On September 26, Huacan Optoelectronics (300323) released a record of investor relations activities. Mr. Han Jidong, the director of the company, presented the development history, product series, and production status of the four factories to visiting investors through promotional videos and PPT presentations. This session provided a comprehensive overview of the company’s current capabilities and future direction.
President Liu Wei then elaborated on the company's journey, explaining that Huacan was founded by a team focused on LED chip development and manufacturing. In late 2007, with the support of IDG Wind Investment, the company expanded its scale. Over the past 12 years, as the global LED industry shifted toward mainland China, Huacan gradually improved from a position of technological disadvantage to one where it now competes globally in terms of both production scale and product performance.
Despite these achievements, Huacan faces new challenges. Rapid growth has tested internal management, and in the next two to three years, the company will need more top-tier management and technical talent to ensure continued investment returns.
The global shift in the LED industry is nearing its final stage, with developed markets increasingly accepting Chinese LED chip products. No longer confined to low-end manufacturing, China's LED chips are now recognized internationally for their performance. Leading domestic companies like Huacan are expected to make significant strides in production scale and product quality, aiming to secure a place among the top five international LED manufacturers.
This collaboration with leading global players represents an external driver for Huacan’s sustainable growth. With cost advantages from large-scale production and high-quality products, the company is well-positioned to partner with major international manufacturers. For example, Sanan Optoelectronics has made substantial investments in equipment and personnel in recent years, and Huacan has followed suit. Both companies are seen as key players by customers, who prefer to work with two major LED chip manufacturers for guaranteed supply.
Internally, Huacan’s success stems from its entrepreneurial spirit and professional team. Founded by a group of technology-driven individuals, the company has always been aggressive and innovative. During the 2012 Zhangjiagang plant construction, when the industry was at a low point, Huacan expanded its production capacity and retained talent. When the market rebounded in 2016, the company saw sales rise from 900 million to nearly 1.6 billion. In 2016, it also decided to invest 6 billion in Yiwu, twice the size of Zhangjiagang, accelerating its expansion and narrowing the gap with Sanan.
Huacan’s dynamic and forward-thinking management team has enabled it to seize opportunities for rapid development. Looking ahead, the company aims to strengthen its position in the global LED market, targeting a 20% market share by 2020.
During the meeting, Allianz Fund asked about the differences between Huacan and Sanan in terms of management and technology. Liu Wei explained that while Sanan has a long history and more R&D resources, Huacan’s own R&D system is highly capable. The company has been rapidly improving its product performance, and many of its products now reach international standards. It is expected that most of its products will be at the leading edge next year.
Taishin International questioned whether Huacan would follow the trend of moving upstream, as some Taiwanese manufacturers have done. Liu Wei responded that while there are different business strategies, Huacan’s core remains focused on LED chips and technology. The company believes in collaborating with packaging factories rather than entering downstream industries, which are closer to end consumers.
Qunyi Securities raised concerns about potential overcapacity due to the expansion of Sanan and Huacan. Liu Wei acknowledged the risk but emphasized that Huacan has strong anti-risk capabilities and can maintain stable gross margins through technological advancement and strategic market positioning.
Regarding state subsidies, Liu Wei noted that while some small manufacturers may have benefited in the past, the government now focuses on supporting competitive companies. As for price competition, he acknowledged the risk but highlighted Huacan’s ability to convert technology into cost efficiency, maintaining higher profit margins.
Looking ahead, the company expects continued growth in small-pitch products, driven by increasing demand for higher resolution displays. While the large-scale expansion will continue until 2020, the industry is expected to stabilize around that time unless new technologies like Micro LED emerge.
Finally, regarding financing, Liu Wei mentioned plans to refinance in the capital market next year, citing favorable valuations and strong financing capabilities. The acquisition of Meixin Semiconductor is also progressing, with regulatory approvals being finalized after delays, and updated materials are currently being prepared for submission.
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