On September 26, Huacan Optoelectronics (300323) released a record of investor relations activities. Mr. Han Jidong, the director of Huacan Optoelectronics, introduced the development history, product series and production situation of the four factories to the visiting investors in the form of promotional videos and PPT.
After that, President Liu Wei further elaborated that Huacan Optoelectronics was founded by a founding team focused on the development and production of LED chips. At the end of 2007, I was assisted by IDG Wind Investment, and the scale was expanded. In the past 12 years, it has experienced the background of the global LED industry shifting to mainland China: from the beginning, Huacan Optoelectronics' production products are backward relative to international competitors. With the development of the company, the investment of advanced equipment With the accumulation of technology, Huacan Optoelectronics has now entered the global ranks in terms of production scale and product performance.
Although Huacan Optoelectronics has achieved such impressive results, it still realizes the new challenges: in the past few years, due to the rapid development of the company, it has challenged internal personnel management; and in the next two or three years, the company continues Investing, it is required to have more excellent management talents and technical talents to join, to ensure the return of investment.
Now the global LED industry transfer pattern has entered the final stage. The developed countries market has gradually accepted Chinese LED chip products: China is no longer only doing low-end LED products, and its product performance has been internationally recognized. In the next few years, domestic leading companies such as Huacan Optoelectronics will make great strides in terms of production scale and product performance. The top five leading manufacturers in the international LED industry will choose Huacan.
Such domestic leading enterprises cooperate, which is the external driving force for the sustainable development of Huacan Optoelectronics.
When we have the cost advantage of scale production and excellent product performance, we have the basis for cooperation with major international manufacturers. Just like Sanan Optoelectronics, in the past few years, it has continuously invested in new equipment and personnel on a large scale. In the past two years, Huacan Optoelectronics has also kept up. Now, Sanan is the first LED chip manufacturer. Customers also hope that two large LED chip manufacturers can choose to guarantee production.
The above is the external factor of Huacan's rapid development in recent years. The intrinsic factor is: Huacan Optoelectronics is a privately-owned venture capital enterprise created by a team of technology-born individuals. It is not only extremely aggressive, but also professional. Therefore, when the development of the enterprise encounters difficulties, Huacan can stand up; when the opportunity comes, the company's decision is very bold. In 2012, when the company decided to invest in the Zhangjiagang plant, the industry was at a low point. However, the company had expanded its production scale and reserved its talents during the construction of Zhangjiagang. When the industry's growth opportunities arrived in 2016, the company's scale effect paid off: sales increased from 900 million in 2015 to nearly 1.6 billion in 2016. Other manufacturers have not "woke up", Huacan Optoelectronics has been growing at a high speed. At the beginning of 2016, it decided to continue investing 6 billion in Yiwu, which is twice the scale of the Zhangjiagang plant. It was originally a five-year project and will be able to complete the project ahead of schedule according to the market situation. As a result, the company has further narrowed the gap with Sanan in terms of production scale, and the distance from other second-tier manufacturers has been further opened.
The management team of Huacan Optoelectronics is very dynamic and pioneering, so the company can seize the opportunity to achieve leapfrog development. In the future, Huacan Optoelectronics will continue to carry forward the company's entrepreneurial spirit and become stronger and stronger in the LED market. In 2020, Huacan Optoelectronics' global position is more stable, with the goal of accounting for about 20% of the global market share.
Allianz Fund asked: What is the gap between Huacan and Sanan's management and technology?
Liu Wei: The situation of Sanan is recommended to understand Sanan. Let us talk about ourselves. Huacan Optoelectronics' entrepreneurial team is a technology-born team. It mainly relies on its own accumulation. It mainly cultivates LED R&D talents and attracts outside talents, but it is not just recruiting one team, but attracting many individuals to join. The open atmosphere of Huacan Optoelectronics, new individuals can be quickly integrated, and there is a lot of team interaction atmosphere. It is also the difference in management philosophy and culture between Huacan Optoelectronics and other companies. Therefore, we rely on our own accumulation. Huacan Optoelectronics management culture is open and inclusive, talents can be quickly accumulated, and the gap with Sanan is rapidly narrowed.
Sanan invested a lot of time in research and development equipment and other resources than we did, and accumulated more history than us. However, the gap between Huacan Optoelectronics and Sanan is gradually narrowing. The endogenous power of our R&D system is strong. Although the performance of some white light chip products is relatively behind the international leading level in the early stage, after the large-scale R&D investment in the past year, the performance of some of our products has reached the international leading level. It is expected that most of our product performance next year will be at the international leading level.
Taishin International asked: We all see that Huacan’s plans for the next three years are focused on the most upstream, Changjing. However, from the perspective of Taiwan’s LED crystal growth manufacturers, many of them have gone from upstream to midstream. For example, Everlight has always been the most terminal. Will Hua Can have such a plan?
Liu Wei: This is a topic that our company often discusses from its founding to the present. Businesses have their own choices. There are also such enterprises in the mainland, such as Dehao Runda, which enters the LED from the external industry. It is the layout of the upper, middle and lower reaches. It makes its own chip. It acquires NVC lighting as a light source and also makes its own packaging.
