Huaqin Technology

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Huaqin Technology 2026 Semi-Annual Results Briefing

[AI Key Takeaways]

Financial Performance

- Revenue for the first half of 2026 reached RMB 93.7 billion, representing an 11.7% year-on-year increase.

- Net profit attributable to shareholders was RMB 3 billion, up 58.8% year-on-year; net profit attributable to shareholders excluding non-recurring items was RMB 1.68 billion, up 11% year-on-year.

- Return on Equity (ROE) stood at 10.5%, an increase of 2.4 percentage points from the same period last year, with an annualized ROE reaching 21%.

- R&D expenses totaled RMB 3.56 billion, a 20% year-on-year increase; gross margin was 8.1%, with gross profit growing by 18%.

Business Progress

- All four business lines achieved growth: Mobile Terminals RMB 41.1 billion (+17%), AIoT RMB 6 billion (+85%), Computing & Data RMB 43.3 billion (+3%), and Innovative Businesses RMB 2.5 billion (+135%).

- Building a "3+N+3" intelligent product mega-platform to establish a corporate positioning as an intelligent product platform enterprise.

- Establishing a "1+5+5" global industrial layout, with a successful listing on the Main Board of the Hong Kong Stock Exchange in April 2026.

- The automotive electronics business exceeded a scale of RMB 1 billion, with the establishment of a joint venture with Toyota Boshoku; the robotics business supplied over 400 units.

Next Quarter Guidance

- Full-year revenue is projected to exceed RMB 200 billion, with non-GAAP net profit growth of approximately 20%.

- Data center business revenue in the second half is expected to be more than double that of the first half, driving full-year growth of 50% to over RMB 60 billion.

- Super-node revenue is projected to exceed RMB 10 billion in the second half, while full-year switch revenue is expected to reach around RMB 6 billion.

- The mobile terminal segment is expected to generate over RMB 90 billion in full-year revenue, while automotive electronics revenue is forecast at RMB 2.5–3 billion, representing a year-over-year doubling.

Opportunity

- AI technology is reshaping consumer electronics categories, supporting customers in developing next-generation AI smartphones and other products.

- ODM penetration is currently below 50%, with long-term potential to exceed 55%, indicating significant room for market expansion.

- A joint venture with Toyota Boshoku is expanding overseas automotive electronics clients, with strategic partnerships creating new growth drivers.

- Operational efficiency is being continuously enhanced through end-to-end digitalization and AI-driven intelligent tools.

Risks

- Super-nodes have become a key investment focus for manufacturers, leading to intensified market competition.

- Switch chip supplies are showing signs of tightness, while rising memory chip prices are putting pressure on industry demand.

- The industry-wide supply chain volatility in the first half of the year impacted operations.

[AI Conference Transcript]

Li Yutao

Huaqin Technology Co., Ltd. 2026 First-Half Performance Briefing. I am Li Yutao, Vice President and Board Secretary of Huaqin Technology. I am delighted to gather with you all today. Chairman and General Manager Mr. Qiu Wensheng, Director and Head of Finance Ms. Xi Pinghua, and Independent Director Mr. Hu Saixiong will participate in the online discussion and exchange of this performance briefing. We will carefully answer your questions and sincerely welcome your valuable opinions and suggestions for the future development of Huaqin Technology.

We would also like to extend our special thanks to the SSE Roadshow Center of the Shanghai Stock Exchange for providing the platform that allows us to engage in in-depth exchanges with a broad base of investors. Next, I will provide an overview of the company. First, let me report on the company's performance in the first half of the year. In the first half of 2026, the company achieved operating revenue of RMB 93.7 billion, a year-on-year increase of 11.7%, and net profit attributable to shareholders of RMB 3 billion, a year-on-year increase of 58.8%.

Net profit attributable to shareholders after deducting non-recurring gains and losses reached RMB 1.68 billion, a year-on-year increase of 11%. Following the rapid growth in 2025, Huaqin still achieved high-quality growth in operating performance despite the industry background of supply chain fluctuations in the first half of the year. Our profitability remained stable with an upward trend. Meanwhile, the company's overall operating cash flow made a positive contribution. The company maintained continuous and steady investment in R&D, supporting the orderly expansion of various business lines.

R&D expenses in the first half of the year reached RMB 3.56 billion, a year-on-year increase of 20%. The company's return on equity (ROE) for the first half was 10.5%, an increase of 2.4 percentage points compared to the same period in 2025, with an annualized ROE reaching 21%. Huaqin Technology has consistently maintained a high level of shareholder returns. In the first half of the year, all four of the company's business lines achieved continuous growth.

