Goldman Sachs Maintains Neutral Rating on StarPower Semiconductor with Target Price of RMB 121.2

Overview

Goldman Sachs met with StarPower Semiconductor’s management during its Shanghai Tech Tour on May 22, 2026. Although the company reported declining results for Q1 2025 and Q1 2026, management remains optimistic about long-term gross margin improvement. Goldman Sachs recognizes the company’s potential in expanding its product lines and entering new markets such as AI data centers, but maintains a 'Neutral' rating—citing ongoing pricing pressure across the power semiconductor sector and a relatively fair current valuation—with a target price of RMB 121.2.

Core views

Causes of Earnings Decline and Short-Term Challenges: Management identified three primary factors behind the Q1 2025 and Q1 2026 earnings decline. First, slower-than-expected growth in China’s electric vehicle market—particularly due to reduced government subsidies in H2 2025—weighed on performance, as automotive-related revenue still accounts for ~50% of total revenue. Second, sustained investment in new device development and power semiconductor transitions (e.g., upgrading IGBTs to Gen-8, SiC MOSFETs to Gen-3, and developing automotive-grade MCUs) has increased R&D expenses. Third, the company’s shift from a fabless to a fabless-lite model in 2025 raised raw material costs and depreciation, pressuring gross margins—even though power semiconductor price declines have begun to moderate. Long-Term Growth Drivers and Gross Margin Recovery: Looking ahead, Goldman Sachs identifies several positive catalysts supporting gross margin recovery. First, rising shipment volumes and improved capacity utilization will directly enhance gross margin. Second, broader adoption of silicon carbide (SiC) in energy storage and AI data centers helps reduce reliance on the highly competitive automotive market and supports end-market diversification. Third, continued product portfolio upgrades in SiC MOSFETs and silicon-based power semiconductors will strengthen competitiveness in high-value-added markets.

Analysis framework

Goldman Sachs employed a combined top-down and bottom-up analytical approach. It first gathered qualitative insights via management interviews to understand drivers of earnings volatility (demand-side subsidy withdrawal and supply-side cost pressures from business model transition). Second, it assessed the market penetration potential of the company’s new products (SiC, MCUs) against industry trends—including surging demand for AI data center power supplies and energy storage. Finally, using a P/E-to-growth (PEG) valuation framework—based on peer-group correlations between sector P/E multiples and EPS growth rates—it derived a target multiple and calculated the target price.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Target P/E multiple derived from historical correlation between sector P/E and YoY EPS growth

  The report derives a reasonable target P/E multiple (31.0x) by observing the historical relationship between sector P/E ratios and year-on-year EPS growth rates, then multiplies this by forecasted 2026 EPS to arrive at the target price. This method is commonly used for growth-oriented manufacturing companies, linking valuation explicitly to growth prospects.

• Company Fundamentals & Financial Framework

  Cost structure analysis of the transition from fabless to fabless-lite

  The report examines how the company’s shift from a light-asset (fabless) to a partially vertically integrated (fabless-lite) model—raising depreciation and raw material costs—has compressed short-term gross margins. This perspective is critical for assessing changes in profitability quality for semiconductor design firms.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• StarPower Semiconductor (603290.SS)

  Benefit rationale: Expansion of SiC and MCU product lines into AI data centers and energy storage markets supports long-term gross margin improvement as utilization rises.

  Strengths

  Diverse product portfolio (IGBT Gen-8, SiC Gen-3); enhanced ability to diversify across end markets.

  Weaknesses

  High sensitivity to EV subsidy rollbacks; depreciation pressure from fabless-lite transition.

  Risks

  Pricing pressure in power semiconductors; slower-than-expected design-win execution for new products.

Key data

• 12-Month Target PriceRMB 121.2Based on 31.0x 2026E P/E
• Current Share PriceRMB 131.75As of May 22, 2026 close
• Implied Return-8.0%Downside risk
• 2026E P/E Multiple31.0xTarget valuation multiple
• Automotive Revenue Contribution~50%Primary revenue source

Impact & implications

The report concludes that although StarPower Semiconductor faces near-term headwinds—including slowing EV demand and transitional cost pressures—the company’s expansion into AI data center power supplies and energy storage markets enables effective diversification away from single-industry risk. A product portfolio upgrade toward higher-margin SiC and next-generation IGBTs is expected to restore profitability over the medium to long term. Investors should closely monitor order traction in non-automotive end markets and the pace of capacity utilization ramp-up.

Risks

• IGBT market growth stronger or weaker than expected
• Design-win capture and market share gains faster or slower than expected
• New product development timelines faster or slower than expected
• Uncertainty regarding intensification or easing of competitive pressure

What to watch

• SiC penetration and order traction in energy storage and AI data center markets
• Actual gross margin improvement attributable to higher capacity utilization
• Mass production timelines for automotive-grade MCUs and next-generation IGBT/SiC products