Compound Semi / LED

Let me start with a call: the 18.5% gross margin in Q1 2026 is no accident—it's a watershed. Looking at the internal numbers now, the drag from the LED business is clearing out fast, and the revenue mix from SiC substrates and SiC devices is climbing every quarter. First key assumption—SiC revenue mix is accelerating. The 6-inch substrate lines at Hunan Sanan and Chongqing hit full capacity in Q2, and 8-inch has started shipping in small batches. We locked in NEV OEM and PV inverter orders through year-end back in Q1. I estimate SiC-related revenue will carry 30%+ of total revenue in Q2, and gross margin gets a structural lift from there. Second assumption—the LED business stops being a drag. That 8.4% gross margin in Q4 was mostly a one-time inventory write-down; Q1 has fully digested it. Traditional lighting and Mini LED backlight are back to normal run-rates, and we won't see write-down hits of that magnitude in Q2 or Q3. So revenue climbs off the Q1 trough—Q2 bounces back to roughly RMB 3.68 billion QoQ, Q3 pushes further to RMB 4.15 billion. Gross margin keeps stepping up to 19.5%, then 20.5%. Operating profit recovers from Q1's RMB 124 million to RMB 195 million, then to RMB 280 million. Net profit tracks at RMB 138 million and RMB 198 million, respectively. I have to flag the biggest risk upfront: SiC substrate capacity has ramped too fast over the past two years—Sicc, TankeBlue, even Wolfspeed are all in a price war. If the industry price midpoint falls faster than our model assumes, Q3 gross margin could get pinned just above 19%. And if the automotive-grade qualification cycle runs longer than we expect, Q3 shipment cadence will slip. But honestly, looking at that Q1 gross margin curve, I'm feeling confident. The speed of our pivot away from LED is faster than most analysts are willing to acknowledge.