Specifically, the Mobile Terminal business achieved operating revenue of RMB 41.1 billion in the first half, a year-on-year increase of 17%. The AIoT business achieved operating revenue of RMB 6 billion, a year-on-year increase of 85%. The Computing and Data Services business achieved operating revenue of RMB 43.3 billion, a year-on-year increase of 3%. The Innovative Business segment reached RMB 2.5 billion, more than doubling with a year-on-year growth of 135%.

The company's revenue structure has become more diversified and balanced, building stronger operational resilience. The company has established a "3+N+3" intelligent product mega-platform. Our "3+N+3" strategy refers to three "1+N" product portfolios and three strategic directions for emerging businesses. The first "1+N" centers on smartphones, covering personal and home digital terminal products such as tablets, wearables, and AIoT devices.

The second "1+N" centers on laptops, covering office productivity product portfolios such as desktops, all-in-one PCs, and printers. The third "1+N" centers on servers, including data center infrastructure product portfolios such as AI servers, super nodes, general-purpose servers, and switches. Meanwhile, the company is actively expanding into three strategic innovative businesses: automotive electronics, robotics, and software services.

The company's "3+N+3" business layout has formed its positioning as a platform-based enterprise for intelligent products. We serve global leading technology companies, including mobile terminal clients, laptop clients, cloud computing and enterprise clients, as well as automotive electronics and industry clients. We are the global intelligent product platform enterprise with the most comprehensive category coverage, holding leading industry positions in smartphones, tablets, wearables, laptops, and data centers.

Here is the evolution of Huaqin Technology's diversified product portfolio. It is evident that the company is continuously expanding its second growth curve. Starting with mobile phones in 2005, we expanded into laptops in 2015, entered the data center business in 2017, ventured into automotive electronics in 2021, and strategically positioned ourselves in the robotics sector by 2025.

In facing each new business expansion, Huaqin Technology has maintained significant strategic patience. By adhering to long-termism, we have strengthened our capabilities and built a rare three-layer value growth flywheel. Mature consumer electronics serve as the company's foundation, providing stable earnings growth and cash flow. The data center business acts as the engine driving sustained high growth in the coming years.

Automotive electronics and robotics serve as long-term options to drive the company's future continuous growth, supporting sustained and robust performance over a longer horizon. To fully support our "3+N+3" business strategy, Huaqin Technology has established a "1+5+5" industrial layout globally. The corporate headquarters is located in Shanghai, and there are currently five R&D centers in China: Shanghai, Dongguan, NamCheong, Xi'an, and Wuxi.

We have established a global manufacturing footprint, with two major manufacturing bases in Dongguan and NamCheong in China. To meet the diverse interaction needs of global customers, the company has also deployed three overseas manufacturing hubs in Vietnam, Mexico, and India. High-quality overseas production capacity has become a core competitive advantage. The company owns three precision structural component enterprises—Huayu, Xiqin, and Chunqin—to strengthen synergy between components and complete devices, further enhancing core competitiveness.

Additionally, we acquired Yiluda and Haoqin Intelligent Robotics to expand into new customer and product tracks. Next, we will look at our further focus on the manufacturing layout, as the company continues to advance its "China + VMI" global manufacturing system. Our domestic manufacturing centers have achieved specialized division of labor, with the NamCheong manufacturing center covering laptops, AIoT, and mobile terminal products.

The Dongguan manufacturing center covers data center infrastructure, automotive electronics, and mobile terminal businesses. Overseas manufacturing centers efficiently support global delivery, addressing geopolitical uncertainties and diverse customer demands while staying closer to end-consumer markets. Currently, all three overseas manufacturing centers have achieved scaled mass production and delivery across multiple categories.

With over twenty years of deep engagement in the smart product sector, leveraging keen insights into industry trends, continuous technological innovation, and full-chain resource integration capabilities, we have built unique ODMM core competencies. The four core capabilities of ODM, efficient operations, R&D design, advanced manufacturing, and precision structural components work synergistically to comprehensively consolidate and continuously expand the company's leading position in the global smart product industry.

We provide end-to-end, full-chain service support to global customers, helping the company continuously increase market share and expand its client base. The company's ODMM platform capabilities are reflected first in efficient operations. Huaqin possesses industry-leading operational efficiency and global delivery capabilities. Through comprehensive digitalization and various AI-enabled tools, we continuously improve efficiency and enhance our capacity for massive global deliveries, achieving highly effective operational management.

Secondly, in R&D design, the company has accumulated deep technical expertise over the past two decades in key hardware, software, and structural technologies. We have developed cross-system, cross-platform, and cross-product R&D capabilities, allowing for the horizontal transfer of core technologies to boost R&D efficiency and product innovation. The company's end-to-end IPD (Integrated Product Development) process supports efficient multi-product R&D and commercializes R&D outcomes, focusing on commercial success and ensuring the company remains large yet well-organized.

