Deepening the

In recent years, the downward pressure on the global economy has increased, and demand in North America, Europe and even the domestic consumer market has further weakened. The prices of LCD panels of various sizes have continued to fall, with most sizes even reaching historical lows, which has directly led to domestic manufacturers lowering their shipment prices. Such fluctuations have tested the flexibility of China's display industry and the ability of enterprises to withstand pressure.

As a leading company in the industry, the answer sheet submitted by Zhaochi is: LCD TV ODM shipments will exceed 10 million units in 2021, ranking second in the world; LED The company has the second largest production capacity in the chip industry; the company's number of LED packaging production lines has expanded to 3,500, ranking at the forefront of the industry; the export volume of machine boxes ranks among the best in the country.

In the trough period of declining industry demand and shrinking production capacity, Zhaochi's Nanchang Crystal Display base opened on November 1At the beginning of the month, production expanded against the trend. Nanchang Jingxian is mainly engaged in the production and research and development of new generation Mini/Micro LED (MLED) display products. Once put into production, it will greatly increase Zhaochi's Mini LED display production capacity, deepen its strategic layout of the entire industry chain "from core to screen", and consolidate Zhaochi's market leading position in the semiconductor display field.

Smart display looks forward to the inflection point of consumption recovery

Zhaochi Co., Ltd.'s main business includes three major sectors: smart display, smart home networking, and the entire LED industry chain. Its products mainly include LCD TVs, Internet smart terminals and video services, box and network communication products, LED products and accessories, etc.

Affected by multiple factors such as the global economy and the decline in demand, the performance of many electronic manufacturing companies in the A-share market has declined. Although Zhaochi's overall performance has also been dragged down to a certain extent, its performance is still relatively stable in the same industry. Pacific Securities believes that from the perspective of the company's business and industry levels, currently among Zhaochi's two core businesses, on the one hand, the large-scale growth period of the entire LED industry chain has begun; on the other hand, the TV ODM business, which accounts for the largest proportion, will be clearly improved after the extreme decline in panel prices slows down and demand rebounds. This will be an important time for Zhaochi to regain its growth flexibility.

According to data from Luotu Technology, in the third quarter of 2022, the company's LCD TV shipments were 2.23 million units, an increase of more than 11% from the previous quarter. In particular, in July, the total shipment volume of the world's top ten professional TV ODM factories dropped by 5.5% from June and increased from last year.Under the environment of growing 2.1%, the company's LCD TV shipments in July returned to the second place in the industry, with a year-on-year growth of 10% and a month-on-month growth of more than 15%, achieving double year-on-month growth, highlighting operational efficiency and market control capabilities.

According to analysis by industry insiders, major manufacturers took the initiative to reduce production capacity due to the market downturn in the first three quarters, and the market entered a state of destocking. Since the fourth quarter, industry-wide inventories have fallen to lower levels, panel prices have begun to stabilize and rebound, and manufacturers' confidence has gradually recovered. The sales data of the "Black Friday" that just passed have recovered significantly. We can expect that with the arrival of the overseas fourth quarter promotion season, the market demand for panels will also recover.

CITIC Securities believes that the panel market is expected to pick up slightly in the fourth quarter; at the same time, with the acceleration of large-size, the company will upgrade its product structure and increase the proportion of smart TVs toEnhance profitability, accelerate the expansion of categories, and use new businesses such as monitors and interactive conference all-in-one machines to bring growth points to enhance competitiveness.

Advanced deployment of new Mini LED display patterns

In recent years, Zhaochi has developed core advantages in the industry chain from focusing on TV ODM business to introducing Mini backlight. In the future, as the company further promotes Mini LED related products, the company is expected to benefit from the market space growth brought about by the accelerated penetration of Mini LED.

Apple launched its first Mini LED product in 2021. Due to its leading position, it accelerated the penetration of Mini LED technology. Subsequently, Samsung, Sony, LG, Asus and other manufacturers launched their own Mini LED TVs, laptops, monitors and other products. This year, more and more companies are involved in Mini/Micro LED in the industry. Major mergers and acquisitions involving the upstream and downstream of the LED industry chain are frequently exposed, and a new industry pattern is about to emerge.

In the first three quarters, despite sluggish industry demand and sluggish performance, the shipments of Mini LED, the next generation display technology, have surged, and the Mini LED backlight solution has entered an explosive period. Industry predictions indicate that by 2026, the market size of China's Mini LED industry alone is expected to exceed 40 billion yuan. If combined with the steady growth of Micro LED, there will be huge room for future industry development.

As a leading comprehensive manufacturing company in the industry, Zhaochi has long been aware of the opportunities contained in the Mini LED track and has continued to increase its investment in this direction. It is reported that in terms of backlight, the company has become a long-term cooperative supplier for well-known domestic and foreign TV customers such as Samsung LED, Sony, LG, Sharp, Konka, Skyworth, TCL and so on, relying on its high process yield and stable production technology. Its products are mainly used in the fields of TVs and monitors. Nearly 1/3 of the current LED packaging component production lines are dedicated to Mini LED backlights, providing production capacity guarantees for Mini POB, Mini COB, and NSCP solutions, and have become the backbone of Mini LED backlight industrialization.

The advantages of the entire LED industry chain are gradually released

The LED industry can be simply divided into three links: "chip, packaging, and application". Zhaochi Technology is one of the few companies in the industry that has implemented a full industry chain layout. At the same time, under the strategic background of deepening the "from core to screen" of the entire LED industry chain, Zhaochi will not only ensure its original market share, but also invest part of its new production capacity in the field of new Mini/Micro LED display chips.

In the upstream chip field, the company's current monthly production capacity of gallium nitride can reach 650,000 4-inch wafers. In 2022, Zhaochi Semiconductor plans to add 52-cavity MOCVD and supporting production equipment for gallium nitride Mini LED chip expansion project, it is expected that the total monthly production capacity of gallium nitride chips will reach 1.1 million 4-inch chips after the expansion.

In the field of LED applications, the number of COB display module production lines of Zhaochi Co., Ltd. was 100 in the first half of this year. As Jiangxi Zhaochi Crystal Display Co., Ltd.'s Nanchang base started production on November 7, its COB display module production lines have been expanded to 600. According to the data, Zhaochi Nanchang Crystal Display Base invested more than 1.5 billion yuan in the first phase, and will invest more than 1.5 billion yuan to expand production in the third quarter of next year, which will greatly enhance Zhaochi's scale advantage.

Pacific Securities believes that Zhaochi's entire LED industry chain has formed an organic whole with interlocking links and strategic synergy among all links. Zhaochi's business has continued to accelerate its transformation from "home appliances" to "technology", and it is also a strong player in this new track with both strategy and tactics. As Zhaochi's LED chip and Mini LED display business in Nanchang enters a winning rhythm of large-scale improvement, ODM The company may return to glory as its business emerges from the current downward trend of weak consumption and continued sharp price drops in panels.

Zhaochi Co., Ltd. stated that facts have proven that the layout of the entire LED industry chain can effectively improve the overall scale and efficiency, speed up the research and development, testing and production of new products. When expanding production, it can simultaneously expand production according to the upstream and downstream production and sales ratio, reduce market risks, and exert greater economic benefits.