meaning GigaDevice’s valuation is significantly higher than the industry midpoint.

Mixed picture: Storage chips with both volume and price rising; slight declines in MCUs and sensors

According to materials, GigaDevice was founded in 2005. It is a fabless semiconductor design company. The company listed on the main board of the Shanghai Stock Exchange in 2016, and, ten years later in January 2026, it listed on the Hong Kong stock market, becoming a chip company listed on both the “A+H” markets.

At present, the company’s principal businesses cover the R&D, technical support, and sales of memory devices, 32-bit general-purpose microcontrollers (MCUs), intelligent human-machine interaction sensors, and analog chips. Its products are widely used in consumer electronics, automotive electronics, industrial control, the Internet of Things, PCs, servers, and other fields.

As a leading domestic player in both memory chips and microcontrollers, GigaDevice delivered a double-digit high growth in revenue and profit in 2025. Its gross margin rose from 38.00% in 2024 to 40.21%; and the gross margin in the fourth quarter alone reached a historical high of 44.91%.

From the perspective of revenue structure, as the company’s core business, the memory chip segment is the main contributor to profit growth. According to the financial report, in 2025, this segment contributed operating revenue of RMB 240.48B, up 26.41% year over year, accounting for 71.35% of total revenue, and gross margin rose to 42.84%.

The company said that under the influence of AI technology, overseas leading manufacturers are accelerating their shift to new process nodes such as HBM and DDR5, gradually withdrawing from niche markets and cutting 2D NAND capacity. A noticeable supply gap has emerged in related areas. The company smoothly captured this demand: in the second half of 2025, both SLC NAND Flash and niche-type DRAM saw a relatively significant rise in both volume and price, and the gross margin improved clearly quarter over quarter.

The analog chip business became an important incremental driver of performance. According to the financial report, this segment achieved revenue of RMB 333 million, up 2051.82% year over year. Its gross margin also increased by 26.43 percentage points year over year to 36.96%.

The growth mainly benefited from the successful acquisition and integration of Suzhou Saicai. During the reporting period, Suzhou Saicai reliably completed its performance commitment for 2025 non-recurring profit after tax not less than RMB 70 million. Excluding the impact of Suzhou Saicai, GigaDevice’s original analog chip revenue also surged by approximately 460% year over year. However, the current base for the analog chip business is relatively small, so its contribution to performance is still limited.

In addition, in non-memory-related areas, things happened the other way. Among them, the microcontroller (MCU) business, as the company’s second growth curve, achieved revenue of RMB 6.57B in 2025, up 12.98% year over year, accounting for 23.00% of total revenue. Due to the year-over-year increase in operating costs of 14.62%, gross margin fell slightly by 0.92 percentage points; the sensor business, affected by intensified competition in the smartphone and tablet PC sectors, saw revenue decline by 13.15% year over year.

Besides releasing its performance, the company announced a cash dividend plan of RMB 7.5 for every 10 shares (including tax), with a total cash distribution of about RMB 525 million, accounting for 31.88% of the company’s net profit attributable to shareholders for 2025. The same-rights dividend will be distributed for both A-shares and H-shares.

Share price pulled back against the trend; memory prices saw a sharp drop

In the secondary market, since GigaDevice listed on the Hong Kong stock market this January, its share price rose steadily. But after H-shares hit a historical high of HKD 463.60 on March 18, 2026, it entered a sustained pullback mode. The standout performance did not reverse the downward momentum. On March 31, the day after the annual report was released, the share price once again pulled back, and compared with the peak, the drawdown exceeded 20%.

Behind the share price pullback is the sharp drop in recent spot prices of memory products. Recently, prices for DDR5 memory modules have fallen noticeably. Combined with concerns in the market about rising memory demand triggered by Google’s memory compression technology, the global memory sector declined in tandem.

On March 26, 2026, Google released an AI memory compression algorithm called “TurboQuant,” which is claimed to reduce at least 60% of the key-value cache memory usage during the runtime of large language models. Some industry insiders expect that if this technology is widely adopted, it may ease the tight supply situation for high-end memory, thereby affecting memory prices.

The reporter noted that since last week, spot prices for DDR5 memory modules have shown clear signs of loosening. The market price for 32GB DDR5 modules, which was originally around RMB 3000, has been cut significantly by about RMB 500 to RMB 1050 in various quotes. Some Taobao sellers have even “liquidated” at prices below RMB 2000.

