After experiencing ups and downs, Huacan Optoelectronics was founded in 2005. After more than ten years of development, it has become the second largest LED chip supplier in China. Its business spans LED chips, sapphires, advanced semiconductors, and gallium nitride power electronics devices. The company's main products are LED light-emitting chips, which include LED lighting, mini LED displays, small-pitch LED displays, traditional LED displays, and mini LED backlights in terms of application areas. The company's revenue performance has been steady in recent years, while the profit side is affected by fluctuations in product prices under industry competition. In 2022, the company and BOE Technology Group signed the “Huacan Optoelectronics Co., Ltd. share subscription agreement with effective conditions to issue A shares to specific targets”. The controlling shareholder of the company was changed from Zhuhai Huafa Technology Industry Group Co., Ltd. to BOE, and the actual controller was changed from the State-owned Assets Supervision and Administration Committee of the Zhuhai Municipal People's Government to Beijing Electronics Holding Co., Ltd.
Basic lighting system, backlight & display two-wheel drive
LED lighting has the characteristics of high energy efficiency, high reliability, and high environmental protection, making it an alternative to traditional lighting methods on a global scale. LED lamps and lamps account for 70% of all current lighting solutions in the world. The global penetration rate of LED lighting is expected to reach 76% by 2025 and 87% by 2030. LED lamps that are replaced twice from 2024 will play a more important role in demand. It is estimated that the global LED lighting market output value is expected to reach US$11.1 billion in 2026, and the compound growth rate will be 8.4% from 2021 to 2026, which is an important basic market for LED chip companies. Mini LED backlights are more suitable for non-mobile terminal scenarios, such as televisions, cars, etc., which do not require high power consumption or flexibility, but are more suitable for high requirements such as reliability and brightness. Mini LED backlight shipments are expected to exceed 31.45 million units in 2027, with a compound growth rate of about 23.9% from 2023 to 2027. TV is an important application scenario for Mini LED in the future. Mini LED backlit TV shipments are expected to reach 6.21 million units in 2024, and 24.4 million units in 2027, with a penetration rate of 12.1%. Furthermore, in-vehicle demand is exploding. The highlight of the Mini LED can greatly reduce glare caused by ambient light, prevent interference with the driver, and reduce the risk of accidents. It is estimated that the number of automotive Mini LED modules shipped will exceed 1 million in 2024. According to Yole's forecast, when considering only the basic scenarios of high-end TVs, AR/VR/MR, and smartwatches, the market demand for micro LED displays is expected to reach US$2.25 billion by 2030; if penetration into all scenarios such as smartphones, tablets, and laptops is taken into account, the market size may reach US$12.06 billion in 2030. The company raised 1.2 billion yuan to invest in the Mini LED/micro LED R&D and manufacturing project, and raised 2 billion yuan to invest in the micro LED wafer manufacturing and package testing base project in Zhuhai, which is expected to increase double growth momentum in the future.
Integrate into BOE system to create MLED business platform
MLED is an important part of BOE's “1+4+N” development strategy. It is one of the four high-potential waterways and driving directions selected based on BOE's core capabilities and value chain extension. In August 2023, Huacan Optoelectronics held a board meeting to elect Mr. Zhang Zhaohong, the former CEO of BOE's MiniLED business and the current chairman of BOE Crystal Technology, as the new chairman of Huacan Optoelectronics.
We believe that changes in Huacan Optoelectronics's senior management reflect the company's importance in BOE's MLED direction. The company is expected to become a business platform for the entire industry chain integrating LED chips, LED packaging, and LED machines, with great long-term investment value. BOE's strong R&D resources can also help Huacan Optoelectronics research cutting-edge technology. Furthermore, with BOE's accumulated high-quality customer resources, Huacan Optoelectronics's future Mini LED and Micro LED products are expected to reach more leading customers.
Risk warning
1. Risk of LED chip price fluctuation;
2. The implementation progress of the new application falls short of the expected risk;
3. The profit forecast assumption is unfounded or falls short of the expected risk.