During the Track Record Period and up to the Latest Practicable Date, there had been no significant increases in the prices of our major raw materials, nor any fluctuations that materially and adversely affected our operations or gross profit margins.
Business · p. 153
Set forth below is our sensitivity analysis of raw material price fluctuations included in our cost of sales during the Track Record Period, which illustrates the impact of a 1%, 3% or 5% increase or decrease in raw material prices on our gross profit margin and net profit margin, assuming all other factors remain unchanged
Our gross profit margin decreased from 30.7% in the four months ended April 30, 2025 to 23.9% in the four months ended April 30, 2026, primarily due to a decline in the gross profit margins of our major products, particularly our multi-modal robotic solutions.
Summary · p. 15
This was mainly attributable to increased raw material costs, especially the rise in wafer prices, together with higher packaging and testing costs, which increased the overall cost per unit.
Business · p. 196
To mitigate such cost pressures, we continue to optimize product design to improve material utilization efficiency, diversify our supplier base, leverage procurement scale and supplier collaboration to enhance purchasing efficiency, and implement pricing optimization initiatives taking into account changes in raw material costs and product value enhancements driven by technological advancements and expanded application scenarios.
We do not engage in hedging using derivative instruments relating to the risk exposures in connection with our raw materials.
Business · p. 157
We typically take into account such fluctuation in raw material costs when pricing our products.
Business · p. 157
Additionally, we have established a rigorous information communication mechanism whereby any changes in procurement costs are immediately communicated to our marketing department, which then engages with customers to negotiate appropriate price adjustment arrangements.
Our cost of sales is significantly affected by the prices of raw materials and energy. In addition, we rely on imports for a significant portion of certain key raw materials, including borax and boric acid.
For the years ended December 31, 2023, 2024 and 2025 and the six months ended June 30, 2025 and 2026, our energy costs associated with production amounted to RMB159.7 million, RMB169.7 million, RMB154.9 million, RMB76.3 million and RMB91.5 million, respectively, representing 20.2%, 19.1%, 19.8%, 19.3% and 17.3%, respectively, of our total cost of production.
Business · p. 141
We seek to mitigate cost fluctuations by maintaining stable relationships with key suppliers, diversifying our supplier base, planning procurement based on production requirements, improving production efficiency and adjusting product prices after taking into account market conditions and customer arrangements.
We mitigate our exposure to fluctuations in raw material prices through a combination of proactive procurement and risk management measures.
Business · p. 182
The gross profit margin of computing chip products increased from 2023 to 2025, primarily due to the completion of ramp-up phase of certain computing chip products and a decrease in costs of raw materials, packaging and testing services, and remained relatively stable from the three months ended March 31, 2025 to the same period in 2026.
Summary · p. 10
To the extent appropriate and subject to market conditions and customer relationships, we may also pass on increased raw material costs, especially with respect to industry-wide increases, to downstream customers through pricing adjustments.
Our cost of revenue increased by 18.0% from RMB23,544.4 million in the six months ended June 30, 2025 to RMB27,786.0 million during the same period in 2026, primarily due to the continued increase in memory chip prices.
Financial Information · p. 248
Our inventories increased by 79.6% from RMB8,902.9 million as of December 31, 2025 to RMB15,986.5 million as of April 30, 2026, primarily due to an increase in raw materials, driven by our strategic inventory build-up to mitigate fluctuations in raw material prices and the growth in our sales scale.
Financial Information · p. 230
Our gross profit margin increased from 19.0% for the six months ended June 30, 2025 to 21.6% for the six months ended June 30, 2026, primarily attributable to (i) the increase in the selling prices of our smartphones in response to the rising memory chip prices and (ii) the cost of memory chips recognized during the period continued to reflect inventories procured at relatively lower prices in earlier periods, prior to the increase in market prices of memory chips.
Since the second half of 2025, prices of chips, a key raw material used in our products, have begun to increase and may continue to rise or experience significant volatility.
Business · p. 142
As is customary in our industry, selling prices are often set in advance and adjusted periodically; therefore, we may not be able to fully or immediately pass price fluctuations on to customers as they occur.
