Summary of Key Points
As a leading domestic manufacturer of memory chips, Changxin Technology went through its IPO process in just 148 days and reported a net profit of 24.762 billion yuan in the first quarter of this year (nearly 300 million yuan per day), despite having accumulated losses of 36.65 billion yuan by the end of last year. This turnaround is attributed to the reversal in the memory chip cycle driven by AI technology. Hefei State-owned Assets is its largest shareholder, and if Changxin’s market value reaches 3 trillion yuan, Hefei State-owned Assets’ assets would be close to 1 trillion yuan—equivalent to Hefei’s annual GDP. This represents a decade of successful investment in DRAM (one of the most challenging chip technologies globally), and it is another example of the “Hefei Model”: by investing in leading enterprises over the long term, the city has been able to upgrade its entire industrial chain, transform its talent structure, and advance from being known as the “Home Appliance Capital” to a “Famous City for Scientific and Technological Innovation.”
1. Changxin Technology: From Losing 366 Billion Yuan in Three Years to Making 300 Million Yuan per Day—The Myth of a Comeback driven by AI
DRAM is essential for smartphones, computers, and AI training centers, but it requires high technical barriers and consumes substantial resources, making it a niche market with few players worldwide. Changxin had been in the red for several years, losing 23.4 billion yuan from 2023 to 2024, for a total loss of 36.6 billion yuan. The turning point came this year when the AI boom led to a surge in DRAM demand, with contract prices rising by 90%-95%. As a result, Changxin turned from losses to profits, achieving revenue of 50.8 billion yuan (a year-on-year increase of 719%) and a net profit of 24.7 billion yuan—nearly 300 million yuan per day. The company expects a net profit of 50-570 billion yuan for the first half of the year, which would almost cover the losses from the past decade.
2. Hefei’s Ten-Year Bet on DRAM: Daring to Invest in a Challenging Field and Reaping Billionaire Returns with Patience
In 2016, while other cities were wary of the risks associated with DRAM investment, Hefei partnered with GigaDevice Technology to initiate the “506 Project” (the predecessor of Changxin), with a total investment of 150 billion yuan (the largest industrial project in Anhui). Hefei State-owned Assets contributed three-quarters of this amount. The project was completed swiftly, with factories built within 10 months, and China’s first domestically produced DRAM was launched in 2019. Despite Changxin’s continued losses, Hefei remained committed to the project. In 2024, Hefei’s investment agency stated, “Chip production is a long-term endeavor; profits will only be realized after several cycles.” Now, with a market value of 3 trillion yuan, Hefei State-owned Assets’ assets are nearly 1 trillion yuan—equivalent to Hefei’s GDP for the year (1.42 trillion yuan in 2025).
3. The Hefei Model Goes Beyond Simply Winning Investments: Using Leading Enterprises to Revitalize the Entire Industry
Hefei doesn’t just focus on short-term gains; it uses leading companies to drive the development of entire industrial chains. For example:
- BOE has attracted 180 upstream and downstream enterprises, making Hefei a hub for flat-panel displays;
- CATL has facilitated the gathering of new energy companies such as BYD and Volkswagen;
- Changxin’s growth has boosted Hefei’s semiconductor industry from an output value of 18 billion yuan in 2016 to 151.4 billion yuan in 2025 (a sevenfold increase), with over 400 companies involved in design, manufacturing, and testing, making it one of the nine major integrated circuit bases in China.
Hefei has also implemented a “Chain Leader” system, assigning officials to oversee each industry chain to address company challenges and prevent scattered policy investments. This approach has helped Hefei transition from a traditional manufacturing city to an emerging technology hub.
4. The Changes Brought by Changxin: Talent Staying in Hefei
Previously, most graduates from the University of Science and Technology of China (USTC) left for Beijing, Shanghai, or Guangzhou. Now, companies like Changxin and iFlytek offer attractive salaries, encouraging them to stay. The “Xiantong Effect” (named after a famous Silicon Valley startup) has also taken hold: former Changxin engineers have started their own businesses in chip equipment, materials, and design, fostering more local innovation. Hefei High-Tech Zone is now filled with people wearing casual clothing and using electric vehicles, transforming the city’s image from an industrial center to a hub for scientific and technological innovation.
5. Hefei’s Next Challenge: From a “Venture Capital City” to a “Famous City for Scientific and Technological Innovation”—What’s Still Needed?
Hefei’s ambition is to become a leading center for scientific and technological innovation, but Changxin alone is not enough. Professor Hu Yan from Anhui University notes that while Hefei has inherent advantages (such as USTC and research institutions), it needs to improve its ability to generate breakthroughs from scratch. Currently, most of the city’s development focuses on scaling existing technologies (from 1 to 10); more original innovations (such in quantum computing or fusion energy) are needed. Although Hefei is already a comprehensive national science center, becoming a global hub for innovation requires additional support for research institutions to foster more groundbreaking developments.
In summary, Changxin’s success is not accidental but the result of Hefei’s ten-year commitment. However, the competition in high-tech fields is just beginning, and there is still a long way for Hefei to go.