Galaxy Microelectronics’ 20CM limit-up after resuming trading: acquisition of Hengtai Ke to enter the higher-end mid- and high-voltage power semiconductor segment

Galaxy Microelectronics (688689.SH), after more than half a month of suspension, disclosed its restructuring plan and resumed trading the same day. The company plans to acquire 100% of Hengtai Ke Semiconductor from three shareholders—Shanghai Zhinen Hengxin Industrial Electronics Co., Ltd., Gongqingcheng Mingnuo Investment Partnership (LP), and Tianmuyulin (Shanghai) Technology Co., Ltd.—through a share issuance, while also raising supporting funds.

On the first day back, the stock hit the 20CM limit-up, closing at RMB 55.88 per share and lifting the market cap to about RMB 7.2 billion, with turnover of only 1.21%. The buy orders at the limit-up were massive: 291 million shares, 185 times the day's trading volume, representing over RMB 1.5 billion in locked-in funds, showing strong market appetite.

In the high-boom power semiconductor cycle, the market responded positively to this veteran discrete-device maker's plan to enter the mid- and high-voltage power semiconductor space through M&A. But the deal still faces multiple controversies: allegations of insider trading due to abnormal price spikes before suspension, the yet-to-be-finalized valuation of the target, and the possibility of large future goodwill pressure, all of which make the integration outlook uncertain.

Jiang Han, a senior researcher at Pangoal Institute, said in an interview that the biggest integration challenge is the fine-grained management of product lines and customers. After Hengtai Ke's 700-plus products are merged in, the total product count will exceed 1,000, greatly increasing complexity in customer management and capacity allocation. Second, core technology is tightly tied to the R&D team; without proper equity incentives and non-compete clauses, the company may face technology leakage and goodwill impairment risk.

Using M&A to fill gaps, but real technical leaps still face barriers

Compared with some listed companies' cross-sector acquisitions that lack synergy with the core business, Galaxy Microelectronics' acquisition of Hengtai Ke is an intra-industry, synergy-focused deal. If completed, it should quickly fill gaps in mid- and high-voltage power semiconductor technology, add high-end product offerings, and improve the overall product matrix.

Galaxy Microelectronics, listed on the STAR Market in 2021, is a semiconductor discrete-device company whose core earnings come from small-signal devices and low-voltage power devices. But its layout in high-end areas such as high-voltage MOSFETs, IGBTs, and silicon carbide (SiC) has been relatively slow. The technical breakthroughs disclosed on paper have not yet turned into actual performance, limiting its penetration into high-end markets such as automotive electronics.

Industry-wise, global giants like Infineon, onsemi, and STMicroelectronics have already built full-chain technology loops spanning materials, processes, and manufacturing. Domestic IDM leaders like Silan Microelectronics and Yangjie Technology have also mass-produced 8-inch high-voltage MOS and IGBT products, while leading capacity keeps expanding and the catch-up window for latecomers narrows.

Against that backdrop, Hengtai Ke becomes the key lever for Galaxy Microelectronics to break through its technical bottleneck. According to the restructuring plan, Hengtai Ke is a national-level "Little Giant" specialized, refined, distinctive, and innovative enterprise focused on R&D, development, and sales of power semiconductor products, with applications in power supplies, lithium-battery protection, brushless motors, new energy, and E-car systems (OBC and motor control). Hengtai Ke owns mid-voltage SGTMOSFET and high-voltage Super Junction technologies. Its mid- and high-voltage SGTMOSFET products in the 150V-200V range are at top domestic level and can be pin-to-pin compatible with Infineon's mid-voltage series.

This transaction is an integration of the "fabless design + IDM manufacturing" chain. Galaxy Microelectronics has mature chip manufacturing capacity but lacks high-end design capability; Hengtai Ke has top-tier design technology but no in-house foundry, and has long been constrained by outsourced capacity and cost swings. The two businesses are complementary, but whether synergies can be realized depends on post-deal integration.