Thirdly, in advanced manufacturing, the company consistently implements concepts of smart and lean manufacturing, continuously advancing factory automation, digitalization, and lean practices. Our global "5D" diversified manufacturing layout meets the diverse delivery needs of both domestic and international customers. Fourthly, in precision structural components, the company enhances its R&D innovation and stable delivery capabilities for parts by vertically integrating advantageous enterprises in this sector.

Building on this foundation, we have achieved deep synergy between the R&D and manufacturing of precision structural components and complete devices, continuously raising barriers to core technologies and enhancing the competitiveness of our finished products, thereby establishing a key competitive advantage for the company. In summary, we are a manufacturing company with strong R&D capabilities, a hardware company with robust software expertise, and a large-scale enterprise with high operational efficiency.

Today, I am pleased to share that Huaqin Technology boasts a highly professional, experienced core team with a global perspective. All four of our co-founders come from R&D engineering backgrounds and have remained deeply involved in frontline business operations for twenty years since the company's inception. We have established an efficient organizational system, adopting a structure characterized by a compact group headquarters overseeing large business groups.

Management has fully delegated authority to the heads of business units, ensuring efficient strategic execution within each unit and the replicability of organizational capabilities. We firmly believe that talent is Huaqin Technology's most valuable resource and the solid foundation of its development. Therefore, in our talent strategy, we persist in recruiting a large number of fresh graduates annually; this year, we hired 2,300 new employees, supported by a systematic talent development framework and an open promotion mechanism.

Since its establishment, the company has consistently implemented equity incentives for core talent to align employee interests with corporate development, supporting long-term sustainable growth. This year marks the third anniversary of Huaqin Technology's listing on the A-share market. Since going public, the company has fulfilled its commitments through sustained high-speed performance growth, continuously strengthening market confidence.

Over the past three years, the company has deepened its focus on core businesses, with revenue jumping from RMB 85.3 billion in the listing year to RMB 171.4 billion in 2025. We are poised to surpass the RMB 200 billion revenue mark in 2026, achieving more than double the growth. Meanwhile, over the past three years, the company's capital market value has received full recognition. From an initial market capitalization of approximately RMB 53 billion at listing, the total market cap exceeded RMB 120 billion as of August 7, three years later.

The company's market capitalization more than doubled over three years, validating the market's affirmation of our operational fundamentals, core technological capabilities, and long-term growth value. Furthermore, in April 2026, the company successfully listed on the Main Board of the Hong Kong Stock Exchange, aligning our corporate governance standards with international practices and injecting new momentum into our global layout and business expansion.

Moreover, we believe that Return on Equity (ROE) is the true indicator reflecting our sustained capabilities. Over the past three years, Huaqin's ROE reached 16.8%, 20.3%, and 16.8% respectively, ranking among the top performers in the A-share market. Behind these high ROE figures lie Huaqin Technology's diversified business layout, a high-quality and stable customer base, and core competitiveness in ODM services. These factors provide strong resilience against economic cycles and form the underlying support for shareholder returns.

Since listing, the company has adhered to high-quality development standards. Over the three years since going public, we have maintained annual cash dividends, with the dividend payout ratio exceeding 30% of net profit attributable to shareholders each year. Cumulative cash distributions have surpassed RMB 3 billion, and we have implemented two stock split initiatives. We share the dividends of corporate growth with our investors, having launched restricted stock incentive plans for three consecutive years, executed two share buyback programs, and seen senior management increase their shareholdings multiple times.

The company has established a shareholder return mechanism combining dividends and share buybacks, while further binding management and core personnel to the listed entity through equity incentives and increased shareholding by executives. These actions demonstrate our firm confidence in long-term value. Since listing, we have strived to build an open and transparent investor relations system. In 2025, the company organized or participated in over 400 events, including investor days, earnings conferences, strategy meetings, and various roadshows.

Simultaneously, through announcements, conference calls, emails, official WeChat accounts, and platforms such as SSE e-Interaction, we continuously communicate various business developments to investors, establishing smooth communication channels. In terms of capital operations, the company successfully listed in Hong Kong in late April this year, establishing an A+H dual capital market platform to facilitate our international expansion.

As the industry chain leader, leveraging our substantial core business traffic, we continue to invest strategically across the upstream and downstream segments of the industrial chain. This not only generates investment returns for the company but also strengthens business collaboration with our partners, fostering the development of the industry ecosystem. Additionally, in conjunction with this semi-annual report, we have simultaneously released the "Quality Improvement, Efficiency Enhancement, and Enhanced Returns 2.0" action plan.

