Market Share Only 1.3%
The price surge in memory chips continues. Against this backdrop, a chip company that previously failed in its A-share listing attempt is now seeking to leverage the momentum to knock on the door of the Hong Kong Stock Exchange.
Recently, on the day after the first version of its Hong Kong stock prospectus lapsed, Chipsea Technology Co., Ltd. (hereinafter referred to as Chipsea) once again submitted a main board listing application to the Hong Kong Stock Exchange.
This "seamless" second sprint stands in stark contrast to its A-share listing journey. In November 2022, after passing the GEM (Growth Enterprise Market) IPO hearing, Chipsea did not proceed to the registration stage for a long time and ultimately voluntarily withdrew its application in December 2023.
With its listing path fraught with twists and turns, Chipsea is now charging into the Hong Kong stock market with a "soaring" first-quarter report.
In the first quarter of 2026, Chipsea's revenue grew 77.4% year-on-year to 224 million yuan, recording a net profit of 75.89 million yuan, nearly three times its full-year net profit for 2025. Its gross profit margin increased by 41.27 percentage points year-on-year to 55.63%.
Is Chipsea finally encountering the best listing window, riding on the industry's upward cycle and supply contraction pushing prices higher?
01 Ranked Fifth in Industry, Market Share Only 1.3%
As a chip company with code-type flash memory as its absolute main business, Chipsea has expanded to three major product lines: NOR Flash, SLC NAND, and MCP. NOR Flash and SLC NAND together contribute over 90% of its revenue, forming the absolute foundation of the company.
These chips are mainly used to store boot codes and firmware for devices, with terminal applications covering communication base stations, industrial controllers, automotive ECUs, and smart homes, among others.
Based on 2025 revenue, Chipsea ranks fifth among global fabless enterprises in code-type flash memory, ranking fourth in SLC NAND and fifth in NOR Flash.
However, the significance of this "top five" industry ranking is limited. Chipsea's market share in the SLC NAND and NOR Flash segments is only 2.4% and 0.7%, respectively. During the same period, the combined market share of the top two manufacturers in both fields was around 40%, highlighting a clear trend of market concentration at the top.
Furthermore, it cannot be ignored that the code-type flash memory market itself is relatively small, with a highly concentrated industry structure, limiting Chipsea's bargaining power.
In 2025, the global flash memory chip market was $74.5 billion, with code-type flash memory accounting for only $5.1 billion, less than one-tenth of the data-type flash memory. With a 1.3% market share, Chipsea ranks 11th in the entire global flash memory chip market, while the combined market share of the top five companies (CR5) is approximately 67.9%.
A deeper constraint comes from reliance on upstream suppliers. The prospectus reveals that, as a fabless enterprise, Chipsea completely outsources its wafer fabrication and packaging/testing processes. From a cost structure perspective, wafer procurement consistently accounts for over 80% of its cost of sales.
The concentration of suppliers is also extremely high. From 2023 to 2025, Chipsea's procurement from its top five suppliers increased from 75.4% to 81.6%, indicating a high degree of concentration. In Q1 2026, this figure further increased to 86.8%, with the single largest supplier alone accounting for 51.9%.
Disadvantages in both upstream and downstream positions amplify the impact of industry cycles on the company.
Chipsea acknowledges in its prospectus that the flash memory chip industry typically cycles every three to four years. After a downturn from 2020 to 2023, the industry rebounded strongly in 2024, with market size growing 67% year-on-year to $68.4 billion.
However, Chipsea's recovery lagged behind the industry, only beginning its rebound in 2025.
From 2023 to 2025, the company's revenue was 663 million yuan, 442 million yuan, and 519 million yuan, respectively. Its net profit attributable to shareholders was -14.0261 million yuan, -37.136 million yuan, and 27.216 million yuan, respectively.
Chipsea explains this in its prospectus as a "temporary operational lag," pointing to a specific action behind it: strategic stockpiling.
02 Stockpiling Pays Off, Gambling on the Cycle
From 2023 to 2025, Chipsea's inventory was 363 million yuan, 318 million yuan, and 294 million yuan, respectively, seemingly effectively cleared. However, the inventory turnover days were 215 days, 327 days, and 279 days, respectively.
The initial increase and subsequent slight decrease in turnover days also indirectly confirm that low-cost inventory from 2024 was not effectively monetized until 2025.
Entering Q1 2026, Chipsea's inventory surged again to 424 million yuan, a 44.3% year-on-year increase, accounting for 48.6% of total assets. Turnover days lengthened to 330 days. In terms of inventory structure, nearly 70% is raw materials and work in progress.
The renewed increase in stockpiling in 2026 represents a bet that the price increase trend will continue. In Q1 2026, the average selling prices of Chipsea's core product lines all jumped significantly, and its strategy has received preliminary validation.
