Looking at the four quarters of data, I have to say it weighs on me — though I can't say I'm surprised.
Did you notice? Revenue is trending up, climbing quarter by quarter from 896 million in Q2 to 1.084 billion in Q1. That's good news — it means our 12-inch capacity utilization and customer qualifications are both moving forward. But gross margin is negative across the board, which is par for the course during a ramp: depreciation and amortization hit the P&L ahead of revenue, the fixed costs of the new fab have already sunk in, and yield is still being ground out. The massive loss in Q4 really stings — there's an inventory write-down component in there — but I wouldn't call it entirely unexpected, either. When volume and price are tightly coupled, inventory turnover pressure builds.
My forecasts for 2026 Q2 and Q3 rest on two key assumptions.
First, **domestic substitution orders will keep ramping**. Downstream customers like SMIC and Hua Hong are accelerating qualification of our 12-inch wafers. The fact that Q4 revenue jumped to 1.074 billion and Q1 held steady at 1.084 billion tells me customers are already pulling in volume. I'm assuming Q2 can grow another ~3% QoQ to around 1.118 billion, with Q3 continuing to climb to 1.158 billion. The logic underneath: domestic wafer fabs are still expanding capacity, and demand for domestically-produced large-diameter wafers is a structural increment, not a passing wind.
Second, **gross margin will continue to recover, but won't flip positive overnight**. Q1 gross margin came back from Q4's -22.9% to -11.8%, and that improvement is not a fluke — it's yield climbing, product mix improving, utilization rate going up. I'm modeling Q2 at around -9.5% and Q3 at -7.5%. But you need to understand: in the wafer industry, every percentage point of yield improvement takes time. I've been a CFO for over a decade — I have that kind of patience.
What's the biggest risk? **Price war**. If every domestic 12-inch player is fighting for downstream orders and pricing gets squeezed too hard, the pace of gross margin recovery will get dragged down. Customer concentration is also high — a swing in demand from SMIC alone hits our P&L directly. And then there's the pace of technology node upgrades — if downstream customers move quickly to more advanced processes and we can't keep up with qualification, the orders will dry up.
On the bottom line, I'm projecting a Q2 net loss of 412 million and a Q3 net loss of 378 million. Losses are narrowing, but we're still some distance from breakeven. As any CFO in this industry knows, it's a game of who can outlast the competition until the day profitability arrives — the fixed assets are already sunk, and from here on out, it's about grinding on yield, winning orders, and controlling costs. I'd call this forecast "cautious optimism."