Looking ahead, we will further optimize measures for high-quality development from multiple dimensions, including improving the quality and efficiency of operations and development, enhancing corporate governance and information disclosure, boosting investor returns and social responsibility performance, as well as refining operational goals and plans. We strive to deliver superior and sustainable returns to our shareholders.

While pursuing commercial success, we place high importance on sustainable corporate development. Huaqin adheres to its mission of improving people's communication and lives. We have established a strategic framework centered on scientific governance, green low-carbon practices, responsible leadership, and a healthy ecosystem, promoting synergistic evolution across the value chain and enhancing the resilience of our ecological system. By continuously optimizing our governance structure, we have integrated risk management into every stage of our end-to-end business processes.

We are firmly advancing our dual carbon goals and increasing the proportion of clean energy usage. We continue to build an agile organizational management system while empowering all our employees. Huaqin Technologies also strives to set a social example; our cumulative charitable contributions have exceeded RMB 21 million, involving over 220,000 participants. Thanks to our solid management and practical implementation, the company has achieved an MSCI ESG rating of A, a Wind ESG rating of 3A, and was included in the Forbes 2025 China ESG Top 50.

This recognition reflects the market's approval of our sustainable development efforts. Finally, our Chairman, Mr. Qiu, has repeatedly emphasized that we must focus on doing the right things and tackling more difficult challenges over a three-to-five-year horizon. This long-termism is deeply ingrained in Huaqin's DNA and serves as the core foundation for our steady growth through industry cycles. The company consistently adheres to a long-term strategic approach, patiently broadening its growth boundaries over the past two decades, continuously investing in new businesses, and forming a more diversified and healthy business portfolio and revenue structure.

Each new business line typically requires a long period of diligent cultivation and refinement, from initial R&D investment to achieving commercial break-even. It is precisely due to our commitment to long-termism that we have been able to construct a diversified, multi-dimensional "3+N+3" intelligent product platform. Going forward, we will adhere to the "3+N+3" business strategy and the "1+5+5" global layout, leveraging our core competitiveness in ODM/M to achieve long-term, stable operational performance.

We remain committed to technological innovation and long-termism, focusing on doing the right things and tackling harder challenges. We aim to create greater value for our customers and deliver long-term, sustainable returns to our investors. We welcome you to follow our official Investor Relations account on WeChat for the latest company updates. Thank you.

Next, we will move to the interactive Q&A session with investors. Investors present onsite please raise your hand to ask questions. For those participating online, please submit your questions via text on the SSE Roadshow Center platform, where some of our executives will provide responses. Let us begin. Investors onsite wishing to ask questions, please raise your hand. Before asking, please state your name and affiliated institution. Thank you.

Sun Yue

Hello, Huaqin management. I am investor Sun Yue. Thank you for the detailed overview of the first-half business performance, and congratulations on the company's achievements. I would like to ask specifically about the detailed performance of each product line in the first half, particularly regarding trends in gross margin and net margin. Additionally, could you share your outlook and plans for the second half of this year and next year? Thank you.

Li Yutao

Understood, thank you. I will now address the question by providing an overview of our company's performance across various business lines since the beginning of the year, broken down by segment. First, regarding our Mobile Terminal segment: the company achieved record highs in the first half of the year. Despite headwinds in the smartphone industry, both our sales volume and revenue continued to grow.

Looking at the full year, we forecast a slight decline in smartphone sales volume, with revenue expected to remain largely flat. However, Huaqin continues to hold the number one position among ODMs for smartphones. For tablet products, we maintained our growth momentum in the first half, with stable performance expected for the full year. Our market share in the tablet industry remains firmly in first place.

Next, within the Mobile Terminal segment, we have our wearable products. Amidst the ongoing trend of brand concentration, our wearables maintained strong growth rates in both the first half and for the full-year outlook, allowing the company to retain its leading position in the wearables industry. Second is our AIoT segment, which saw a growth rate exceeding 80% in the first half.

This growth was primarily driven by the expansion of our AIoT product categories, which further scaled up our operations. For the full year, we expect the entire AIoT segment to maintain high-speed growth. Overall, our '1+N' product portfolio in mobile terminals is poised for steady growth throughout the year. Revenue is projected to rise from over RMB 80 billion last year to exceed RMB 90 billion for this segment this year.

The third segment is our PC business. Our company maintains strong competitiveness in laptops, as we continue to diversify our models and product categories. Consequently, our market share in the laptop sector continues to increase. Laptop revenue grew by over 50% in the first half, and we anticipate that full-year revenue will also maintain high-speed growth.