Among them, the average price of the SLC NAND products, contributing nearly 70% of revenue, surged 235.22% year-on-year to 13.04 yuan. Despite a 34.39% year-on-year drop in sales volume, revenue from this segment still achieved a staggering 119.12% year-on-year surge, with its gross margin soaring from 14.2% to 67.5%.
Meanwhile, the average price of NOR Flash products increased 21.67% year-on-year to 0.73 yuan, and the average price of MCP products increased 70.01% year-on-year to 29.02 yuan.
With all product lines seeing price increases, Chipsea's comprehensive gross profit margin in Q1 2026 skyrocketed 41.27 percentage points year-on-year to 55.63%.
However, the other side of the soaring performance is the unsustainability of the upward cycle.
Considering a typical cycle of three to four years, the rebound starting in 2024 has already lasted two years. By the end of Q1 2026, Chipsea's inventory takes an average of 11 months from warehousing to delivery. Once the cycle's turning point arrives, this batch of high-priced inventory could transform from a profit reserve into a cost burden.
The cyclical fluctuation in inventory value is already evident in the financial data. From 2023 to Q1 2026, Chipsea accumulated provisions for inventory write-downs totaling approximately 81.7 million yuan.
This historical baggage also adds variables to this Hong Kong IPO. In 2022, Chipsea was given a written warning by the Shenzhen Stock Exchange for significant discrepancies between its A-share performance forecasts and actual results due to underestimating the speed of the cycle downturn, ultimately leading to the withdrawal of its GEM IPO.
This time, switching to the Hong Kong market, the Stock Exchange of Hong Kong requires disclosure of historical information disclosure violation records, and the China Securities Regulatory Commission's filing review also requires supplementation of equity compliance matters. Cycle risk not only once blocked the A-share listing but remains a compliance threshold the company must overcome.
03 When the Tide Recedes
The flip side of gambling on the cycle is the massive consumption of cash by stockpiling.
In Q1 2026, although Chipsea's profits soared, its net cash flow from operating activities turned negative at -45.426 million yuan, primarily due to large-scale stockpiling.
Furthermore, the collection cycle of sales channels also affects cash flow.
In Q1 2026, the distributor channel contributed 88.1% of Chipsea's revenue, and for the first time, the gross margin of this channel exceeded that of the direct sales channel, increasing by 12.7 percentage points year-on-year to 56.2%, now becoming the company's fundamental business.
Synchronously amplifying is the pressure on collection. As of the end of March 2026, trade receivables increased from 72.4 million yuan at the end of 2025 to 103 million yuan, with turnover days extending from 45 days to 57 days.
As of the end of March 2026, Chipsea's cash and cash equivalents were 149 million yuan, sufficient to cover short-term borrowings of 87.392 million yuan and long-term borrowings of 53.7 million yuan. However, if inventory clearance falls short of expectations and collection continues to slow in the future, the buffer space for the capital chain will gradually narrow.
Chipsea also notes in its prospectus that it may continue to experience net cash outflows from operating activities. Among the intended uses of IPO proceeds, supplementing working capital is listed as one of the four core projects.
Despite pressure on the capital chain, Chipsea maintained substantial dividend payouts during the loss period.
In 2024, against the backdrop of declining revenue and expanding losses, Chipsea distributed a dividend of 30.9 million yuan to shareholders. After returning to profitability in 2025, it distributed another dividend of 20.6 million yuan. The cumulative dividends over the two years exceeded 51.5 million yuan.
The act of generous dividend distribution while raising funds to supplement working capital raises questions about the rationality of Chipsea's capital planning. What concerns the market more is the intensive reduction of holdings by early shareholders and the actual controller just before the IPO.
From August to November 2025, Shanghai Guotou, a shareholder of seven years, sold all its shares in four transactions, cashing out approximately 150 million yuan. Three companies under Shenzhen Capital Group also reduced their holdings, collectively cashing out about 59.9 million yuan. The actual controller, Long Dongqing, transferred 1.6 million shares, cashing out 25.6 million yuan. Initial shareholder Shen Yue transferred 925,900 shares, cashing out about 15 million yuan.
While shareholders are voting with their feet, regulatory scrutiny has also arrived. In June 2026, the China Securities Regulatory Commission, in its feedback on the overseas listing filing, required Chipsea to provide additional explanations regarding the pricing basis for each previous capital increase and equity transfer, and whether there were instances of abnormal entry prices or interest transfer.
With shareholders cashing out and regulatory bodies questioning pricing, on Chipsea's IPO journey, the questions to answer are never just about whether the industry has warmed up, but whether it can stand alone when this wave of price increases recedes.
This article is from the WeChat public account "DongCha-IPO" (ID: dongcha-ipo), author: Pan Yan, editor: Wei Fanxi.
