CITIC Securities Co., Ltd

About Haiguang Information Technology Co., Ltd

2024 Semi-Annual Continuous Supervision Follow-up Report

CITIC Securities Co., Ltd. (hereinafter referred to as "CITIC Securities" or the "Sponsor") acted as the sponsor of the initial public offering and listing on the STAR Market of Haiguang Information Technology Co., Ltd. (hereinafter referred to as "Haiguang Information" or the "Company" or the "Listed Company"). In accordance with the Administrative Measures for the Sponsorship Business of Securities Issuance and Listing, the Rules for the Listing of Stocks on the Science and Technology Innovation Board of the Shanghai Stock Exchange and other relevant regulations, CITIC Securities performs the duties of continuous supervision and issues this semi-annual follow-up report for continuous supervision in 2024.

1. Overview of continuous supervision

1. The sponsor has formulated a continuous supervision work system, formulated a corresponding work plan, and clarified the work requirements for on-site inspection.

2. The sponsor has signed a sponsorship agreement with the company, which has clarified the rights and obligations of both parties during the continuous supervision period, and has been reported to the Shanghai Stock Exchange for the record.

3. During the period of continuous supervision, the sponsor shall perform the duties of continuous supervision in accordance with the requirements of relevant laws and regulations and normative documents, including:

(1) Consult the articles of association, the rules of procedure of the three sessions and other corporate governance systems, and the materials of the three sessions;

(2) Check the company's internal control systems such as financial management, accounting and internal audit;

(3) Check the details of the company's capital transactions with major shareholders and their related parties, as well as relevant internal deliberation documents and information disclosure documents;

(4) Check the relevant systems of the company's raised funds, information disclosure documents and decision-making procedures for the use of raised funds, bank statements of special accounts for raised funds, and detailed accounts for the use of raised funds;

(5) Conduct interviews with senior management of the company;

(6) Conduct public information inquiries about the company and its major shareholders, directors, supervisors, and senior managers;

(7) Inquire about the commitments announced by the company and verify the fulfillment of the commitments;

(8) Pay attention to media reports related to the issuer through public network search, public opinion monitoring, etc.

2. Problems found by the sponsor and the sponsor representative and their rectification

Based on the above-mentioned continuous supervision work carried out by the sponsors, the sponsor and the sponsor representative did not find any major problems with the company during the continuous supervision period.

3. Major risk matters

During the period of continuous supervision, the Company's main risk issues are as follows:

(1) Core competitiveness risks

1. The company's R&D work does not meet the expected risk

High-end processors belong to the frontier core technology field, existing product upgrades and new product development need to continue to invest a lot of money and personnel, but the process and results of the R & D project are uncertain, if the company fails to make a correct judgment in the future research and development direction, in the research and development process fails to continue to break through key technologies or performance indicators do not meet expectations, the company will face the risk that it is difficult to recover the early R & D investment, and the expected benefits are difficult to achieve, which will adversely affect the company's performance.

2. Intellectual property risks

As a scientific and technological innovation enterprise, the company currently has a large number of patents, software copyrights, integrated circuit layout design, proprietary technology and other intellectual property rights, which are the key factors for the company to achieve competitive advantages and sustainable development. In the course of business development, the company has risks such as theft, improper use or intellectual property disputes. In addition, due to the high degree of internationalization of the integrated circuit design business, there are differences in the interpretation and determination of the scope of intellectual property rights in different countries and different legal systems, which may lead to international intellectual property disputes and even litigation, which in turn affects the company's business development.

(2) Business risks

1. High risk of customer concentration

Due to the obvious head effect of the server industry, the company's main customers are concentrated in several major domestic server manufacturers, and the customer concentration is high

To develop more high-quality customers, the company will face greater business risks.

2. The concentration of suppliers is high and the risk of difficulty in replacing some suppliers

The company's suppliers include wafer fabs, packaging and testing plants, IP licensing manufacturers, EDA tool manufacturers, etc., with a high concentration of suppliers. Due to the high degree of specialization and technical threshold in the field of integrated circuits, the products of some suppliers are scarce and proprietary, if they cannot maintain a stable cooperative relationship with them, or due to geopolitics, the company is in the entity list and other external environmental factors that cause the supplier to terminate business cooperation with the company, the company will replace the new supplier at a higher cost, which will have an adverse impact on the company's production and operation, research and development.

(3) Financial risks

1. Intangible asset impairment risk caused by a high capitalization ratio of R&D expenditure

During the reporting period, the company's R&D investment was 1371.9664 million yuan, accounting for 36.46% of operating income, and the amount of R&D expenditure capitalized was 266.4355 million yuan, with a capitalization ratio of 19.42%, forming a large amount of self-developed intangible assets. If there are major changes in the external market and the existing technology is replaced by other new technologies, the company may face a large risk of impairment of self-developed intangible assets.

