News丨Struggle for control of Zinitix, a subsidiary of HiDi Micro

Halo Microelectronics Group Co., Ltd. (Halo Micro, 688173.SH) acquired a 30.91% stake in the South Korean chip design company Zinitix for RMB 112 million in August 2024, gaining control. Halo Micro appointed its then-director and CEO Nam David Ingyun, along with employees Kwon Seok-man and Zhang Haozhe, to Zinitix’s board.

However, between March and April 2025, Halo Micro discovered that these three individuals were allegedly involved in serious misconduct during their tenure, including stealing trade secrets, breaching fiduciary duties, and unfair competition. This misconduct reportedly included secretly setting up a competing company and poaching Halo Micro’s clients.

To regain control, Halo Micro requested the Zinitix board on April 2, 2025, to convene an Extraordinary General Meeting (EGM) to replace the directors. The Zinitix board delayed the EGM until July 23rd, citing reasons of “minority shareholder proposals” and an “ongoing application for South Korean National Core Technology (NCT) designation.”

Just one day before the meeting (July 22nd), Zinitix suddenly announced it had been designated as holding an NCT. It claimed that appointing new directors now required approval from South Korea’s Ministry of Trade, Industry and Energy (MOTIE) and used this to cancel the director replacement motion.

At the EGM on July 23rd, the Zinitix board was accused of procedural violations, including failing to verify duplicate proxy voting forms and not announcing the vote results. Despite this, the board declared all motions (including replacing directors) had failed, allowing the current board to remain in place.

Facing this situation, Halo Micro issued an announcement on July 24th, acknowledging the risk of losing control over Zinitix but expressing cautious optimism about resolving the issue. The company has already:
Filed civil lawsuits and/or criminal complaints against those involved in California (USA) and South Korea.
Filed a lawsuit with the Suwon District Court in South Korea, requesting an order allowing Halo Micro to convene a new EGM.
Actively solicited proxies from minority shareholders, amassing close to 50% of voting rights. This is expected to give Halo Micro a voting advantage in any future meeting.

Potential Financial Impact: If Halo Micro ultimately loses control of Zinitix:
Zinitix (which contributed 27.06% of Halo Micro’s Q1 2025 revenue) would be removed from Halo Micro’s consolidated financial statements.
The goodwill of RMB 64.22 million recognized during the acquisition would need to be written off, resulting in a loss. This could have a significant adverse impact on Halo Micro’s 2025 financial statements.
Current Status: Legal actions and the battle for control of Zinitix are ongoing, and the outcome remains uncertain.