The fourth segment is our Data Business, which is of significant interest to many. In the first half, revenue from this segment was approximately RMB 20 billion. As many are aware, following the transition to domestic GPUs in the second half of last year, our revenue has grown quarter-over-quarter. However, it still represents a year-on-year decline compared to the high base set in the first half of last year. Looking ahead to the second half, with the commercial delivery of super nodes and rapid growth in switch shipments, we expect to enter a period of high year-on-year growth.

Therefore, for the Data Business segment, we project full-year revenue growth of 50%. The fifth segment is our Innovative Businesses, which includes automotive electronics, robotics, and software services. All these areas achieved more than double-digit growth.

Regarding profitability, our overall gross margin for the first half was 8.1%. Gross margins across various categories remained relatively stable with slight improvements. We expect the full-year gross margin to remain around 8%. Internally, the company places greater emphasis on the growth in gross profit amount and the Return on Equity (ROE) level mentioned earlier.

In the first half, our gross profit grew by 18%, and our annualized ROE reached 21%. Indeed, ROE is a better indicator of the company's true profitability. Our average ROE over the past three years has been close to 16%, up from 10%. Overall, Huaqin's ROE ranks among the top listed companies, demonstrating our high-quality earnings capability.

Of course, we expect the company's ROE to stabilize at a high level in the range of 15% to 20% in the future. Finally, let me provide an outlook on the forecasts for the second half of this year and next year that we just mentioned. The company's net profit excluding non-recurring items for the first half of the year grew by 11%, and we expect the growth rate of net profit excluding non-recurring items to be even higher in the second half.

Looking at the full year, we expect revenue to exceed RMB 200 billion, with the growth rate of net profit excluding non-recurring items at around 20%. As products such as the company's super-node switches continue to grow at a high speed, we anticipate an even higher growth rate in net profit excluding non-recurring items by 2027. In terms of profit margins, driven by continuous scale expansion and changes in product mix, we see room for improvement in gross margin, while the overall expense ratio is expected to decline.

In the long term, our profit margin is expected to rise from the current level of slightly over 2% to slightly over 3%. That concludes my response. Thank you, and please feel free to ask further questions.

Xiaokang

Hello to the leadership team at Huaqin, and hello Mr. Li Yutao. I am Xiao Kang from Guotai Junan Securities. I have two questions regarding the data center business. As you just mentioned, our data center business is growing very rapidly. My first question is: Recently, we have observed that leading domestic CSPs are increasing their capital expenditures. Could you please provide an outlook on the growth rate of our data center business for the second half of this year, next year, and the full year? Additionally, could you elaborate on the specific product structure and potential growth opportunities for next year? Thank you.

Li Yutao

Thank you, Xiao Kang. Indeed, in our data center business segment, as everyone has seen, leading CSPs have been rapidly increasing their AI-related capital expenditures since the beginning of this year. The industry was also in a transition phase towards domestic solutions in the first half of the year. The maturity of various links in the domestic chip supply chain is visibly improving rapidly, and supply is gradually being released. This includes clear growth points in areas such as domestic chips and super-node switches.

As mentioned earlier, the revenue scale of the company's data business in the first half was around RMB 20 billion, during which we achieved the initial shipment of super-node products in Q2. Starting from Q3, we will enter a phase of rapid growth. We expect that in the second half, the revenue from super-nodes and the entire data business will be more than double that of the first half, achieving a 50% growth rate for the full year, resulting in a revenue scale exceeding RMB 60 billion.

Breaking it down, the accelerated growth in the second half benefits from the accelerated pace and volume of product shipments. Specifically, for super-nodes, we began mass shipments in Q3, and revenue is expected to exceed RMB 10 billion in the second half. Meanwhile, the market share of switches is rising rapidly, with full-year revenue estimated at around RMB 6 billion, representing a doubling of revenue for the switch business.

For the entire data center business in the second half, quarterly revenue will exceed RMB 20 billion each quarter. By customer, revenue from the top three CSP clients should each reach the scale of over RMB 10 billion. Revenue from industry customers will also exceed RMB 10 billion this year. Looking ahead to 2027, the total demand for computing power investment at the industry level is significantly increasing.

Given the massive scale of capex from leading CSPs, we are clearly seeing a significant increase in the proportion of super-nodes. Huaqin's data business as a whole will continue to achieve high-speed growth in 2027, with super-nodes maintaining their leading advantage and achieving multiplicative growth. The network business will also maintain doubledigit growth, and our goal is to rank among the top one or two suppliers for major CSP clients.

