In this episode of "Daily SSE STAR Market," we look at SICC (688234). According to the company's Q3 2026 report, revenue for the first three quarters reached CNY 1.559 billion, a year-on-year increase of 40.22%; net profit attributable to shareholders was CNY 27.2162 million, up 2330.24% year-on-year; and net profit attributable to shareholders excluding non-recurring items was CNY 8.8295 million, turning from a loss to a profit. Specifically, in Q3 alone, revenue was CNY 646 million, up 102.89% year-on-year, and net profit attributable to shareholders was CNY 85.8329 million, up 979.41% year-on-year. Notably, the single-quarter net profit excluding non-recurring items was CNY 96.168 million, slightly higher than the reported net profit—the difference stems from negative non-recurring gains and losses in that quarter.
However, looking at the valuation metrics, the Trailing Twelve Months (TTM) P/E ratio remains negative. Profits have just emerged from below the waterline, while the financial statements still bear the traces of the previous cycle—this "time lag" is precisely the key to understanding SICC.
01、The Barrier for a Substrate Wafer Lies Within 2300°C
What SICC does is not complicated; it can be summarized in one sentence: transforming silicon carbide powder into large-diameter, low-defect substrate wafers, selling them to power device manufacturers, who then integrate them into chips for new energy vehicles, AI server power supplies, and photovoltaic inverters.
Substrates account for the largest portion of the cost structure for silicon carbide devices and represent the steepest technical barrier.
Crystal growth requires controlling crystal defects in extreme environments above 2300°C. For every inch increase in diameter, the difficulty of thermal field uniformity and stress control escalates significantly. SICC has currently established a full-size matrix ranging from 2-inch to 12-inch wafers.
According to a report released by Fuji Keizai of Japan in March 2026, in the global conductive silicon carbide substrate market (measured by external shipment volume) in 2025, the company's share reached 27.6%, surpassing Wolfspeed for the first time to take the top spot. Specifically, its share in the 6-inch segment was 27.5%, while in the 8-inch segment, it rose to as high as 51.3%. In other words, during the transition window where global silicon carbide substrates are shifting from 6-inch to 8-inch, this Shandong-based company secured a leading position.
02、Liquid Phase Method, 12-Inch Wafers, and a Ticket to AI Packaging
The technological innovation attributes focus on two keywords: liquid phase method and 12-inch wafers. Traditional Physical Vapor Transport (PVT) crystal growth often suffers from uneven solute distribution when diameters exceed 8 inches. The company's pioneering liquid phase preparation technology bypasses this bottleneck, bringing the uniformity of large-diameter crystals to mass-production levels.
The significance of 12-inch substrates goes a step further—the usable area per wafer is 2.25 times that of an 8-inch wafer, and the effective utilization rate is approximately 2.5 times that of 8-inch wafers, significantly reducing edge losses. It is no longer just a "larger substrate" but a material prerequisite for entering new scenarios such as advanced packaging heat dissipation for AI chips and AR optical waveguide lenses.
NVIDIA GPUs widely adopt CoWoS packaging, which imposes requirements on interposer thermal conductivity that fall squarely within the capabilities of silicon carbide. As of the end of H1 2026, the company had been granted209 cumulative invention patents and 294 utility model patents. Its number of silicon carbide substrate patents ranks among the top five globally, with 38.15% of R&D personnel holding master's or doctoral degrees.
These figures collectively outline not merely a "capacity-expansion" manufacturing enterprise, but a company leveraging a technological generational gap at the material end to secure pricing power.
03、8-Inch Share Exceeds Half, Gross Margin Recovers Before P/E Ratio
The core clue in the investment logic lies hidden in the product mix.
The Q3 report disclosed that the revenue share of SICC's 8-inch products exceeded 50% for the first time, and both the unit price and gross margin of 8-inch substrates are higher than those of 6-inch substrates. This means that the company's investments in 8-inch capacity and technology over the past two to three years are beginning to shift from "depreciation weighing on the balance sheet" to "revenue landing on the income statement."
