Shannon Semiconductor's revenue increased by 252% year-on-year in the first half of the year, and its net profit surged by 2207%, with its storage business becoming a new engine | Financial Report Insights

On August 27, Shannon Semiconductor released its 2026 semi-annual report. In the first half of the year, the company achieved operating revenue of RMB 60.204 billion, a year-on-year increase of 251.60%; net profit attributable to the parent company was RMB 3.642 billion, a year-on-year increase of 2207.20%; and net profit attributable to the parent company excluding non-recurring items was RMB 3.531 billion, a year-on-year increase of 2163.51%. Both revenue and profit achieved significant growth, with the net profit growth rate far exceeding the revenue growth rate.

More noteworthy is the changing structure of revenue growth. While the traditional electronic component distribution business continues its rapid growth, HiPhi's storage business has seen revenue increase nearly tenfold year-on-year, with a gross profit margin reaching 53.51%. Its contribution to profitability has significantly improved, transforming from a supplementary business to a key engine for the company's profit growth.

The cash flow performance was equally impressive. In the first half of the year, the company's net cash flow from operating activities reached RMB 5.731 billion, compared to a net outflow of RMB 498 million in the same period last year. The company explained that cash received from sales of goods significantly exceeded cash outflows for purchases, and that it increasingly used letters of credit to settle purchase payments, with related margin deposits included in cash flow from financing activities.

The rapid growth in performance has been accompanied by a rapid expansion of the balance sheet. As of the end of June, the company's total assets reached 31.404 billion yuan, an increase of 183.34% compared to the beginning of the year; short-term borrowings were 4.937 billion yuan and bills payable were 10.192 billion yuan, both significantly higher than at the beginning of the year. At the same time, the company's cash and cash equivalents of 7.44 billion yuan were restricted due to bank acceptance bills and international letter of credit margins, and the capital tied up in business expansion is also increasing significantly.

Both business segments grew simultaneously: distribution remained the main source of revenue.

In terms of business structure, Shannon Chip currently relies mainly on two businesses: electronic component distribution and Hypu Storage.

Electronic component distribution remains the absolute main source of revenue. In the first half of the year, operating revenue reached 56.402 billion yuan, a year-on-year increase of 239.44%; operating costs were 51.39 billion yuan, a year-on-year increase of 216.99%; and the gross profit margin was 8.89%, an increase of 6.45 percentage points compared to the same period last year.

Looking at the performance of its subsidiaries, United Creation Technology achieved operating revenue of RMB 46.882 billion and net profit of RMB 2.969 billion in the first half of the year; Newlink Hong Kong achieved operating revenue of RMB 4.784 billion and net profit of RMB 609 million. These two companies constitute the main source of revenue for the company's electronic component distribution business.

This business is characterized by a typical "large inflow, large outflow" pattern: extremely large revenue but relatively low profit margins, so rapid revenue growth does not necessarily mean a proportional increase in profits. The fact that profit growth significantly outpaced revenue growth is also related to the improved gross profit margin of the distribution business.

HiPu Storage's revenue surged nearly tenfold, with its profit contribution increasing rapidly.

What truly deserves attention is HiPhi's storage business. In the first half of the year, HiPhi's storage business achieved operating revenue of 3.626 billion yuan, a year-on-year increase of 996.19%; operating costs of 1.686 billion yuan, a year-on-year increase of 411.24%; and a gross profit margin of 53.51%, a year-on-year increase of 53.20 percentage points.

According to data from its subsidiary, Wuxi Haipu Semiconductor achieved operating revenue of 3.625 billion yuan and net profit of 1.318 billion yuan in the first half of the year, with net cash flow from operating activities of 718 million yuan. In contrast, operating revenue in the same period last year was only 331 million yuan, and the company suffered a net loss. This means that Haipu Storage has not only rapidly expanded its revenue scale but has also developed a high level of profitability.

The company also clearly pointed out that with the rapid growth of Hypu's storage business, its profit contribution has increased significantly : during the reporting period, the profit of Hypu's storage business accounted for 17.76 percentage points more of the net profit attributable to the parent company than the same period of the previous year; correspondingly, although the profit of the electronic component distribution business also increased significantly, its proportion of the company's net profit attributable to the parent company actually decreased by 23.09 percentage points.

This means that Shannon's profit structure is gradually shifting from being primarily driven by distribution business to a dual-engine model of "distribution + storage".

With the rapid expansion of the storage business, capital requirements have also increased accordingly.

The expansion of business scale is also directly reflected in the balance sheet.