We are also accelerating our expansion in industry and channel markets, with the goal of becoming a leading domestic data center supplier. The company is highly confident in achieving its IPO objectives. Thank you.

Xiaokang

Understood. My second question concerns specific categories within the data business. First, regarding the super-node business: you mentioned earlier that growth will accelerate significantly in the second half of this year. Could you provide an outlook on the gross and net profit margins for this segment, as well as the future competitive landscape of the super-node market? Second, regarding the switch business: you noted that it will enter a period of rapid growth in the second half of the year. Are there currently any supply-side constraints for switches? Additionally, what are the future technical roadmaps and opportunities in this area? Thank you.

Li Yutao

Thank you. I will address these points separately. First, regarding the super-node products, which are of widespread concern: Huaqin began delivering super-node products to key clients in Q2 of this year, started volume deliveries in Q3, and will continue to ramp up volumes in Q4. The company holds a first-mover advantage in the super-node product segment.

Regarding profitability, we would like to share that internally, we focus primarily on ROI. The ROI for super-nodes is significantly higher than that of other products. As super-node penetration increases and scale expands, the profit margin levels for the entire super-node solution will outperform those of AI servers.

Leveraging our full-stack advantages and R&D leadership, Huaqin is one of the few manufacturers in the industry with simultaneous design capabilities for both compute nodes and network nodes. Consequently, our gross and net profit margins for super-nodes are superior to those of our peers. Regarding your question on the competitive landscape:

Super-nodes will become a critical form of computing power infrastructure and a key focus for investment by various manufacturers. The industry is still in its early stages. Due to the high barriers to entry for super-nodes, system architectures and technological directions will continue to evolve, solutions will become increasingly complex, and the importance of networking will continue to rise.

Therefore, differentiated demands will gradually emerge during the growth process. Huaqin will continue to expand our first-mover advantage in several ways. First, we will leverage our full-stack compute-plus-network strengths to reinforce our capabilities, particularly in networking. Second, we will maintain technological leadership by actively laying out strategies in interconnects, power supply, and thermal management.

Our R&D investment in the data business has grown at a rate of 50% for three consecutive years, adhering to our strategy of mass-producing one generation, developing the next, and pre-researching the subsequent one. By continuously and firmly increasing R&D investment, we aim to maintain and expand our first-mover advantage. Additionally, we are building capacity advantages for our data centers.

Huaqin possesses leading manufacturing capabilities and production scale. Through yield control and delivery capabilities, we translate our aforementioned technological leadership into leadership in scale and market share. Regarding the switch products you mentioned: we are indeed in a phase of rapid growth in this segment.

Switches are playing an increasingly critical role in computing power infrastructure. Indeed, there is a growing trend of tight supply for switching chips. To mitigate this, the company has implemented multiple measures to secure overseas chip procurement, including establishing collaborative coordination mechanisms with chip suppliers. These mid-to-long-term control measures ensure we can execute our plans promptly.

Furthermore, in times of supply shortages, our suppliers prioritize core key accounts. Since our switch business primarily focuses on large Cloud Service Providers (CSPs), our overall supply capacity is sufficient to meet both customer demands and our own operational needs. The company has also significantly increased inventory buffers for key materials, including memory and switching chips, ensuring we are well-prepared.

Regarding switch planning, while current products rely on overseas switching chip platforms, domestic switching chip technology is iterating rapidly. The company is synchronously advancing product adaptation and validation based on domestic chips in line with customer needs. For super-node products, in addition to those using overseas switching chips, we also offer solutions based on customers' self-developed switching chips or other alternatives.

This product strategy establishes a parallel layout across multiple technical routes. Optical switching is a clearly defined future technological trend, and the company is actively positioning itself in this area, with NPO (Near-Packaged Optics) and CPO (Co-Packaged Optics) being key investment focuses. In the short term, we are accelerating the R&D and deployment of NPO products, and super-node products based on NPO are currently undergoing validation.

The company will closely follow the pace of technological development and strive to launch relevant products at the earliest opportunity. Thank you. You are welcome to ask further questions.

Wang Yujie

Hello, Mr. Li Yutao. I am Wang Yujie, an analyst at SDIC Securities. I would like to ask two questions regarding consumer electronics. First, we are pleased to see that the company's mobile phone business is growing against the trend. Given the potential for continued memory price increases in the second half of the year, what is your outlook on the full-year plan for mobile phones, and how do you assess the current marginal changes in downstream terminals? Second, our laptop business is also growing against the trend. What are the underlying reasons for this? Additionally, how have raw material price increases throughout the first and second halves of the year impacted gross margins? Thank you.