Financial Information · p. 217
For major components like screens and lithium batteries, we enter into annual framework agreements with the relevant suppliers with automatic renewal provisions or purchase orders.
Our revenue derived from sales of copper concentrates was 52.0%, 50.3%, 43.0%, 46.7% and 40.4% in 2023, 2024 and 2025 and the six months ended June 30, 2025 and 2026, respectively.
Financial Information · p. 183
For daily sales of copper concentrates, we reference copper prices quoted on the Shanghai Futures Exchange, which closely follows international copper prices, and apply a three-month pricing mechanism, with adjustments made based on product quality specifications.
Financial Information · p. 183
Our raw material procurement costs are subject to market price fluctuations. In particular, the cost of key mining reagents has exhibited notable price volatility in the Track Record Period.
In 2023, 2024 and 2025, raw material costs represented approximately 60.4%, 60.5% and 61.4% of our cost of sales, respectively. For the four months ended April 30, 2025 and 2026, raw material costs represented approximately 60.4% and 62.9% of our cost of sales, respectively.
Financial Information · p. 204
While we seek to mitigate these risks through multi-sourcing, longer term supply arrangements, inventory planning, significant volatility could negatively impact our production efficiency, profitability and overall financial performance.
Financial Information · p. 204
Our profitability is also affected by our ability to price our products, which is in turn affected by market competition, raw materials price, pricing of similar products and solutions offered by our peers and our bargaining power.
Raw materials constituted the largest component of our cost of sales throughout the Track Record Period.
Financial Information · p. 159
We seek to manage this exposure through strategic procurement, supplier diversification, alternative-material qualification, inventory planning, selected price-locking arrangements and customer price negotiations.
In FY2023, FY2024, FY2025 and 6M2026, our cost of raw materials amounted to RMB1,813.2 million, RMB1,999.1 million, RMB2,117.4 million and RMB1,326.0 million, respectively, according for 80.5%, 81.0%, 81.2% and 80.6% of our cost of sales for the respective periods.
Business · p. 134
To manage the fluctuation of raw material prices, we closely monitor market trends and adjust our procurement strategy accordingly to minimize the effects of price volatility.
Business · p. 134
Under the relevant framework agreements, the procurement prices are typically adjusted on a regular basis with reference to the then prevailing market prices plus a fixed premium.
Material cost was the largest component of our cost of sales, amounting to RMB1,483.5 million, RMB1,521.2 million, RMB1,412.5 million, RMB697.5 million and RMB674.9 million in 2023, 2024, 2025 and the six months ended June 30, 2025 and 2026, respectively, representing 73.0%, 71.0%, 67.0%, 67.9% and 65.4%, of our cost of sales for the same periods.
Financial Information · p. 205
For products included in centralized procurement or medical insurance schemes, selling prices are generally fixed for a certain period, and our ability to pass through short-term raw material price fluctuations is limited.
Financial Information · p. 206
Looking forward, the market prices of the Group's key raw materials are expected to gradually stabilize from 2026 to 2030 following the price adjustments during the historical period.
In 2023, 2024, 2025 and the six months ended June 30, 2026, our direct material costs, as part of our cost of sales, amounted to RMB96.2 million, RMB136.3 million, RMB139.6 million and RMB100.0 million, representing 38.6%, 39.3%, 36.3% and 44.2% of our total cost of sales for the respective years/period, respectively.
Financial Information · p. 229
During the Track Record Period, fluctuations in the prices of key raw materials, in particular lithium cobalt oxide, electrolyte and graphite, affected our production costs to some extent, but the overall impact on our profitability was limited.
Business · p. 173
Our framework sales agreements generally contain price adjustment mechanisms linked to market prices of key raw materials.
In each period comprising the Track Record Period, we were able to pass on over 99.0% of our costs of copper to our customers.
Business · p. 165
Our cost of raw materials, which was mainly copper, amounted to RMB2,442.8 million, RMB2,638.3 million, RMB3,430.2 million, RMB1,485.1 million and RMB2,763.9 million in 2023, 2024 and 2025 and the six months ended June 30, 2025 and 2026, respectively, accounting for 82.8%, 84.8%, 86.4%, 86.3% and 88.4% of our total costs of sales in the same periods, respectively.