As of the end of June, the company's cash and cash equivalents reached RMB 9.662 billion, a significant increase from RMB 2.392 billion at the beginning of the year; accounts receivable totaled RMB 6.335 billion, an increase from RMB 3.523 billion at the beginning of the year; and inventory reached RMB 6.138 billion, more than doubling from RMB 2.598 billion at the beginning of the year. Meanwhile, the company's total assets increased from RMB 11.084 billion at the beginning of the year to RMB 31.404 billion, a six-month increase of 183.34%. Short-term borrowings also increased from RMB 2.066 billion to RMB 4.937 billion, while bills payable increased from RMB 3.261 billion to RMB 10.192 billion.

For semiconductor distribution businesses, inventory, accounts receivable, and supply chain financing often grow in tandem with revenue expansion. Shannon Semiconductor's rapid asset growth indicates that the company is investing more capital to support its business expansion.

As of the end of June, the company had RMB 7.44 billion in restricted monetary funds used for opening bank acceptance bills and international letters of credit; in addition, RMB 3.998 billion in accounts receivable were used to obtain credit lines.

Cash flow turned positive, and operating quality improved significantly.

Compared to the rapid expansion of asset size, the changes in cash flow in this financial report are particularly noteworthy.

In the first half of the year, the company's net cash flow from operating activities was RMB 5.731 billion, compared to a net outflow of RMB 498 million in the same period of 2025, representing a year-on-year increase of 1250.26%. The company stated that the main reason was that cash received from sales of goods exceeded cash expenditures on purchases significantly during the period, and that more purchase payments were settled using letters of credit, with the corresponding margin payments being recorded in cash flow from financing activities.

However, the company's net cash flow from financing activities was -4.082 billion yuan, turning from positive to negative year-on-year, mainly due to increased payments of letter of credit margin. Ultimately, the net increase in cash and cash equivalents in the first half of the year was 1.235 billion yuan, compared to a net decrease of 54.63 million yuan in the same period last year.

Therefore, from a cash flow perspective, the expansion of the company's main business has already brought in a large amount of operating cash flow, but the supply chain business is also increasing its demand for margin, credit lines and working capital.

The upstream supply chain is highly concentrated, with SK Hynix being the core supplier.

Despite its rapid growth, the company still faces significant risks associated with supply chain concentration.

The company explicitly stated in its semi-annual report that its largest supplier is currently SK Hynix, and United Technologies mainly purchases data storage devices from SK Hynix. The company also stated that Samsung, SK Hynix, and Micron hold the vast majority of the global DRAM market share, indicating a high concentration of upstream manufacturers and thus posing a certain risk of supplier dependence.

Meanwhile, Hypu Semiconductor is also an important driver of the company's rapid growth. The company holds a 41% stake in Hypu Semiconductor, but due to its agreement with other shareholders to act in concert, it holds more than 50% of the voting rights and is therefore included in the consolidated financial statements.

It is worth noting that Hypu Semiconductor has a relatively high proportion of minority shareholders' equity. During the reporting period, the profit attributable to minority shareholders corresponding to 59% of Hypu Semiconductor's minority shareholders' equity reached RMB 778 million.

This also means that although HiPhi Memory is becoming an important source of profit growth for Shannon Semiconductor, not all of its profits belong to the listed company's shareholders.

The faster the growth rate, the more attention should be paid to the pressure on the balance sheet.

According to its interim report, Shannon Semiconductor is experiencing a significant leap in business scale: revenue is rapidly moving from the 10 billion yuan level to the 60 billion yuan level, storage business revenue is close to 4 billion yuan, and operating cash flow has turned positive significantly.

On the other hand, the company's assets, inventory, accounts receivable, short-term borrowings, and notes payable all expanded rapidly. In particular, inventory increased from RMB 2.598 billion to RMB 6.138 billion, short-term borrowings increased from RMB 2.066 billion to RMB 4.937 billion, and notes payable increased from RMB 3.261 billion to RMB 10.192 billion.

In addition, the company's top five customers accounted for 95.01% of the total accounts receivable at the end of the period, with the top three customers accounting for 32.41%, 28.45% and 23.70% respectively, indicating a high degree of customer concentration.

For a semiconductor distribution company in a period of rapid expansion, the key to future performance lies not only in how much revenue can grow, but also in whether the high gross margin of the memory business can be sustained, whether the working capital occupation can be controlled, and whether the dependence on upstream core suppliers and downstream major customers will become more concentrated.

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