Annual Report 2024

China Merchants China Direct Investments Limited Annual Report 2024 29 INVESTMENT MANAGER’S DISCUSSION AND ANALYSIS (CONTINUED) REVIEW OF INVESTMENTS (CONTINUED) Xinyi Information Technology Ltd. (“Xinyi”) was established in Zhang Jiang District, Shanghai in March 2017. It is a company that focuses on the research and development of SoC (system on a chip) for Internet of Things (IoT) for low-power wide-area network (LPWAN), and is committed to becoming a world-class manufacturer of Internet of Things intelligent terminal SoCs for the 5th generation mobile communications (5G), with applications mainly covering smart meters, smart security, smart transportation, smart cities, the sharing economy and other scenarios. The Fund invested RMB35 million (equivalent to US$5.42 million) in September 2021 and held a 1.29% equity interest in Xinyi. Xinyi completed a new round of equity financing in May 2024, and the equity interest held by the Fund in Xinyi was diluted from 1.29% to 1.28%, accordingly. As of the end of 2024, the carrying value of the Fund’s interest in Xinyi was US$0.79 million, representing a decrease of 84.04% from the value at the end of last year of US$4.95 million. In 2024, although Xinyi was negatively affected by the NB-IoT chip industry, shipments rose slightly due to the efforts made to explore overseas markets and new customers. The SoC of XY1200S/XY2100S, a second-generation product specifically developed for smart meters, has completed the customer integration processes and has started to ship. The CAT-1 chip for medium-speed IoT, XY4100 and XY4100L, began to ship in batches to customers, and the order volume is gradually increasing. At present, the company’s overseas sales orders are also gradually increasing. Rizhao Azuri Technologies Co., Ltd. (“Azuri”) was established in Rizhao, Shandong in August 2016. It is a company that develops and manufactures laser diode chips, optical devices and optical module products for high- speed optical communications, mainly targeting the fiber to the home (FTTH), 5th generation mobile communications (5G), enterprise networking and data centre markets. The Fund invested RMB30 million (equivalent to US$4.72 million) in December 2021 for a 2.50% equity interest in Azuri. As of the end of 2024, the carrying value of the Fund’s interest in Azuri was US$0.75 million, representing a decrease of 78.81% from the value at the end of last year of US$3.54 million. In 2024, Azuri’s 10G-EPON OLT continued to ship both domestically and to North America, but due to a decline in investment by the three major domestic telecom operators, the company’s shipments saw a decrease year-over-year. The design of the ultra-low chirp 1577nm DML V2 chip has been completed and has entered mass production, and the modules based on this chip and provided to specific customers continued to be in test use. Samples of the high- power CW-DFB laser with a novel waveguide structure, targeting silicon photonics-based applications, is expected to be released in the second quarter of 2025. The company’s self-built epitaxial production line, which can further reduce chip costs while accelerating the speed of research and development, has now begun in production.