Financial Information · p. 210
The following table sets forth a sensitivity analysis of the impact that the level of our processing fee may have on our profitability.
In 2023, 2024 and 2025, raw materials costs accounted for 85.2%, 86.7% and 88.1% of our cost of sales, respectively.
Financial Information · p. 228
Meanwhile, the supply of key memory raw materials, including DRAM and NAND Flash wafers, remained tight, and the average prices of DRAM and NAND Flash wafers continued to increase in the first half of 2026, as upstream suppliers continued to prioritize capacity for products such as HBM and enterprise SSDs amid strong demand from AI and data center applications.
Summary · p. 25
Our procurement strategy combines on-demand purchasing with stockpiling.
Our raw material costs, which primarily consisted of costs of copper materials, accounted for 96.5%, 96.0%, 95.2%, 94.9% and 95.3% of our total cost of revenue in 2023, 2024, 2025 and the five months ended May 31, 2025 and 2026, respectively.
Business · p. 144
Hedging positions covered approximately 90% of our net copper exposure, measured at each month-end or quarter-end, during the Track Record Period.
Business · p. 144
Our profitability, cash flow, and working capital management are sensitive to fluctuations in raw material prices, in particular, copper price.
During the Track Record Period and up to the Latest Practicable Date, while the prices of storage devices increased due to the increase in market prices of storage chips, we did not experience any other major price fluctuations, nor did we experience any overstock, delays or shortages in the supply of performance-critical components.
Business · p. 190
Our term deposits under current portion decreased from RMB82.8 million as of December 31, 2025 to RMB32.3 million as of June 30, 2026, primarily reflecting the reallocation of our cash resources toward the strategic procurement of hardware components during the period of relatively favorable pricing, in anticipation of further increase in hardware component costs and to support customer delivery schedules.
This is primarily because plastic-related materials did not constitute a material component of our cost base during the Track Record Period representing only 6.8%, 5.7%, 6.9% and 6.9% of our total purchases in 2023, 2024, 2025 and the three months ended March 31, 2026, respectively, and therefore accounted for only a relatively small proportion of our total purchases.
Summary · p. 13
Furthermore, rather than directly procuring basic plastic particles that are more directly exposed to oil price volatility, we primarily procure processed injection-molded plastic components, which helps delay the pass-through of raw material price fluctuations and reduce their impact, and provides flexibility within our supply chain to absorb short-term price fluctuations.
Summary · p. 13
Supported by our proactive supply chain management, limited reliance on any single supplier, and early engagement with suppliers, we believe that the closure of the Strait of Hormuz and the related fluctuations in global oil prices are not expected to materially and adversely affect our raw material costs and our supply chain.
Our raw materials for all segments in the aggregate account for 78.5%, 74.8%, 76.9%, 76.1%, and 83.6% of our cost of sales in 2023, 2024, 2025, and for the six months ended June 30, 2025 and 2026.
Financial Information · p. 206
For illustrative purposes only, assuming that all other factors affecting our financial performance remain constant (including assuming that material price fluctuations cannot be passed on to customers through price adjustment mechanisms), the sensitivity analysis of the impact of fluctuations in the average price of raw materials being 1% and 5% on our profit before income tax during the Track Record Period is as follows
Financial Information · p. 207
We have taken measures to mitigate the impact of raw material price volatility, including enhancing upstream integration, strengthening supplier management, optimising procurement strategies and improving production efficiency.
In 2023, 2024, 2025 and the six months ended June 30, 2025 and 2026, raw materials and consumables used represented 67.4%, 59.6%, 54.6%, 55.8% and 54.5% of our total cost of sales, respectively, while installation and development costs represented 17.5%, 23.3%, 23.8%, 24.0% and 29.4%, respectively.
Financial Information · p. 164
Our results of operations are therefore sensitive to fluctuations in raw material prices, supply chain stability, operation-related costs and utilization of assets and facilities, among others.
Financial Information · p. 164
Such decrease was partially offset by an increase in prepayments for operating expenses, raw material and finished goods, primarily due to increased stocking of raw materials amid the continued rise in raw material prices.