Li Yutao

Thank you. I will first address the question regarding mobile phones. This year, price increases in the upstream smartphone sector, particularly for memory chips, have indeed put pressure on industry-wide demand. Leveraging our diversified customer base and platform advantages, the decline in our smartphone shipments this year has been smaller than the overall industry decline, demonstrating our strong resilience.

We expect the company's smartphone shipments to decrease by approximately 5% to 10% year-on-year this year, while smartphone revenue is expected to remain flat. Relying on our comprehensive advantages, the company maintains its leading position as the No. 1 smartphone ODM, No. 1 tablet ODM, and No. 1 wearables ODM. As previously mentioned, the overall revenue scale of our mobile consumer electronics business is projected to grow further from over RMB 80 billion last year to over RMB 90 billion.

In the long term, demand for smartphones has not declined. However, short-term fluctuations have occurred due to rising upstream supply chain costs. The company assesses that the smartphone market is currently in a relative bottoming phase this year, with a gradual recovery expected over the next two years. Over the past few years, total global smartphone shipments have remained stable at approximately 1.2 to 1.3 billion units, while the penetration rate of ODMs (Original Design Manufacturers) has been steadily increasing, currently standing at just under 50%.

Looking ahead, we see an opportunity for ODM penetration to exceed 50%, potentially reaching 55%. At such penetration levels, the company projects that our annual shipment volume will surpass 200 million units. Huaqin will continue to maintain its leading position as the industry's number one player, indicating there is still room for future growth.

Additionally, it is worth noting that AI is reshaping all consumer electronics categories. Smartphones, wearables, and PCs can all serve as entry points for future AI agents. The company is currently collaborating with clients to develop the next generation of AI-enabled smartphones. Furthermore, smart wearables and AIoT devices are benefiting from the deep integration of AI technology, leading to a continuous emergence of new features, form factors, and product categories.

Leveraging our technological accumulation across various chip platforms, our advantageous position in the industrial chain, our consistent high R&D investment, and our abundant R&D resources, we will closely harness AI technology to empower our diverse consumer electronics products. We are committed to seizing the opportunities presented by this transformation. This addresses your first question.

Secondly, regarding our laptop business: although the industry faced pressure in 2026 similar to that of the smartphone sector, our company achieved counter-trend rapid growth in laptop shipments by increasing our share among clients. We expect our laptop shipments to reach 20 million units this year, with H1 revenue actually increasing by more than 50% year-over-year.

We forecast that full-year growth will remain robust, driven by rapid share gains among both US-based and Taiwan-based clients. This trend is expected to persist in the coming years. Huaqin has demonstrated strong competitiveness in the laptop client base. I will now elaborate on our technological and product advantages in the laptop sector.

Huaqin has rapidly transferred the quality standards and product innovation capabilities accumulated in the smartphone sector to laptop R&D and manufacturing, continuously innovating in areas such as antennas, thermal management, new materials, and new processes. Notably, the company pioneered the development of next-generation AI PC products with innovative architectures. Secondly, we possess efficiency advantages; compared to competitors, Huaqin offers shorter R&D cycles, along with integrated capabilities in laptop R&D, manufacturing, delivery, and supply chain management.

Our four major operational links have achieved an integrated ecosystem layout in NamCheong, resulting in a more efficient operating system. Regarding talent, Huaqin leverages the strong 'engineer dividend' in China, ensuring a plentiful supply of R&D personnel. Meanwhile, the company has built a young, dynamic, and highly competitive team and organizational structure.

These significant advantages have supported Huaqin in continuously gaining higher market share in the laptop market. Additionally, regarding laptops, the rise in prices of upstream components, including memory chips mentioned earlier, has indeed contributed to an increase in our average selling price (ASP) and revenue for laptops, which addresses your concern.

While this has had some impact on gross margins, the company has achieved full category coverage in laptops, ranging from consumer to commercial segments. We will continue to increase the proportion of commercial laptop sales. By enhancing overall operational efficiency and expanding our scale advantages, we aim to improve profit margins. We are very confident in achieving sustained rapid growth in revenue, gross profit, and net profit in our laptop business in the future. Thank you, that concludes my response.

Hu Yue

Good day, executives and Mr. Li Yutao. I am Hu Yue, an individual investor. My question concerns the company's automotive electronics business. Noting the significant growth in this segment during the first half of the year, could Mr. Li please share the latest developments? Additionally, are there any corresponding moves in terms of overseas expansion? Thank you.

Li Yutao

Thank you. Let me share an update on our automotive electronics business. Huaqin's automotive electronics revenue first exceeded RMB 1 billion in 2025. Since crossing that threshold last year, we have entered a phase of rapid growth. In the first half of 2026, our automotive electronics business again surpassed the RMB 1 billion mark. We expect full-year revenue to double year-on-year, reaching approximately RMB 2.5 to 3 billion for the entire year.

