Huacan Optoelectronics Co., Ltd. will become the world's second largest LED chip manufacturer

The production capacity has increased from 700,000 to 1.8 million. After the company's planned production capacity is released, Huacan Optoelectronics Co., Ltd. (hereinafter referred to as “Huacan Optoelectronics”) will become the world's second largest LED chip manufacturer.

"The company will also invest 10.8 billion yuan to build advanced semiconductor and device projects, which can give play to the company's scale advantage and R&D base advantage." Recently, at the Huacan Optoelectronics Performance Briefing, Hua Can Optoelectronics Chairman and Acting Board Secretary Yu Xinhua said.

External mergers and acquisitions and internal expansion have enabled Huacan Optoelectronics to expand its scale. Since its launch, the company has successively acquired Yunnan Lanjing Technology and American Midea Semiconductor Co., Ltd. to expand the industrial chain from the previous LED epitaxial chip manufacturing to the sensor and semiconductor fields. This is also the qualitative change of Huacan Optoelectronics after the shareholders of IDG. This kind of institutional assistance and M&A effect was revealed in Huacan Optoelectronics. The company's 2017 revenue and net profit increased significantly.

Huacan Optoelectronics 2017 annual report shows that the company's operating income during the period was 2.629 billion yuan, a year-on-year increase of 66.21%; the net profit of returning mothers was 502 million yuan, an increase of 87.92% over the same period of last year, and the net profit after deduction was 273 million yuan, up 970.30% year-on-year. .

This performance continues to increase in the first quarter of this year. In the first quarter of 2018, the company's revenue reached 709 million yuan, a year-on-year increase of 40.17%, net profit of 142 million yuan, a year-on-year increase of 76.84%, and a net profit of 69,790,800 yuan, a year-on-year increase of 57.49%.

"In the first quarter of this year, the company's inventory increased by only 100 million yuan. Operating cash flow reached 150 million yuan, higher than the net profit of the mother." Orient Securities team in the research report pointed out.

The main reason for the change in performance was the company's scale expansion and customer structure improvement.

Since 2016, China's LED industry has ushered in a boom cycle. The main products of Huacan Optoelectronics are LED epitaxial wafers and chips. Before that, there were only nearly 100 MOCVDs, and the production capacity could not keep up with market demand.

The company's performance turning point occurred in the fourth quarter of 2016, from the previous negative growth to an increase of 171%. At this point, the company has started the expansion plan and successfully implemented, and the production base expanded from Wuhan and Zhangjiagang to Yiwu, Zhejiang. By the end of last year, the company's LED epitaxial wafers had 257 MOCVD (converted into 2 inch and 54-inch machines), and all of them were introduced into the 4-inch film production process. The overall yield of epitaxial wafers increased from 98.5% to 99%. The company's 4-inch substrate production reached 4.89 million pieces per year, the capacity utilization rate has reached 98%, and the capacity under construction is 7 million pieces per year.

In 2015, under the leadership of IDG, Huacan Optoelectronics acquired Yunnan Blue Crystal to cut into the field of sapphire substrate. In 2017, Yunnan Lanjing will produce 13 million pieces of 2-inch substrate sheets (contracted to an annual output of 3.25 million pieces of 4-inch sheets) to contribute production capacity. The company's production of LED blue chip reached 270,899 kk / year, and the capacity utilization rate reached 93.41%. LED green chip production reached 170,713 kk / year, capacity utilization reached 94.84%. As an upstream product of LED epitaxial wafers, Yunnan Lanjing's products are 90% self-use and 10% are used for export.

The company's product structure also improved significantly in 2017. Huacan Optoelectronics LED Blu-ray chip operating income was 1.592 billion yuan, an increase of 77.00% year-on-year, and the gross profit margin reached 33.1%. The substrate sheet was 403 million yuan, a year-on-year increase of 74.40%, and the gross profit margin reached 40.64%.

