With the development of smart terminal devices and the further recognition of OLED display panels by terminal manufacturers, the market penetration rate of AMOLED (Active Matrix Organic Light Emitting Diode panels) with wider viewing angles, higher refresh rates, and thinner sizes continues to increase.

Against this backdrop, the panel company Visionox (002387) has chosen to invest 55 billion yuan in Hefei to build a related production line, increasing its stake in the AMOLED race.

55 Billion Yuan Boost for AMOLED

On the evening of August 29, Visionox announced that, in view of the continuous expansion of the market size of AMOLED display panels and their continuous expansion from the smartphone field to medium-sized display panels such as tablets, notebooks, and automotive panels, the company intends to establish and operate a 8.6th generation flexible active matrix organic light-emitting diode display device production line, engaged in the research and development, production, and sales of medium-sized AMOLED-related products, according to its strategic planning.

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"The Hefei Municipal People's Government recognizes the significant importance of this project for Hefei City to continue to build a new display industry cluster with international competitiveness and hopes to introduce and support this project," Visionox stated. After friendly negotiations, the two parties intend to sign the "Hefei 8.6th Generation Flexible Active Matrix Organic Light Emitting Diode Display Device (AMOLED) Production Line Project Investment Framework Agreement," agreeing to cooperate in establishing/investing in a project company in the Hefei Xinzhan High-tech Industrial Development Zone to invest in, construct, and operate this project, with a total investment of 55 billion yuan, including 33 billion yuan in equity investment and 22 billion yuan in debt financing.

To promote the project to be implemented as soon as possible, Visionox has reached an "Investment Cooperation Agreement" with Hefei Jianxiang Investment Co., Ltd., a wholly-owned enterprise of the Hefei Municipal Government, and Hefei Xincheng Holding Group Co., Ltd., agreeing to cooperate and use Visionox's wholly-owned subsidiary, Hefei Guoxian Technology Co., Ltd. (referred to as "Hefei Guoxian"), as the investment, construction, and operation platform for the production line project, with a total project investment of 55 billion yuan, a first-phase registered capital of 2 billion yuan, of which the aforementioned two companies under the Hefei Municipal Government contribute a total of 1.6 billion yuan (accounting for 80%), and the company contributes 400 million yuan (accounting for 20%). The parties agree that the parties will pay in installments in the same proportion according to the construction needs of the project.

Hefei Guoxian has a short establishment time and has not yet carried out its main business. As of June 30, 2024, its total assets were 20.017 million yuan, total liabilities were 25.1702 million yuan, net assets were -5.1686 million yuan, operating income was 0 yuan, and net profit was -5.1686 million yuan.

The announcement shows that, in view of Hefei Guoxian being a wholly-owned subsidiary of Visionox before, Visionox provided loans for its daily operation. As of August 29, 2024, the loan amount was 50 million yuan, and after the first-phase registered capital of the project company is in place, Hefei Guoxian will immediately repay the aforementioned loan.

AMOLED Race is Favored

It is understood that with the development of smart terminal devices and the further recognition of OLED display panels by terminal manufacturers, the global market size of AMOLED is steadily expanding, the penetration rate continues to increase, and it is continuously penetrating into fields such as tablets, notebooks, and automotive display panels from the smartphone field.Omdia data indicates that from 2023 to 2028, the annual compound growth rate (CAGR) of shipments for IT product AMOLED panels is expected to reach 56%, and for automotive display AMOLED panels, it is expected to reach 49%. AMOLED is set to further enhance its share in the mid-size market segment.

Visonox has stated that the company is actively responding to the market demand for mid-size AMOLED products, planning high-generation OLED production lines, and actively expanding into mid-size application areas represented by tablets, laptops, and automotive displays. This strategy aims to further tap into the growth opportunities of AMOLED, seize the high ground of new product technologies, and provide effective assurance for the listed company to focus on its main business and enhance its core competitiveness, aligning with the company's development strategy.

Visonox mentioned that this cooperation involves its established subsidiary, Hefei Guoxian, as the operating entity of the production line. The company has relinquished part of its priority subscription rights for the subsidiary and is jointly investing in the production line with state-owned shareholders. This collaboration can fully leverage the resource advantages of all parties and represents an organic combination of state capital and the company's technological strengths. It can promote a long-term and stable cooperative relationship between state capital and the company, improve the efficiency of project construction, and enhance the project's risk resistance.

Visonox also revealed that the source of funds for this investment is the company's own or self-raised funds. The construction period of this project is relatively long, and the registered capital will be invested in installments according to the progress needs of the project construction. In the short term, it will not have a significant impact on the company's financial status, operating results, and cash flow. The impact on the company's financial status and operating results in future fiscal years will depend on the progress and implementation of specific projects.

Previously, on May 28th at noon, Visonox had announced that it had reached a cooperation intention with the Hefei Municipal People's Government for this project and signed a Memorandum of Cooperation, agreeing to jointly invest in the construction and production operation of the 8.6th generation flexible active matrix organic light-emitting diode (AMOLED) panel production line project in the Xinzhan High-tech Industrial Development Zone of Hefei.

First Half-Year Loss of 1.177 Billion Yuan

On the same day as the disclosure of the above investment matters, on the evening of August 29th, Visonox also released its report card for the first half of the year.

In the first half of this year, Visonox was still in a loss-making state, with a loss of 1.177 billion yuan, but the loss has narrowed compared to the loss of 1.634 billion yuan in the same period of the previous year. During the period, Visonox's revenue was 3.933 billion yuan, a year-on-year increase of 46.05%.

It is worth mentioning that, as of the end of June this year, Visonox's net operating cash flow increased by 378% to 1.256 billion yuan, compared to a net outflow of 451 million yuan in the same period of the previous year.

Visonox focuses on new display businesses, researching and developing, producing, and selling small and mid-size OLED display devices, as well as Micro-LED display screens. Its application areas cover smartphones, smart wearables, tablets, laptops, automotive displays, and extra-large sizes, and it is also exploring and deploying applications and services in smart home, industrial control medical, and innovative commercial fields.Regarding the change in performance, Visionox stated that in the first half of the year, as the consumer electronics industry gradually recovered, the demand for OLED mobile phone panels was strong, leading to an increase in product prices and an improvement in gross margin.

During the reporting period, the company continued to optimize its product structure around the "One Strong, Two New" medium-term development strategy and annual business objectives, focusing on OLED display products for leading customers, and significantly increasing the shipment volume of multiple products supplied to clients.

"During the reporting period, the company has been continuously refining and innovating in areas such as folding, rolling, transparent display, low power consumption, ultra-thin, narrow bezel, under-display integration, and mid-size AMOLED technology, and the related products have been well-received in the market," Visionox said.

It is understood that in the first half of the year, the global demand for AMOLED smartphone panels remained strong, with folding phones maintaining a rapid growth trend. According to CINNO Research data, in the first half of 2024, the global market shipment of AMOLED smartphone panels was approximately 420 million units, a year-on-year increase of 50.1%. Omdia data shows that in the first half of 2024, the global market penetration rate of AMOLED panel phones has exceeded 50% and will continue to rise.