Looking ahead, we anticipate this doubling trend will continue. By 2028, we aim to achieve RMB 10 billion in revenue and reach profitability. In terms of product focus, our automotive electronics portfolio currently centers on smart cockpit display mounts and vehicle control products.

On the cockpit platform, the company has continued to invest in new product R&D, establishing a comprehensive suite of platforms in the cockpit domain. Regarding intelligent driving platforms, we previously focused mainly on mainstream domestic platforms. Starting this year, we have also begun investing in NVIDIA's high-end Thor platform. This platform involves higher technical barriers and fewer domestic participants, resulting in a more favorable competitive landscape.

For this platform, we have secured customer nominations under both JDM (Joint Design Manufacture) and joint development/manufacturing models. Anticipating the long-term industry trend toward integrated cockpit and autonomous driving central computing, the company has proactively developed related converged products. Beyond products, we are also making continuous breakthroughs in expanding our automotive electronics customer base.

We have established collaborations with traditional domestic automakers, OEMs, and leading new-energy vehicle players. In addition to domestic clients, we are actively expanding our overseas customer base, with significant breakthroughs in the Japanese market. The company has formally established a joint venture with Toyota Boshoku, rapidly ramping up supplies of seat controllers and other vehicle control products to them.

We previously achieved breakthroughs in aftermarket projects and are now actively advancing our expansion into front-load (OEM) projects. Overall, our customer structure is extending from domestic to overseas automakers. Regarding your specific interest in our overseas business with foreign automakers, it is important to note that supply chain entry is indeed challenging, characterized by long certification cycles and high entry barriers.

The company is accelerating business breakthroughs and gradually entering international automaker supply chains through diverse strategies, including establishing joint ventures and engaging in joint development. Thank you.

Hu Zuwei

Hello, Mr. Li. I am investor Hu Zuwei. I would like to ask why the company chose to enter the robotics industry. Regarding the company's focus in the robotics sector, will it be on whole-unit ODM or components? What is the current progress?

Li Yutao

Thank you. Regarding the company's robotics business that you are interested in, Huaqin's decision to enter the robotics industry was primarily driven by three considerations. First, we believe the market space for the robotics sector is enormous—truly a massive track—and Huaqin did not want to miss this significant future opportunity.

Second, based on Huaqin's '3+1+3' product platform, our technological accumulation is reusable. Apart from foundational software algorithms such as large models ('brain'), the company has already accumulated expertise and involvement in most of the core technologies required for robotics products to varying degrees. Third, a major characteristic of Huaqin is our extensive manufacturing scenarios.

Our internal demand is also robust. Our current manufacturing capabilities range from earphones weighing a few grams to super-node products weighing tons, covering a wide variety of products. Consequently, there is substantial real-world demand for automation and robotics applications within our own factories. Regarding Huaqin's direction in robotics, we are not simply manufacturing components; instead, we are focusing on whole-unit and system solutions based on manufacturing scenarios.

Thirdly, I would like to report on the current progress of our robotics business. First, we are supplying some leading large-model robotics companies. Based on the needs of domestic leaders in large models, the company has developed and manufactured data collection robots, with shipments exceeding 400 units to date.

Second, our robotics manufacturing capability has been validated. We have manufactured robotic products for leading domestic robotics companies, with shipments exceeding 4,000 units, which serves as proof of our manufacturing prowess. Third, our self-developed wheeled robots have been deployed in our factories. Our self-developed wheeled dual-arm robots for factory use have begun delivery for internal factory operations, utilized for data collection and model training.

Over the next one to two years, we expect to gradually achieve replacement at certain workstations and enable human-robot collaborative operations. Additionally, we are developing an integrated 'big brain and small brain' controller. Our self-developed integrated robot controller is expected to begin shipments by the end of this year. Finally, the company remains bullish on the robotics sector in the long term and will continue to follow technological development trends in this field.

In the robotics field, we maintain appropriate R&D investment. Our annual investment scale is modest, generally under RMB 100 million. Of course, in the robotics sector, we expect to reach profitability or break-even more rapidly. That concludes my response. Thank you.

Li Yutao

Thank you. Due to time constraints, we will conclude Huaqin Technology's earnings briefing for the first half of 2026 here. We sincerely appreciate all investors for their questions and engagement. We warmly welcome investors to maintain open communication with the company through public channels such as telephone, email, SSE e-Interaction, and Huaqin Technology's official investor relations WeChat account. Thank you all, and we look forward to seeing you next time.

More details:Huaqin Co., Ltd. IR

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