According to the Guolian Securities Research Report, Huacan Optoelectronics has increased the overall price of its products by increasing the proportion of high-efficiency products; on the other hand, it has eliminated old equipment, improved product yield and production efficiency and reduced costs. At the same time, the blue crystal LED sapphire substrate is also expanded simultaneously, and the synergy effect is used to improve the gross profit level.

In view of the low gross profit margin of Wuhan base products, the company has started to integrate production lines. In this regard, the company's financial controller Jiang Ruixiang said that at present, the company's production line integration is completed, and the impact on performance has been fully accrued in 2017. Regarding the concerns about further price hikes or gross profit margins, Jiang Ruixiang said that this year will introduce a 6-inch mass production plan for substrate and chip production. In addition, the company has formed a strategic supplier procurement cooperation mechanism, will continue to improve yield, especially new product yield, and will plan the expansion of sapphire substrate to further reduce the cost of the main material.

As the industry's prosperity index rebounds, companies have accelerated capacity expansion.

Han Hongling, an independent director of Huacan Optoelectronics, also said that this year, with the expansion of the capacity of large factories, the second-line factory has been under pressure. The LED industry may be oversupplied in the local market, which is a structural overcapacity, that is, the surplus of low-end lighting products where second-tier enterprises are located. However, the strength of the first-line factory with strong technical strength and strong customer base is still in a healthy state. First-tier enterprises can undertake international orders in the middle and high-end market areas through sufficient R&D investment and higher scale cost advantages, ensuring sufficient capacity utilization and good sales gross margin.

From the perspective of industry boom, LED is a growing industry. As technology advances and costs fall, new markets will continue to open, but high-speed growth does not mean that it will not fluctuate. As the competitive landscape gradually stabilizes, the industry growth rate will also change. slow. China's LED production has been less than 1 million units in 2010, and has grown nearly 10 times. In the next two or three years, the industry's growth rate is about 10%, and the average can be maintained at around 15%.

Yu Xinhua said that the earliest equipment in the industry will be delivered in batches in the third quarter of 2018, one or two quarters later than expected, and some production capacity will be formed in the third quarter of 2019. This part of the production capacity will not be special for the industry leaders. Great impact.

Due to the long expansion cycle, it takes time from the epitaxial end to the chip process, and it takes time to achieve the current brightness, including the new product to the customer, so the real mass production may be in the third quarter of 2019.

In April of this year, Huacan Optoelectronics completed the acquisition of MEMSIC (Meixin Semiconductor), and under the leadership of IDG, it expanded its business from LED to MEMS sensor. At the same time, in the internal independent expansion, the company has signed an investment framework agreement with Zhejiang Yiwu Information Optoelectronics High-tech Industrial Park Management Committee, which will invest 10.8 billion yuan to lay out advanced semiconductor and device projects.

“Investing in this project has many advantages.” Yu Xinhua said that in the field of compound semiconductor devices, Huacan Optoelectronics has formed a leading international R&D and manufacturing scale advantage, and has extended its natural advantages to the development and manufacturing of other related devices in the material system. . In addition, in the field of MEMS sensors, the company has the ability to mass-produce self-developed international leading devices. In addition, the company has set up a factory for LED epitaxial wafers in Yiwu, and the company has further developed its support from local governments.

Mesin Semiconductor is the world's leading MEMS sensor manufacturer, the main products are accelerometers and geomagnetic sensors, customers in the consumer electronics and automotive electronics. In 2016, the company ranked fourth in the world in the global accelerometer market and third in the world in geomagnetic sensors.

"These changes are done under the leadership of IDG." A person who is concerned about the company pointed out that IDG has contributed to the development history of Huacan Optoelectronics. From the initial investment to the two mergers and acquisitions after the investment, Hua Can Optoelectronics achieved great changes in scale and extension of the business chain, and this assist effect quickly appeared in 2017. With the gradual withdrawal of Huacan Optoelectronics' original team from the company and the operation capacity of IDG, IDG's right to speak in Huacan Optoelectronics Increasingly high, "daily management and management are gradually getting deeper."

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