On January 9th, we participated in the China Resources Micro (688396. CH) held an investor open day in Wuxi, visited the company's mask production line and communicated with the management.

At the Investor Open Day, the company's management and industry experts shared their views on CR Micro's strategic direction (including power devices, integrated circuits, wafer manufacturing, packaging and testing), as well as industry trends such as AI server power supplies and smart electric vehicles. CR Micro has expanded the production capacity of two 12-inch lines in Chongqing (power devices) and Shenzhen (integrated circuits), and increased the proportion of high-end and high value-added businesses such as automotive electronics, industrial control, and new energy with products such as devices, modules, and system solutions. At the same time, the company takes into account both connotative growth and M&A extension growth, and strengthens the implementation of the company's strategy.

Among them, the mask project we visited has a planned production capacity of 5,000 pieces/month, and continues to evolve to 90nm, 40nm, 28nm and other technology nodes. This is one of the more significant business segments of CR Micro Growth. The company expects mask-related capital expenditure to be $700 million in 2025.

Domestic substitution of AI server power supply: AI server power supply has a wide range of application scenarios, and its power supply accounts for about 3% of the value of servers. Therefore, the demand for AI server power supply has been strong in the past two years, and it will further increase with the increase in the demand for computing power localization. Driven by the market, AI server power supplies are constantly upgrading to high efficiency and high power density. CR Micro's high-performance semiconductor power devices are expected to enjoy industry growth dividends while increasing the localization rate.

Rapid growth of smart electric vehicle business: CR Micro provides a complete set of solutions around multiple application scenarios of automobiles. The company's application scenarios include powertrain and voltage conversion, body and chassis, air conditioning and thermal management system, and others. Correspondingly, CR Micro can provide IGBT single tube/module and SiC MOS single tube/module products. These products can be used in different parts of the car. This will be one of the company's key growth drivers in 2025.

Investment Advice: We maintain our interest in CR Micro (688396. CH).

We believe that CR Micro's growth in 2025 will mainly come from several directions: 1) the rapid growth of downstream demand for new energy vehicles, and 2) the third generation of semiconductors, including new incremental areas such as SiC and GaN. The company's growth direction is matched with the release of IGBT, IPM and other module products, as well as the production capacity of two 12-inch production lines in Chongqing and Shenzhen. Against the backdrop of a slow industry recovery in 2025, the company is expected to enjoy cyclical upward momentum, maintain price stability and boost shipments.

Investment risk: domestic and foreign macroeconomic growth is less than expected; The recovery and growth of downstream demand such as consumption, industry, and new energy are less than expected; The capacity expansion of power semiconductors in Chinese mainland is still fast, and the supply is oversupply; Industry competition intensified, and the company's profits declined; The price increase of power devices such as MOS, IGBT, and SiC is insufficient; The process of localization and high-end is slower than expected.