Annual Report 2023

China Merchants China Direct Investments Limited Annual Report 2023 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 for a 1.44% equity interest in Xinyi. In March and November 2023, Xinyi completed two new rounds of equity financing, respectively, and the Fund’s equity interest in Xinyi was then diluted from 1.44% to 1.29%. As of the end of 2023, the carrying value of the Fund’s interest in Xinyi was US$4.95 million, representing a decrease of 26.23% from the value at the end of last year of US$6.71 million. In 2023, more than 30 million Xinyi NB-IoT chips have been shipped, maintaining its leading position in the industry. The SoC of XY2100S, a second-generation product specifically developed for smart meters, has passed testing and is undergoing the customer integration processes. The industrial SoC of XY1200S, deeply integrated with the public utility sector, has completed testing with customers and is scheduled for large-scale commercial use next year. The CAT-1 chip for medium-speed IoT has been commercially available and has secured orders of 4 million units from a telecommunications provider, China Unicom. Meanwhile, negotiations are ongoing with other leading telecommunications providers for large-scale order contracts. 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 2023, the carrying value of the Fund’s interest in Azuri was US$3.54 million, representing an increase of 55.26% over US$2.28 million at the end of last year. In 2023, Azuri’s 10G-EPON OLT continued to be shipped both domestically and to North America. The performance and yield of the ultra-low chirp 1577nm DML V2 chip continue to improve and preparations for mass production are underway. The first tape-out of the high-power CW-DFB laser with a novel waveguide structure, targeting silicon photonics-based transceivers, has been completed, and a second tape-out has been initiated. The company’s self- built epitaxial production line is nearing completion and will soon commence production.