(4) Other risks

1. Management risks caused by scale expansion

During the reporting period, the company's business scale continued to expand. With the development of the company's business and the implementation of the investment projects of raised funds, the company's revenue scale and asset scale will continue to grow, and higher requirements will be put forward for management personnel in strategic planning, business development, product research and development, marketing and sales, financial management, internal control, etc. If the company's organizational model and management system fail to be adjusted and improved in a timely manner with the expansion of the company's scale, and the management level cannot be further improved with the expansion of the scale, the company will face the management risks caused by the expansion of the scale to a certain extent.

4. Major violations

Based on the above-mentioned continuous supervision work carried out by the sponsor, the sponsor did not find any material violations of the company during the continuous supervision period.

5. Reasons and reasonableness of changes in major financial indicators

For the first half of 2024, the company's main financial data and indicators are as follows:

Unit: 10,000 yuan

Key Accounting Data Current Reporting Period Same Period Last Year This reporting period is the same period last year

Changes

Operating income 376,291.26 261,169.41 44.08%

Net profit attributable to shareholders of listed companies 85,339.59 67,745.18 25.97%

Deductions attributable to shareholders of listed companies 81,763.04 61,899.77 32.09%

Net profit from recurring gains and losses

Net cash flow from operating activities -11,331.81 37,838.97 Not applicable

Key accounting data End of the reporting period End of the previous year The end of the reporting period compared with the previous year

The end of the increase or decrease

Net assets attributable to shareholders of listed companies 1,921,319.77 1,870,508.40 2.72%

Total assets 2,433,344.58 2,290,254.80 6.25%

Key Financial Indicators Current Reporting Period Same Period Last Year The reporting period was the same period last year

Changes

Basic earnings per share (RMB/share) 0.37 0.29 27.59%

Diluted earnings per share (RMB/share) 0.37 0.29 27.59%

Basic per share after deducting non-recurring gains and losses 0.35 0.27 29.63%

Earnings (RMB/share)

Weighted average return on equity (%) 4.45 3.88 increased by 0.57 percentage points

The weighted average after deducting non-recurring gains and losses was 4.27 3.55, an increase of 0.72 percentage points

Return on equity (%)

Ratio of R&D investment to operating income (%) 36.46 47.1 decreased by 10.64 percentage points

1. During the reporting period, the operating income achieved rapid growth year-on-year, mainly due to the increase in market demand and the further improvement of customer recognition of the company's products; At the same time, the company continued to improve product performance, increase market expansion efforts, strengthen the depth and breadth of cooperation with customers and ecological partners, and promoted the rapid growth of its main business.

2. During the reporting period, the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses achieved rapid growth, mainly due to the increase in operating income and the year-on-year decrease in non-recurring profits and losses.

3. During the reporting period, the net cash flow generated by operating activities decreased significantly year-on-year, mainly due to the rapid growth of the company's business, the advance of the stocking cycle and the increase in the number of stocking, resulting in a large negative net cash flow from operating activities.

4. During the reporting period, the company continued to increase R&D investment, product competitiveness continued to increase, R&D investment increased by 11.54% year-on-year, and the operating income increased even more, so that the proportion of R&D investment in operating income decreased slightly

Sixth, the changes in core competitiveness

(1) The company's core competitiveness

Relying on the leading core technology advantages, the first-class integrated circuit talent team, excellent product performance and ecology, and high-quality customer resources, the company has formed a core competitive advantage.

1. Leading core technology advantages

High-end processors are complex in design, and their core technologies were previously only in the hands of a few leading international companies. The company is one of the few integrated circuit design companies with both high-end general-purpose processor and co-processor research and development capabilities. Based on the x86 instruction framework, the "CUDA-like" computing environment, the international advanced processor design technology and the upstream and downstream needs of the industrial chain, the company vigorously develops high-end processor products that meet the needs of China's informatization development, and carries out continuous research and development and optimization to continuously improve the performance of high-end processors. The company attaches great importance to the security of the processor, and effectively improves the security of Haiguang's high-end processor by expanding the security algorithm instruction set, natively supporting trusted computing and encryption virtualization solutions. The performance and ecology of CPU products and DCU products developed by the company are in a leading position in China.

The company has carried out a systematic intellectual property layout in high-end processors and related fields.

The company has obtained 774 invention patents, 98 utility model patents, 3 design patents and integration

There are 241 circuit layout design registration certificates and 259 software copyrights.