The gross margin was 25.36% in Q2 and further improved to 27.46% in Q3, with a recovery slope steeper than market expectations. Meanwhile, signs of dual-engine demand growth have emerged on the demand side. The penetration of 800V high-voltage platforms in new energy vehicles continues—by H1 2026, the penetration rate of 800V models among insured NEVs was approximately 36.3%, and the penetration rate of silicon carbide within these 800V models had risen to about 71.6%, forming the fundamental base.
The true marginal change comes from AI: rack power in servers is climbing towards over 200 kW, traditional silicon-based power supplies are approaching physical limits in efficiency and size, and 800V high-voltage DC architectures and solid-state transformers are moving from solution verification to project delivery. Silicon carbide has shifted from "optional" to "unavoidable."
Automotive-grade demand provides a floor for volume, while AI power supplies and advanced packaging provide elasticity for price. This is the underlying narrative behind why the current market is willing to assign SICC a relatively high Price-to-Sales (P/S) ratio (approximately 25x TTM) while tolerating a negative P/E ratio.
03、Price Wars Haven't Gone Far, Major Clients and Overseas Expansion Remain Variables
But narratives aside, the silicon carbide substrate business is fundamentally a manufacturing trade, and the laws of manufacturing do not spare anyone. The severity of the price war in 2025 is worth revisiting repeatedly: spot prices for 6-inch automotive-grade substrates fell from CNY 4,000–4,500 per piece at the beginning of the year to over CNY 2,000, plunging the entire industry into losses. SICC's full-year net profit attributable to shareholders was -CNY 208 million, and net profit excluding non-recurring items was -CNY 246 million.
The reversal in supply-demand dynamics and price stabilization in2026 were built upon partial capacity clearance and supply constraints during the 8-inch transition period, rather than a demand-side breakthrough capable of absorbing unlimited capacity.
As major players' 8-inch production lines come online densely between late 2026 and 2027, the average price of 8-inch substrates faces the possibility of renewed pressure. A JPMorgan research report from May 2026 predicted that the average price of 8-inch substrates would drop to CNY 3,000–4,000 per piece by the end of 2026, and further decline to CNY 2,500–3,500 per piece in 2027.
SICC's cost control capability is indeed prominent among pure substrate manufacturers—during the three consecutive years of industry downturn from 2023 to 2025, it was one of the few substrate makers that consistently maintained positive gross margins—but cost leadership only determines "who can withstand pressure better," not "whether prices will stop falling."
Customer concentration is another thread that needs to be placed on the table. The prospectus disclosed that in H1 2021, the revenue share of the top five customers briefly touched a high of 91.68%; subsequently, this declined year by year, standing at 51.16%, 57.23%, and 57.14% for 2023, 2024, and 2025 respectively (totaling CNY 837 million in 2025).
The oligopolistic landscape of the downstream power device industry dictates that customer structures for substrate suppliers are naturally concentrated. Deep ties with leading device manufacturers form part of the barrier to entry, but they also mean that order rhythms, inventory strategies, or minor adjustments in technical routes by a single major client are amplified in terms of shipment volumes and pricing at the substrate end.
Furthermore, overlaying the reality of a high proportion of overseas revenue—in 2025, overseas revenue from main businesses was CNY 677 million, accounting for approximately 55%—the uncertainty of geopolitics and export controls remains a layer of discount that cannot be fully digested by financial models.
04、After the Turning Point, Success Depends on Daily Operations on the Production Line
Returning to the initial discrepancy of "positive profits but negative TTM P/E ratio."
It reflects the typical state of a capital-intensive materials company just after turning the corner at the bottom of a cycle: the recovery of reported profits lags behind the recovery of gross margins, and the digestion of valuation lags behind the recovery of profits.
SICC holds cards such as an 8-inch revenue share exceeding half, the world's number one share in conductive substrates, and a long-term ticket for 12-inch wafers. These are its chips for avoiding being knocked off the table in the next round of industry reshuffling.
However, the essence of the substrate business ultimately relies on manufacturing patience—growing crystals inch by inch, refining yield rates point by point, and reducing costs cent by cent. A technological generational gap can open a door, but whether one can walk through it depends on the daily routines on the production line that never appear in press releases.