Summary of Key Points
Hengxuan Technology is a Shanghai-based company that started with Bluetooth headphone chips. It has made breakthroughs in technology (such as the world's first integrated noise-cancelling headphone chip and being the first to use 28-nanometer manufacturing processes) to break into the supply chains of Huawei and Xiaomi from the low-end market in Huaqiangbei. In 2020, it became the "first stock in the TWS (True Wireless Stereo) headphone chip sector" to be listed on the STAR Market. Currently, the company is expanding into the AI glasses chip market. However, in the first quarter of 2026, its revenue and profits both declined (revenue fell by 32%, and net profit was halved). Nevertheless, due to the increasing contribution from its new businesses (watch and glasses chips), its gross margin reached a new high of 42.55%. At the same time, the actual controller and early investors sold more than 2 billion yuan in shares at the peak of the stock price, which has sparked controversy. The company's future success depends on the new BES6100 chip (which will be mass-produced in 2027) and three key indicators in its half-year report.
Detailed Analysis
From Huaqiangbei to Huawei and Xiaomi: Hengxuan's Rise
Hengxuan was founded in 2015 by a team from Ruidike (which was later acquired by Unisoc). Initially, it chose a less competitive niche: Bluetooth headphone chips, when mobile phone chips were the mainstream. In the beginning, it could only accept orders from low-end Huaqiangbei headphone manufacturers (accounting for 80% of its revenue), but these orders helped it improve its technology by addressing issues such as poor connectivity, noise, and high power consumption through firmware updates.
The turning point came in 2016 with the development of the world's first dual-mode headphone chip that integrated noise cancellation (previously, noise cancellation and Bluetooth functions were separate). In 2018, it dared to use the 28-nanometer manufacturing process, which was then only used by high-end mobile phone chips (while its competitors still used older, cost-saving processes). These moves allowed it to gain entry into the supply chains of brands like Huawei and Xiaomi, and in 2020, it went public on the STAR Market. Later, it expanded into the watch chip market, using a 6-nanometer process (few A-share consumer electronics companies could afford this level of technology).
In short, by refining its technology for peripheral devices (headphones/watches), Hengxuan climbed from the low-end market to become a key supplier for brands like Huawei and Xiaomi.
Revenue Drops by 30%, but Gross Margin Soars? How Does This Happen?
Despite a 32% decrease in revenue and a 50% drop in net profit in the first quarter of 2026, its gross margin reached a new high of 42.55%. The reasons are somewhat contradictory but logical:
- Revenue Drop: The cost of memory chips increased, raising the costs for downstream headphone/watch manufacturers. Additionally, government subsidies for these products were reduced, leading to lower demand and fewer orders from them.
- Gross Margin Increase: This was not due to price increases but a change in product mix. The gross margin of its old business (Bluetooth headphones) was around 35%, and its contribution decreased significantly, while the new businesses (watch and glasses chips) had a higher margin of 43%. As the old business declined, the overall gross margin improved.
In other words, the company's revenue came from less profitable products, but the proportion of higher-margin products increased.
Hengxuan Chips in AI Glasses: Role Player or Main Actor?
Hengxuan's chips play two roles in AI glasses:
- Low-end Glasses: In models from Meizu and Looktech, Hengxuan's chips are the main components, holding a leading market share. However, this position is competitive, with Unisoc and other headphone chip manufacturers also competing.
- Flagship Glasses: In products from Xiaomi and Alibaba's Qiaoke, Hengxuan's chips act as "auxiliary" components ( costing around $7), with Qualcomm chips handling the main functions such as AI and photography. The auxiliary role involves keeping the Qualcomm chip in standby mode to save power and waking it up when needed to perform tasks like connecting to the phone and checking battery levels.
Hengxuan's ambition is to integrate the functions of both "auxiliary" and "main" chips in the new BES6100 chip (with a low-power core for standby and a high-performance core for main tasks). If this succeeds, it could dominate flagship glasses. However, mass production is scheduled for 2027, and the sample delivery is currently half a year behind schedule.
Risks include Huawei's potential adoption of its own chips and Qualcomm's ongoing innovation, which may affect Hengxuan's chances of taking the leading position.
Investors Selling at the Peak: Is It Fair?
From the end of 2024 to April 2026, the actual controller and early investors sold more than 8 million shares, earning over 2 billion yuan. Retailers criticized this move because it occurred at the peak of the stock price (market value was 50 billion yuan in October 2025, now down to 28.2 billion yuan), and no research reports warned of the sale.
From an investor's perspective, these were pre-listing shares with early lock-up periods that had expired. Venture capital funds are required to sell their shares to repay their investors upon maturity, so they have no obligation to stay with the company for another decade. The company did offer a 40% dividend in 2025, but this does not address the core issue of the new chip's delayed mass production.
Hengxuan's Future: Three Key Indicators in the Half-Year Report
The most critical factors will be revealed in the half-year report at the end of August:
1. Stability of the Old Business: If the revenue from its main business (headphone chips) continues to decline, the company's situation will worsen.
2. Gross Margin Maintenance: Whether the new businesses (watch and glasses chips) can maintain their high margins as they grow. If growth slows, gross margins may drop.
3. New Chip Progress: Whether the BES6100 chip can be delivered to customers on time, which will determine the success of mass production in 2027.
In summary, Hengxuan is currently facing challenges with its old business and is relying on its new businesses for growth. Its future success depends on whether the BES6100 chip can take a leading role in the AI glasses market by 2027.
(Note: Data comes from company announcements, supply chain information, and media reports and does not constitute investment advice.)