Selling Jinglong Technology equity, while increasing capital expenditure.

Yesterday, at a significant information briefing, Zhao Jingyao, Deputy General Manager and CFO of chip testing giant Jingyuan Electronics, announced the sale of approximately 92% of its Suzhou Jinglong Technology equity for about 4.885 billion yuan, with the transaction expected to be completed by the end of the third quarter.

Jinglong Technology's revenue sources are about 90% from local Chinese customers. The estimated disposal profit from this sale is about 3.827 billion yuan, which will contribute to Jingyuan Electronics' net profit per share of approximately 3.13 yuan, and an increase in net asset value per share of about 3.23 yuan.

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Zhao Jingyao further stated that to give back to shareholders and share investment results, the funds obtained from this disposal will allocate about 3.668 billion yuan to issue additional cash dividends of 1.5 yuan per share in 2025 and 2026 respectively.

Zhao Jingyao said that in recent years, the global semiconductor supply chain map has been impacted, coupled with the United States' technological restrictions and trade entity list against the Chinese mainland semiconductor industry, and the ban on the sale of some products, market competition has become increasingly fierce. After fully considering the environment in which Jinglong Technology operates, and weighing the future development strategy planning and effective use of financial resources, the board of directors made the decision to exit the semiconductor manufacturing business in mainland China.

Suzhou Jinglong Technology, established in September 2002, has a paid-in capital of 18.168 million US dollars, mainly engaged in the business of analog or mixed automatic data processing machine components, solid-state storage system components, thermal oven processing assembly and sales business, as well as integrated circuit packaging and testing. Institutional investors pointed out that Jinglong Technology's main business is the wafer testing of 5G chips and CMOS image sensors.

This time, the disposal of Jinglong by Jingyuan Electronics is to King Legacy Investments Limited, Dense Forest Limited, LePower (HK) Limited, Anchor Light Holdings Ltd., Cypress Solaia Venture Capital SPV, VK Global Investments Limited, Suzhou Industrial Park Industry Investment Fund (Limited Partnership), Tongfu Microelectronics Co., Ltd., Suzhou Xinrui Equity Investment Partnership (Limited Partnership), Shanghai State-owned Assets Supervision and Administration Commission Reform Pilot Private Equity Fund Partnership (Limited Partnership) and other companies. After this sale, Jingyuan Electronics' indirect holding of Jinglong Technology's equity will be reduced to 0%.

Jingyuan Electronics' individual financial report revenue for 2022 and 2023 is 27.619 billion New Taiwan dollars and 24.006 billion New Taiwan dollars respectively, with a gross margin of 34% and 33%, and an operating profit margin of 24% and 22%. Jinglong Technology's profit contribution to Jingyuan Electronics' consolidated statement per share is 1.06 yuan and 1.13 yuan respectively.In addition to announcing the sale of Suzhou Jinglong's equity, Jingyuan Electronics also raised its full-year capital expenditure through the board of directors, from 7 billion yuan to 12.281 billion yuan, an increase of 75%, mainly invested in the high-end testing field to meet the strong demand brought by AI and HPC. Jingyuan Electronics pointed out that after the sale of Suzhou Jinglong's equity, the net cash inflow after deducting the impact of relevant taxes and other factors from the transaction amount was approximately NT$16.6 billion. After the funds were remitted back to Taiwan, China, in addition to accelerating the construction of plant equipment and enriching working capital, the funds will be invested in the research and development of higher-level testing technologies and the expansion of high-end testing equipment to respond to the strong market demand for AI, HPC, etc. Jingyuan Electronics is optimistic that in view of the rapid development of technology, the complexity of terminal mobile devices, automobiles, the Internet of Things, high-performance computing (HPC) and artificial intelligence software and hardware products has increased, the quality of global major customers' products has changed and demand is racing against time, and the company's development strategy has also changed accordingly. In the future, KYEC will focus resources on the semiconductor manufacturing supply chain in Taiwan, China, and work closely with customers and suppliers to strengthen the testing services of fabless advanced process products and increase outsourcing orders from IDMs, creating higher growth space for revenue and profits. Previously, TSMC, the leading wafer foundry, said at the legal conference that advanced packaging will increase third-party assistance from OSAT (packaging and testing factory) in the back-end oS packaging and testing business of CoWoS in the future. The industry pointed out that KYEC currently has a very high market share in FT (terminal test) and Burn in the back-end of CoWoS. KYEC General Manager Zhang Gaoxun analyzed that CoWoS and chiplets must have production records in the testing process, record the test results at different stages, and finally integrate the data. In addition, high-end AI and HPC chips generate more and more heat problems. KYEC has started to extend the existing high power burn in system and develop a new intelligent high-end testing system. Zhang Gaoxun emphasized that the prototype of the system has been completed and is expected to be sent to customers for verification by the end of this year. It will begin to contribute to revenue and profits. As AI and HPC chips become more and more common, advanced packaging is not limited to CoWoS, and the customer base increases simultaneously, and new intelligent high-end test systems are more widely used. KYEC's capital expenditure increased by 75.4%. Legal persons are positive that in the foreseeable future, KYEC will be able to meet the needs of AI and HPC chip testing, while expanding the company's operating scale. The flourishing of AI applications has driven a surge in demand for chip packaging and testing, coupled with the shortage of advanced packaging and the rebound of the memory market, not only KYEC, but also Taiwan's packaging and testing giants such as ASE Technology Holding, Powertech, Siliconware Precision, and TSMC are actively investing. This year's capital expenditure totals nearly NT$90 billion (approximately RMB 20.646 billion), the largest amount since the epidemic.