2. First-class integrated circuit talent team

High-end processor design is a technology-intensive industry, and professional R&D personnel are the cornerstone of the continuous improvement of the R&D capabilities of chip design enterprises. Most of the company's backbone R&D personnel have a working background in well-known chip companies and have success

Experience in developing x86 processors or ARM processors. As of June 30, 2024, the company has developed technology

There were 1,855 technicians, accounting for 91.07%, including 1,461 with master's degree or above

R&D personnel have a solid theoretical foundation, rich practical experience, and reasonable knowledge structure, and play an important role in various key positions of the company, which can strongly support the company's technological innovation and product iteration, and ensure the smooth completion of Haiguang's high-end processor R&D tasks.

The company has established a mature team in internal management, supply chain, product sales, etc., and the core backbone is all

He has many years of experience in company operation management or market sales, and has clear goals and plans for the company's future development direction and the market positioning of the company's products.

3. Excellent product performance and ecology

Haiguang CPU is compatible with x86 instruction set, with excellent processor performance parameters and supports mainstream operating systems at home and abroad

system, database, virtualization platform or cloud computing platform can effectively be compatible with the millions of system software and application software based on x86 instruction set that currently exist, and has excellent ecosystem advantages. Haiguang DCU is compatible with a "CUDA-like" environment and has a rich software and hardware ecosystem, mainly for computing-intensive applications such as big data processing and business computing, as well as large model training, artificial intelligence, and pan-artificial intelligence computing acceleration fields.

The company actively integrates into the open source community at home and abroad, and actively provides the open source community with adaptation and optimization solutions suitable for Haiguang CPU and Haiguang DCU, ensuring the compatibility of Haiguang high-end processors in the open source ecosystem. With the continuous advancement of information technology application innovation, more leading domestic enterprises have actively carried out ecological construction and adaptation based on Haiguang's high-end processors, and carried out research and development, mutual authentication and continuous optimization in operating systems, databases, middleware, cloud computing platform software, artificial intelligence technology frameworks and programming environments, core industry applications, etc., and developed a number of domestic complete machine systems, basic software and application software with international influence, which are basically independent and controllable in key areas of the national economy such as finance, telecommunications, and transportation. A complete domestic software and hardware ecological chain based on Haiguang CPU and Haiguang DCU has been preliminarily formed.

4. High-quality upstream and downstream industrial chain

As a leading chip design enterprise in China, the company maintains close ties with the upstream and downstream of the industrial chain. The upstream of the industrial chain mainly includes EDA tool suppliers and IP developers related to chip design, wafer processing enterprises related to chip manufacturing and their upstream equipment manufacturers and material suppliers, as well as packaging and testing related packaging enterprises and their upstream equipment manufacturers and material suppliers. In terms of IP, EDA design tools, chip manufacturing and packaging, the company continues to increase cooperation with upstream enterprises to promote the coordinated development of the industrial chain. The downstream of the industrial chain is mainly server machine manufacturing enterprises and some direct users of servers. Haiguang's high-end processor products have been widely recognized by domestic industry users, and have gradually expanded Inspur, Lenovo, Xinhua III, Tongfang and other well-known domestic server manufacturers, developed a variety of servers based on Haiguang processors, and effectively promoted the industrialization of Haiguang's high-end processors. The company takes advantage of the unique advantages of its high-end processors in terms of function, performance, ecology and security, and unites machine manufacturers, basic software suppliers, application software suppliers, system integrators and industry users to establish an industrial chain based on Haiguang's high-end processors.

At present, Haiguang CPU has been applied to telecommunications, finance, Internet, education, transportation and other industries; Haiguang DCU is mainly commercialized in computing-intensive applications such as big data processing and business computing, as well as in large model training, artificial intelligence, and pan-artificial intelligence applications. Compared with the world's leading chip companies, the company is rooted in the local Chinese market, better understands the needs of Chinese customers, and can provide more safe and controllable products and more comprehensive and meticulous solutions and after-sales services, with localized competitive advantages. With the gradual emergence of the demonstration effect of the company's products in the above fields and the continuous strengthening of the company's marketing efforts, the company's high-end processor products will be expanded to more fields and occupy a larger market share.

(2) Changes in core competitiveness

During the period of continuous supervision, the sponsor did not find any material adverse changes in the company's core competitiveness by reviewing the listed companies and market information in the same industry, reviewing the company's prospectus, periodic reports and other information disclosure documents, and interviewing the company's senior management.

