Summary of Key Points
Jiangsu Luwen Instrument is a “specialized, sophisticated, and innovative” company in the domestic semiconductor front-end equipment sector, focusing on ion beam equipment and ICP etching equipment (key tools for chip production). Investors such as the Third Phase of the National Fund and the Institute of Microelectronics of the Chinese Academy of Sciences hold shares in the company. It holds the highest market share in China for ion beam equipment and can produce 12-inch etching equipment (used for mainstream chips), which has been repeatedly purchased by customers. The company is currently pursuing an IPO on the STAR Market, aiming to raise 2.5 billion yuan to build research and development facilities and advance technological innovation. However, it has suffered losses for three consecutive years (with net losses exceeding 500 million yuan from 2023 to 2025). Despite this, its revenue has grown rapidly (by 237% in two years), and its R&D investment has also increased year by year.
Detailed Analysis
1. Investor Background: National and Industry Leaders Show Support
Luwen Instrument’s shareholder lineup is impressive:
- Third Phase of the National Fund (with a 7.29% stake held by Guotou Jixin): This fund is dedicated to supporting the semiconductor industry, indicating state recognition of the company’s technology and market position.
- Institute of Microelectronics of the Chinese Academy of Sciences (with a 2.98% stake): A leading force in scientific research, providing credibility for the company’s technology.
- Changcun Industrial Fund (with a 2.58% stake): Associated with Changjiang Storage, a leading domestic memory chip manufacturer, suggesting that Luwen’s equipment may already be part of its supply chain.
These investors not only provide financial support but also bring in technical and customer resources, offering a significant boost to the company’s development.
2. Business Products: Leading in Chip Production Equipment
Luwen Instrument’s core products include two types of equipment:
- Ion Beam Equipment: Used to refine chip surfaces or create special patterns (such as the inclined gratings used in AR glasses). The company holds a 28.4% market share in this segment in China, ranking first, with technology on par with international manufacturers and some parameters even superior.
- ICP Etching Equipment: A crucial tool for chip production that uses plasma to “etch” circuits onto wafers. Luwen can produce 12-inch equipment (used for mainstream chips) and is one of the few domestic companies whose products have been validated and repeatedly purchased by major customers like Changjiang Storage and Sunny Optical. In short, its equipment is essential for chip manufacturers and plays a vital role in the drive towards domestic substitution.
3. Financial Situation: Rapid Revenue Growth but Persistent Losses
From 2023 to 2025, Luwen’s revenue increased from 200 million yuan to 700 million yuan (triple in two years), yet it has incurred losses for three consecutive years, totaling 537 million yuan. The reasons are:
- High R&D Investment: The company spent 541 million yuan on R&D in three years (with R&D expenses accounting for 34% of revenue in 2025). Semiconductor equipment development is costly and requires continuous technological advancement.
- Discounts for New Customers: For example, discounts given on the first 12-inch etching equipment led to negative gross margins in 2024.
- Small Scale: Compared to leading companies like North China Huachuang and Zhongwei, Luwen’s lower sales volume results in higher costs per unit, resulting in lower overall gross margins.
However, the proportion of revenue from its core products (ion beam + ICP etching) has increased from 59% to 88%, and the gross margin for ion beam equipment is quite high (54.57% in 2025), indicating the competitiveness of these products. Once production capacity expands, profitability is likely to improve.
4. R&D Strength: Half of the Staff Dedicated to Innovation
Luwen Instrument invests heavily in R&D:
- Personnel: With 525 employees in 2025, 233 are dedicated to R&D (44.38%).
- Patents: The company holds 407 patents, including 273 invention patents, demonstrating its technological prowess.
- Technical Level: Its ion beam equipment technology (such as wafer superflatting) is on par with international manufacturers, and its 12-inch ICP etching equipment meets international standards.
The founder, Xu Kaidong, holds a Ph.D. from Peking University and the University of Leuven in Belgium and has over 200 patents, reflecting a solid technical foundation.
5. Use of Raised Funds and Future Prospects
The 2.5 billion yuan to be raised will be allocated as follows:
- 1.365 billion yuan for building a R&D headquarters and manufacturing facilities: To increase production capacity and address the issue of high demand versus limited supply.
- 1.135 billion yuan for integrated circuit equipment R&D: To further advance technology, such as developing more advanced etching equipment.
The company’s future profitability depends on several factors:
- Customer Purchases: Whether major customers like Changjiang Storage and SMIC will purchase more of its equipment.
- Progress in Domestic Substitution: The government is promoting the localization of chip equipment, and Luwen, as a leading domestic player, could benefit significantly.
- Industry Cycles: The semiconductor industry experiences fluctuations in demand; a recovery in the industry would increase demand for equipment.
Although currently losing money, Luwen’s strong technical foundation and market position make it a promising candidate for future profitability.
Conclusion
Luwen Instrument is a potential leader in the domestic semiconductor equipment sector, with solid technology, strong investors, and a leading market share. However, it is still in a phase of high R&D investment and losses. Its IPO will not only help the company finance its growth but also provide insights into the niche markets for semiconductor front-end equipment (such as specialized etching and ion beam processes). If successful, it could become the next domestic leader in this industry.