Zhang Jiaming, general manager of the investment department at Guangzhou Ruizhi Venture Capital Management Co., said that for smaller companies, the biggest advantage of M&A is shortening the development timeline. Industry leaders often take years to build supply-chain synergy, while smaller firms can use targeted acquisitions to form an early version of a full-chain synergy and enhance overall strength.

He also noted that smaller companies face multiple risks, with integration risk being the biggest challenge. Differences in organizational structure, corporate culture, team integration, and R&D paths must be deeply aligned through refined management to reduce internal friction and create a unified force to execute strategy.

Valuation fog and funding pressure: the M&A chess match is still underway

Galaxy Microelectronics warned in its plan that Hengtai Ke will face pressure from both global giants and domestic new entrants. If the global macro environment weakens, downstream demand slows, or the semiconductor industry enters a deep and prolonged downturn, Hengtai Ke's operating performance could be directly affected.

The bigger uncertainty is that the final valuation and deal consideration have not yet been set. At the time the plan was signed, audit and valuation work on Hengtai Ke was still underway, and the transaction price had not been disclosed. The share issuance price was set at RMB 28.48 per share, and the shares received by the counterparties will be locked up for 36 months. The supporting funds will be used to pay taxes and intermediary fees, fund the target projects, replenish working capital, and repay debt.

Unaudited figures show Hengtai Ke generated revenue of RMB 206 million and RMB 193 million in 2024 and 2025, respectively; net profit attributable to the parent was RMB 32.2325 million and RMB 35.718 million, respectively, showing steady profit growth. The company also disclosed that as of the end of 2025, shareholder equity at the parent company level was only RMB 416 million, indicating a strong asset-light profile.

Jiang Han believes the valuation core of an asset-light semiconductor design company lies in intangible assets such as IP cores and the R&D team. Traditional PE/PB models often fail because of earnings volatility and heavy upfront investment. A more reasonable valuation should be based on a multi-stage discounted cash flow (DCF) model, supplemented by relative valuation for cross-checking, while also quantifying technical iteration risk and downstream application cyclicality. Whether there is a valuation bubble should not be judged only by book net assets or short-term profit, but by a comprehensive assessment of technology scarcity, commercialization progress, and the transaction payment structure.

On the listed company's fundamentals, Galaxy Microelectronics saw its net profit attributable to shareholders decline year over year in both 2022 and 2023. In 2024, the company generated revenue of RMB 909 million, up 30.75% year over year; net profit attributable to shareholders was RMB 71.8742 million, up 12.21%. In 2025, revenue rose to RMB 1.05 billion, up 15.46%; net profit attributable to shareholders reached RMB 79.9047 million, but growth slowed to 11.17%, showing overall momentum weakening.

On the funding side, Galaxy Microelectronics' cash and equivalents at the end of 2025 were RMB 137 million, down 44.65% year over year. Operating cash flow also weakened, with net cash from operations at RMB 43.7501 million last year, down 34.73%, due to longer payment cycles from downstream customers and inventory buildup.

A person familiar with a private fund said the key to whether M&A can deliver the cyclical upside lies in the pace of consolidation and synergy realization. Hengtai Ke has stable revenue and profit, so post-closing consolidation may boost earnings. But the two companies are relatively small, and whether the synergy becomes 1+1>2 is still uncertain. The biggest risk is a high-premium acquisition creating large goodwill, which could hurt earnings if future performance falls short.

He further noted that the market's enthusiasm for semiconductor M&A into high-end segments is not just about short-term cycle strength; it is about long-term earnings delivery and integration execution after the deal.

In addition, abnormal stock moves before the suspension also sparked insider-information concerns. Before the suspension notice, Galaxy Microelectronics jumped sharply on June 10-11, rising nearly 19% over two trading days on heavy volume; the semiconductor sector index rose only 2.70% over the same period. The company had previously said that none of the relevant parties were involved in information leakage or insider trading violations.