On January 15, Huacan Optoelectronics released its performance forecast for the full year of 2017. The company expects net profit attributable to shareholders to range between 470 million and 534 million yuan, representing a year-on-year increase of 76% to 100%. This strong growth is attributed to several key factors.
Firstly, the expansion of the company’s LED chip production capacity led to a significant increase in both production and sales compared to the previous year. Second, continuous investment in R&D allowed the company to shift its product structure towards high-end chips, reducing costs through economies of scale while attracting larger, high-quality clients. This shift contributed to a substantial improvement in gross profit margins throughout the year. Lastly, Blue Crystal Technology, a subsidiary of Huacan, successfully completed the transition from 2-inch to 4-inch substrates during the year, further enhancing production efficiency.
Liu Can, President of Huacan Optoelectronics, reflected on the company's journey over the past 12 years. He noted that as the global LED industry shifted to mainland China, Huacan initially lagged behind international competitors. However, through continuous investment in advanced equipment and technology, the company has now reached a position where it competes globally in terms of both production scale and product performance.
Focusing on deep cultivation and promoting a sustainable industry cycle is a core strategy for Huacan. Liu Wei, a senior executive, emphasized that while some companies expand across the entire supply chain, Huacan remains dedicated to its core strength: LED chip technology. He explained that the company believes in specialization, with downstream packaging and consumer products better managed by others who are closer to end customers.
In contrast to the structure of the foreign LED industry, where upstream manufacturers often acquire downstream facilities, the mainland market has a more fragmented supply chain. While many packaging factories have done well, Huacan sees no need to enter this space, choosing instead to collaborate with existing players. This approach, according to Liu Wei, fosters a healthier and more efficient industry ecosystem.
Regarding the risks associated with overcapacity, Liu Wei acknowledged that the industry cannot remain in a state of constant shortage. While 2017 was driven by supply constraints, 2018 could bring challenges if smaller manufacturers fail to adjust. However, Huacan’s cost-effective products and reliable supply chain give it a strong foundation to weather any downturns. By leveraging technological advancements, the company can maintain higher gross margins than its competitors.
Looking ahead, Huacan aims to solidify its position as a leading player in the global LED chip market. With a growing reputation for quality and performance, the company is increasingly seen as a strategic partner by international manufacturers. Liu Wei highlighted that Huacan has invested heavily in R&D and talent, positioning itself among the top-tier chip producers.
Internally, the company’s entrepreneurial spirit and agile decision-making have been key to its success. For example, during the industry downturn in 2012, Huacan made a bold move to build the Zhangjiagang factory, expanding its capacity and talent pool. When the market rebounded in 2016, the company reaped the benefits, with sales surging from 900 million to nearly 1.6 billion yuan. In 2016, it also accelerated the Yiwu project, doubling the size of the Zhangjiagang facility and completing it ahead of schedule.
Looking to the future, Huacan plans to maintain its focus on the most upstream segments of the supply chain. While some Taiwanese manufacturers are shifting downstream, Huacan remains committed to its original strategy. Liu Wei expressed confidence that by 2020, the company will achieve a stable global position, aiming for around 20% of the total market share.
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