The trend of high prosperity in the semiconductor industry chain is clear, Huacan Optoelectronics is riding the wave of private placement

The National Development and Reform Commission officially announced the scope of "new infrastructure" and formally set the development direction of seven major areas including 5G infrastructure, artificial intelligence, and industrial Internet. The third generation of semiconductors, led by gallium nitride (GaN) and silicon carbide (SiC), are the core materials supporting "new infrastructure". LED is the most mature commercial application of gallium nitride (GaN) materials, and power electronic devices are another broad application field of gallium nitride (GaN) materials. Benefiting from the "new infrastructure"'s strong support for downstream industries, and with the support of the "new infrastructure" and domestic substitution, domestic semiconductor manufacturers will usher in huge development opportunities.

Strategic transformation has achieved significant results, with the launch of high-end products

Under the pattern of innovation-driven development, since the beginning of the year, the corporate governance system, product structure, etc. have been continuously optimized, and the strategic transformation has achieved outstanding results. This is also reflected in the performance of Huacan Optoelectronics' third quarter report. In the third quarter of this year, the company's performance successfully turned losses into profits, including a net profit of 563. 750,000 yuan, a year-on-year increase of 103.09%, and achieved revenue of 743 million yuan, a year-on-year increase of 3.68%. In the first three quarters, the company achieved a total revenue of 1.811 billion yuan.

In order to occupy the strategic commanding heights in the future market competition and continue to maintain the competitive advantage in the industry, the company follows the right rhythm and rational and orderly expansion, and plans to raise an additional 1.5 billion yuan for the research and development and manufacturing projects of Mini/Micro LED and the research and development and manufacturing projects of GaN-based power electronic devices.

Public information shows that Huacan Optoelectronics is one of the first manufacturers to enter the field of Mini LED and Micro LED research. The company's Mini LED products have the advantages of good light color consistency, strong solderability, and good reliability. They have been recognized by many major terminal display customers. They have been shipped in large quantities and sales continue to rise; Micro LED has currently achieved good results in epitaxy and chip technology. The products have made breakthrough progress in terms of wavelength uniformity and surface defect density. In the future, with the solution of massive transfer technology, the commercialization process of Micro LED will be vigorously promoted. In addition, Huacan Optoelectronics' GaN-based power electronic devices will be mainly used in markets such as smartphones, automotive electronics, and data centers.

The market continues to expand and Mini/Micro LED is ready for development

According to Trendforce forecast, the global Mini/Micro LED market size is expected to reach US$4.2 billion in 2024. At the same time, favorable policies are also promoting the development of Mini/Micro LED. It is expected that by 2022, the overall scale of my country's ultra-high-definition video industry will exceed 4 trillion yuan. Micro LED is considered to be a new outlet for the development of LED display technology in the future, and may determine the competitive landscape of display technology in the next few decades. Previously, many international giants such as Apple, Facebook, and Samsung have already laid out their plans. At the same time, the Micro LED market is booming. The Micro LED index has soared to 1539.09 points since the beginning of the year, an increase of 60.29% from the lowest point during the year.

As the world's leading LED chip manufacturer, Huacan Optoelectronics attaches particular importance to the research and development of high-end LED products. It has developed RGB Mini LED chips, backlight Mini LED chips, ultra-high current density white LED chips and other special projects, and has accumulated a number of core technologies. Among them, the Mini LED display/backlight chip products developed by the company have been greatly improved and optimized in terms of light efficiency, current impact resistance, consistency and reliability, and are widely used in conferences, cinemas, consumer electronics, vehicle displays and other fields.

The main products of the Mini/Micro led R&D and manufacturing project funded by the company include Mini/Micro led epitaxial chips, Mini/Micro led chips, etc. This project is in line with the company's long-term development strategy of laying out high-end LEDs, which will help the company continue to expand its competitive advantage in the led chip field and consolidate its leading position in the led display chip market. Mini led RGB display technology is a natural extension of small-pitch displays. For display applications below P1.1, Mini led is the mainstream chip solution. In the future, with the cost decreasing, Mini backlight will replace the existing led backlight in a large proportion, becoming the mainstream choice for large-size LCD backlight display solutions. The market penetration of Micro LEDs will also be further improved, and the company is expected to enjoy market dividends.

Building a complete GaN power device industry chain in the new highlands

With favorable national policies, third-generation semiconductors are expected to become the pioneers of my country's semiconductor industry, and enterprises upstream and downstream of the relevant industry chain will fully benefit. At the same time, the technology and application development of artificial intelligence, 5G and other industries continue to improve, providing support for the rise of the third-generation semiconductor sector represented by gallium nitride, silicon carbide, etc. Since the beginning of the year, the third-generation semiconductor index has reached a high point of 3154.78, up 84.93% from the beginning of the year. It can be seen that both policies and capital markets have conveyed signals of a booming third-generation semiconductor industry, and many brokerages have also given the third-generation semiconductor industry a "recommended" rating.

The third generation of semiconductor materials has the advantages of high thermal conductivity, high breakdown field strength, high saturation electron drift rate, high bonding energy, etc., and is a crucial technical support for the construction of my country's "new infrastructure". According to Omdia's forecast, global SiC and GaN power semiconductor sales revenue will increase from US$571 million in 2018 to US$854 million by the end of 2020, and may exceed US$5 billion by the end of 2029, and will maintain an average annual double-digit growth rate in the next ten years. Among them, the physical properties of GaN are similar to SiC. The energy gap, saturated electron velocity, and critical breakdown electric field are all higher than SiC. It has attracted widespread attention from the industry and market. GaN-based radio frequency semiconductors support the construction of 5G base stations and industrial Internet systems.

Huacan Optoelectronics is closely following the development trend of the industry. The R&D and manufacturing project of GaN-based power electronic devices launched this time will establish a complete business chain of GaN power devices from design and development, epitaxial growth, chip manufacturing to wafer testing. It will closely integrate product development and manufacturing with market demand. Through faster product iteration and stable yield rate, it will rapidly promote the large-scale industrialization of GaN power devices with a very competitive price/performance ratio in the market.

After the completion of this private placement, Huacan Optoelectronics will consolidate its leading position in the LED chip industry. At the same time, the company will establish its domestic leading position in the field of GaN power devices, realize the company's strategic upgrade to a high-end integrated semiconductor manufacturer, and comprehensively enhance the company's core competitiveness and sustainable development capabilities.