7. Changes in R&D expenditure and R&D progress

(1) Changes in R&D expenditure

Unit: 10,000 yuan

Number of the current period The same period of the previous year The extent of the change

Expensed R&D investment 110,553.09 83,663.35 32.14%

Capitalized R&D investment 26,643.55 39,334.45 -32.26%

Total R&D investment 137,196.64 122,997.80 11.54%

Ratio of total R&D investment to operating income (%) 36.46 47.1 decreased by 10.64 percentage points

Proportion of capitalization of R&D investment (%) 19.42 31.98 decreased by 12.56 percentage points

During the reporting period, the company's R&D investment continued to grow compared with the same period last year, and among the research projects, the capitalization projects such as the engineering technology of the new generation of Haiguang coprocessor products were accepted and completed; The R&D progress of expense-based projects such as the R&D of key technologies of Haiguang processors and the design of new-generation Haiguang general-purpose processor chips has been accelerated, and the investment has increased significantly, which has reduced the capitalization ratio by 12.56 percentage points in the current period.

(2) R&D progress

The company's research projects are as follows:

Unit: 10,000 yuan

Progress is expected

Preface Project Name Total Investment Current Investment Cumulative Investment or Stages to Achieve the Goal Technology Specific Application

Prospects

Results

The new generation of Haiguang is not suitable for the development of a new generation of Haiguang domestic Haiguang general

1 General-purpose processor with 50,994.71 153,941.02 stage optical general-purpose leading processor

Chip design manager chip

2024 Deal with the Haiguang Association

2 Key technologies of the device 28,440.68 61,589.82 Development of sea light treatment domestic processors, sea

R&D projects are designed with stagers leading the general purpose of light

Rationalizers

Haiguang processor is not suitable for the development of Haiguang processing in China, and Haiguang is universal

3 Process implementation technology 11,779.24 30,147.69 Stage device design Leading processor

technique

Haiguang Association deals with discomfort and develops Haiguang Association Domestic Haiguang Association

4 New process technology 19,383.92 27,629.64 stage processor chip leading processor

Studies

A new generation of Haiguang enhances Haiguang

5 Coprocessor Production Discomfort 11,776.04 11,776.04 Development Coprocessor Domestic Haiguang Association

Stage performance leader for product performance optimization

technology

The new generation of Haiguang is not suitable for the development of a new generation of Haiguang in China

6 Coprocessor 2,617.16 4,611.94 Stage Optical Coprocessor Leader

Craft implementer chips

Total 124,991.75 289,696.15 / / / /

8. Whether the progress of the new business is consistent with the information disclosed in the previous period

During the period of continuous supervision, the sponsor conducted interviews with the company's senior management by reviewing the company's prospectus, periodic reports and other information disclosure documents, and based on the aforesaid verification procedures, the sponsor did not find any new business in the company.

9. The use of the raised funds and whether they are compliant

During the period of continuous supervision, the sponsor consulted the company's management and use system of raised funds, bank statements of the special account for raised funds and detailed accounts for the use of raised funds, and conducted spot checks on vouchers for the payment of large amounts of raised funds, consulted information disclosure documents and decision-making procedure documents on the use of raised funds, inspected the site of the raised funds investment project on the spot, understood the construction progress of the project and the progress of the use of funds, and conducted interviews with the company's senior management.

In October 2021, the company completed the "R&D of a new generation of Haiguang general processor" and "a new generation of Haiguang cooperation

The three fund-raising projects of "R&D" and "Construction of Advanced Processor Technology R&D Center" are registered for the record, and the construction period of the project is 3 years. In order to ensure the consistency of the implementation of the fundraising project and the adequacy of the invested funds, the company launched the project in 2022

In August of this year, the company was listed on the Science and Technology Innovation Board and the large amount of investment in the fund-raising project was carried out after the raised funds were received, and there was a time lag between the arrival time of the raised funds and the project planning plan. In order to strictly control the overall quality of the fundraising and investment projects and ensure the smooth development of the projects, the company has achieved the predetermined completion of the above three fundraising projects without changing the investment content, total investment, implementation subject and implementation location of the fundraising and investment projects, combined with the actual investment amount of the company's fundraising and investment projects

The availability period has been extended from September 2024 to September 2025. The company called on April 10, 2024

The fourth meeting of the second board of directors and the fourth meeting of the second board of supervisors were held, and relevant matters were deliberated and approved.

Based on the aforesaid verification procedures, the sponsor believes that: during the period of continuous supervision, the company has established and implemented a management system for raised funds, the necessary decision-making procedures and information disclosure procedures have been fulfilled for the use of raised funds, and there is no serious delay in the progress of raised funds, and no illegal use of raised funds has been found based on the aforesaid inspection. 10. Shareholdings, pledges, freezing and shareholding reductions of major shareholders, directors, supervisors and senior managers

The company has no controlling shareholder and no actual controller. The company's major shareholders, directors, supervisors and senior management personnel have no pledge, freezing or shareholding reduction.

11. Other matters on which the sponsor deems it necessary to express its opinion

Based on the above-mentioned continuous supervision work carried out by the sponsor, during the period of continuous supervision, the sponsor did not find any other matters on which the sponsor should express its opinion.

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