Huacan's genes are LED chips, focusing on technology. We specialize in industrial product management, while downstream packaging and further industries are close to end customers. It is a consumer product management brand. The pattern of the foreign LED industry is different from that of the mainland. There are not many manufacturers in the middle and lower reaches of the country. The upstream manufacturers, such as Cree of the United States, have begun to expand downstream by acquiring the packaging factory, which can solve the technical cooperation of the packaging factory. The problem.
In the current situation, there are many manufacturers in each layer of the industrial chain in the mainland, and the packaging factories are doing a good job. If Huacan Optoelectronics wants to enter the packaging field, it needs to be done better than the existing ones. We don’t have this idea. . We can work well with the packaging factory, and each has the expertise, which is the favorable promotion of the benign cycle of the industry.
Qunyi Securities asked: Taiwanese manufacturers did not expand production, but Sanan and Huacan were expanding production in the past two years. Will the supply and demand situation in the future market support such expansion?
Liu Wei: The risk has always existed. An industry cannot always be in a situation of short supply. From 2016 to the present, it is in short supply, which is also the market background that supports Huacan Optoelectronics' rapid growth in 2017. As for whether there will be overcapacity in the next year due to the expansion of the two companies, I think that if other small and medium-sized manufacturers do not have a "closed door" tide, it will certainly not be left; if there is excess, the market competition pattern will be readjusted. In this process, the company itself resists. The ability to risk is different, the strength is different, and the results will be different. With the strength of our Huacan Optoelectronics, our anti-risk ability is stronger than other manufacturers. Our customers will feel that our products are the most cost-effective, and the supply chain is safe and reliable.
Allianz Fund asked: The mainland LED chip industry has state subsidies. Will some small manufacturers survive because they have been subsidized?
Liu Wei: This is no longer a problem. In the past, each local government responded to the national call to support the sunrise industry; and at that time there were no large manufacturers, many manufacturers and the government promised to do well, so they received subsidies. After so many years, the government has been able to see clearly which companies are competitive and worth investing in; the government cannot always let the subsidized money go.
Qunyi Securities asked: Will price competition exist next year? Will the company's gross margin level not be as good as this year?
Liu Wei: There is a risk of price competition. Gross profit margins are divided by market. Large enterprises have more market segments, and some of the blocks are less competitive and can maintain a relatively stable gross profit margin. Some market segments have more than a dozen manufacturers, and the price competition is relatively fierce and the price is easy. Out of order. In response to this market, Huacan Optoelectronics has the ability to transform its leading technology into considerable cost.
The advantage is to maintain a higher gross margin level than the competition. In short, on the whole, even if there is a certain degree of oversupply in the market, we can still maintain the current level of gross profit margin through technological advancement and market layout.
Qunyi Securities asked: Mulinsen's sales growth in small-pitch products is still very fast, right?
Liu Wei: In terms of the overall size of the market, the room for growth is still very large. Because the penetration rate of small-pitch market has not been completed, as the resolution continues to increase, the demand for chip counts will increase and multiply, so our sales growth of small-pitch chips in the past 2016-2017 is very fast. It will continue in 2018.
Allianz Fund asked: How long will it last for a large-scale expansion like this?
Liu Wei: Is it the income period? In fact, our previous investment has gradually generated revenue, just as our profit this year is generated by Zhangjiagang investment. Yiwu plant will invest this year and will have corresponding income next year. In the next two or three years, some assets will be in the construction period, and it is estimated that the construction will be completed by 2020.
Allianz Fund asked: Is it that the entire industry will stabilize by 2020?
Liu Wei A: That's almost the same, if no new applications appear. Lighting-based industry applications will be basically stabilized by 2020. Of course, like the new technology Micro LED can be applied to the field of consumer electronics, then this increase will be huge. It will take a year or two to see clearly, because the technology is achievable, but it needs the cooperation of the entire industry chain, and the cost can be reduced before it can be applied to mobile phones.
Qunyi Securities asked: The investment in these years has been so large, is the demand for funds not great? So what is the future financing plan?
Liu Wei answered: Yes. We are going to refinance in the capital market next year. The valuation of China's capital market is still ok, so our financing ability should be good. At present, relevant work has not been carried out. If yes, please refer to the announcement.
Qunyi Securities asked: What is the common effect (ie, synergy) in the acquisition of LED chips manufactured by Meixin Semiconductor and Huacan?
Liu Wei: After 12 years of hard work, Huacan's LED chip business has gradually solidified and stabilized. We are aware of the problem of solid and limited space for future growth, so we must cultivate new growth points. It is a good way to expand new business through acquisition. As for the acquisition of MEMS sensor companies like Meixin, we believe that there are two main synergies: MEMS is also a semiconductor device, and the LED chip is in the same way of production management logic, so We believe that we have the ability to manage; second, in terms of market channels, Meixin and Huacan have customers in the automotive, consumer electronics and other applications, and the future market incremental space is as great as micro LED. of. These two factors have led us to decide to use MEMS sensors as a new growth point.
Qunyi Securities asked: What is the progress of the acquisition of Meixin?
Liu Wei: After we reported last year, we have been waiting for CFIUS approval in the United States, and the approval time is very long. CFIUS approval was passed in May this year. The CSRC issued a formal acceptance on June 30, but believes that the materials we submitted need to be updated because the report is valid for 6 months. The materials prepared by the brokers and lawyers are the data as of the previous year's annual report. Therefore, at present, brokers and lawyers are preparing materials again, and it is estimated that they will be reported again recently.
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