(Image source: Taobao screenshot)

CCTV Finance reported that, at present, an increasing number of upstream distributors are strengthening their willingness to ship, but the market has not warmed up because memory has become cheaper. Since the memory price upcycle began in the fourth quarter of last year, many individual consumers’ purchasing demand has been suppressed; they have chosen to buy lower-capacity memory or switch to the secondhand market, which to some extent has suppressed shipment volumes of memory products.

Many merchants in Huaqiangbei also said that last year’s price surge had a significant impact on business. Transaction volumes generally fell, and this is also the main reason why memory prices have started to decline recently.

As memory market prices have dropped sharply, the company’s high inventory has also created significant pressure on its cash flow. By the end of 2025, the carrying value of inventory reached RMB 2.12B, up 30.67% from the beginning of the period.

In its annual report, the company explained that this was mainly due to the upswing in the storage industry cycle and the company’s proactive inventory-building strategy. The increase in inventory also ties up a large amount of capital and increases the risk of inventory write-downs when prices fall back in the future. The annual report shows that the company has made inventory impairment provisions of RMB 299 million, representing a provision ratio of 8.89%.

In 2025, the net cash flow from operating activities was RMB 8B, up 4.74% year over year—far lower than the year-over-year growth rate of net profit of 49.47%. This typically means that the company’s profit growth, to some extent, depends on increases in accounts receivable or inventory backlog, rather than being fully converted into actual cash inflows. As of the end of 2025, the company also had RMB 200 million in short-term borrowings.

RMB 5.6 billion order related-party transactions are stepped up to lock in capacity amid industry changes

Facing the “roller-coaster” behavior of industry cycles and uncertainty in market demand, GigaDevice chose to lock in production capacity by deepening related-party transactions.

The annual report shows that in 2025, the scale of GigaDevice’s related-party transactions increased significantly compared with previous years. Among the top five suppliers’ purchasing amounts, purchases from related parties were RMB 3.07B, accounting for 16.38% of total annual purchases.

These related purchases mainly refer to GigaDevice purchasing DRAM wafers from the domestic DRAM wafer manufacturer CXMT, which are used for the design and sales of its niche-type DRAM products.

The announcement shows that the chairman of GigaDevice, Mr. Zhu Ming, also serves as chairman of CXMT Group Co., Ltd., and he holds 6.85% of GigaDevice’s shares, making him the company’s largest shareholder. CXMT was established in 2016, and its main businesses include integrated circuit design, manufacturing, processing, and sales of electronic products.

More importantly, the announcement disclosed by GigaDevice titled “Announcement on the Estimated Amounts of Daily Related-Party Transactions for the First Half of 2026” indicates that, against the backdrop of severe DRAM shortages in the global market, to lock in DRAM wafer supply, GigaDevice expects that in the first half of 2026 it will purchase DRAM-related products produced on a contract manufacturing basis from CXMT Group and its major business subsidiaries. The transaction quota is expected to be 221M美元, which is about RMB 2.13B after conversion.

Another announcement titled “Announcement on the Estimated Amounts of Daily Related-Party Transactions for 2026” shows that GigaDevice expects that for the full year 2026, it will purchase DRAM-related products produced on a contract manufacturing basis from CXMT Group and its major business subsidiaries, with a transaction quota of 825M美元, equivalent to about RMB 1.18B. Among this, the amount already occurred is RMB 581 million.

This means that GigaDevice has already secured orders of more than RMB 5.6 billion. In 2025, the niche-type DRAM market was booming, and GigaDevice increased its procurement of DRAM wafers from CXMT Group to meet strong market demand. At the same time, amid the global shortage of DRAM wafer supply, deepening related-party cooperation may, to a certain extent, help control costs.

However, as a fabless semiconductor design company, GigaDevice’s production capacity is highly dependent on foundry manufacturers. While its cooperation with CXMT provides stable capacity assurance for its DRAM business, there are also risks. If CXMT’s capacity faces problems, or if the relationship between the two parties changes, it would directly affect the supply of the company’s DRAM products, thereby creating adverse impacts on performance.

Earlier, Ping An Securities pointed out in a research report that whether capacity at each link of the supply chain—such as wafer foundries and packaging/testing plants—can secure procurement demand and reasonable costs involves uncertain risks. If downstream demand fails to meet expectations, the company may not be able to adjust customer and product structure in a timely manner, which could negatively affect performance.