Hua Hong Semiconductor Forecast: Price Increase Clearly Supports Profit Expectations

Amidst the high capacity utilization in the wafer foundry industry and the anticipated second wave of price increases scheduled for the second quarter of 2026, Huahong, which focuses on mature processes, is expected to be a relatively certain beneficiary in this cycle of prosperity.

Tomorrow, after the market close, Huahong Semiconductor will release its first-quarter report and will hold a performance explanation meeting for the first quarter later that day.

Regarding the first quarter, Huahong previously provided guidance for revenue to remain flat quarter-on-quarter and a gross margin increase of about 1 percentage point. Analysis anticipates a slight increase in actual performance for both, slightly better than the guidance. The outlook for the second quarter is also positive, with revenue expected to grow slightly quarter-on-quarter, and the gross margin is likely to continue to increase slightly. The management's attitude towards subsequent price increases during the first-quarter exchange provided support for the profitability of subsequent quarters.

Demand Side: From Restocking to Genuine Drive

The logic behind Huahong's benefits is not only about price increases but more about the substantive improvement in the demand structure. The recovery of mature processes in 2025 was mainly driven by restocking, and the incremental demand for 2026 is shifting to automotive-grade chips, special chips, and general industrial applications. This aligns perfectly with Huahong's long-term layout in的特色 processes such as power devices and embedded non-volatile memory, creating a resonance between demand and supply.

Differentiated Advantages in the Price Increase Cycle

Unlike integrated foundries, Huahong does not have the depreciation pressure associated with large-scale expansion of advanced processes. The improvement in gross margin brought about by price increases in mature processes can be more directly transmitted to the profit side. Against the backdrop of a general industry-wide price increase, Huahong, which is lightly loaded, may actually show superior profit elasticity.

As the tide of price increases comes, Huahong, standing on the track of specialty processes, may have a foundation more solid than what most people have expected.