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Behind the '20CM' limit-up: Galaxy Microelectronics aims to break into high-end power semiconductors via M&A

Galaxy Microelectronics (688689.SH), after a half-month trading halt, disclosed a restructuring plan and resumed trading the same day. The company plans to acquire 100% equity of Hangtai Ke Semiconductor from three shareholders via share issuance, and to raise matching funds simultaneously.

On the resumption day, the stock hit the 20CM limit-up, closing at RMB 55.88 per share, with a market cap of about RMB 7.2B. Turnover rate was only 1.21%. Buy orders at limit reached 291M shares, 185 times the day's volume, representing over RMB 1.5B in pending funds, indicating strong market demand.

In the high-cycle power semiconductor industry, the market gave a positive expectation to this established discrete device maker's move into mid-to-high-voltage power semiconductors via M&A. However, the deal faces multiple controversies: insider trading allegations due to abnormal pre-halt price surge, unvalued target, and potential large goodwill pressure, all adding uncertainty.

Product line and customer management complexity rises: integration challenges cannot be ignored

Pangu Think Tank senior researcher Jiang Han said the biggest integration challenge is fine management of product lines and customers. With over 700 products from Hangtai Ke, total products exceed 1,000, sharply increasing complexity in customer management and capacity allocation.

Second, core technology is highly tied to the R&D team. Without reasonable equity incentives and non-compete clauses, there is risk of technology loss and goodwill impairment.

Filling gaps via M&A: from fabless design to IDM manufacturing synergy

Unlike cross-industry or non-synergistic acquisitions, Galaxy Microelectronics' acquisition of Hangtai Ke is a same-industry 'fill-gap' and synergy deal. Upon completion, the company can quickly fill its mid-to-high-voltage power semiconductor technology gaps, complementing its high-end product portfolio.

As a semiconductor discrete device firm listed on the STAR Market in 2021, Galaxy Microelectronics' core business has long been small-signal devices and low-voltage power devices. But it lagged in high-end areas like high-voltage MOSFET, IGBT, and SiC, with disclosed technology breakthroughs not yet translating into actual performance, limiting penetration into high-end markets like automotive electronics.

Industry leaders have built full technical chains from materials to process and manufacturing. Domestic IDM giants have already mass-produced high-voltage MOS and IGBT, narrowing the catching-up window. Against this backdrop, Hangtai Ke became a key lever for Galaxy to break through technical bottlenecks.

According to the restructuring plan, Hangtai Ke mainly researches, develops, and sells power semiconductor products. It is a national-level specialized 'little giant' enterprise. Products are used in power supplies, lithium battery protection, brushless motors, new energy, and E-car (OBC, electric control). Hangtai Ke has medium-voltage SGT MOSFET and high-voltage SuperJunction technology, with its 150V-200V medium-high voltage SGT MOSFET reaching domestic top level, pin-to-pin comparable and replaceable with Infineon's medium-voltage series.

The transaction is an integration of 'fabless design + IDM manufacturing'. Galaxy has mature wafer manufacturing capacity but lacks high-end design; Hangtai Ke has top design but no own production lines, long dependent on foundry capacity and cost fluctuations. There is complementarity, but synergy realization depends on post-integration execution.

For small companies, M&A can significantly shorten development time. Despite advantages, integration risks remain the biggest challenge, involving differences in organizational structure, corporate culture, team integration, and R&D paths. Fine management to deeply integrate strengths and reduce internal friction is needed to form synergy.

Valuation fog and funding pressure: final pricing and consolidation timing key variables

Galaxy Microelectronics flagged risks in the plan: Hangtai Ke faces two-way competition from international giants and domestic newcomers. If global macroeconomy weakens, downstream demand slows, or the semiconductor industry experiences deep, sustained downturn, Hangtai Ke's performance could be directly impacted.

A more core uncertainty is the final valuation and consideration not yet determined. As of the plan signing date, Hangtai Ke's audit and valuation are ongoing; the consideration is undisclosed. The share issuance price is set at RMB 28.48 per share, with a 36-month lock-up period. Matching funds will be used for transaction fees, intermediary costs, project construction, working capital, and debt repayment.

Unaudited data show Hangtai Ke's 2024 and 2025 revenues were RMB 206M and RMB 193M; net profit attributable to parent was RMB 32.23M and RMB 35.72M, with stable profit growth. As of end-2025, parent equity was only RMB 416M, indicating clear asset-light nature.

Jiang Han said the valuation core of asset-light semiconductor design firms lies in intangible assets like IP cores and R&D teams. Traditional PE/PB models often fail due to volatile earnings and high upfront costs. A reasonable valuation should be based on multi-stage DCF, cross-validated with relative valuation, incorporating technology iteration risk and downstream cyclical factors.

From Galaxy's fundamentals, net profit attributable to parent declined year-on-year from 2022 to 2023. In 2024, revenue reached RMB 909M, up 30.75% YoY; net profit was RMB 71.87M, up only 12.21%. In 2025, annual revenue was RMB 1.05B, up 15.46%; net profit was RMB 79.90M, with YoY growth slowing to 11.17%.

On the funding side, financial pressure increased. As of end-2025, cash was only RMB 137M, down 44.65% YoY. Operating cash flow weakened year by year, with net operating cash inflow of RMB 43.75M in 2025, down 34.73% YoY, due to longer customer payment terms and increased inventory.

A private equity insider said whether the M&A can realize dividend gains depends not on deal closure but on consolidation timing and synergy realization. Hangtai Ke's consolidation can boost the listed company's earnings, but both firms are relatively small, and synergy remains uncertain. The biggest risk is large goodwill from high-premium acquisition; if subsequent performance disappoints, goodwill impairment could erode profit.

Pre-halt abnormal share price movement raises controversy: insider leak allegations denied

Additionally, the abnormal price movement before the trading halt sparked market concerns about insider information leakage. In the two trading days before the halt notice (June 10-11), Galaxy Microelectronics' shares surged nearly 19% with significantly increased volume; over the same period, the semiconductor sector index rose only 2.70%, showing a significant deviation.

The company stated that all parties involved in the transaction did not engage in insider information leakage or insider trading. Blue Whale News called the board office on June 29 but received no response as of press time.