Hongli Zhihui: The company has now established a complete R&D system for Mini LED

On January 8, 2020, Hongli Zhihui released news that on January 7, 2020, the company received visits from three institutions including Yuya Investment. The reception personnel were Board Secretary Guan Fei and Securities Affairs Representative Liu Dongli. The meeting took place in the conference room of Hongli Zhihui Group Co., Ltd.

1. How is the company progressing in the Mini LED field?

The company has now established a complete R&D system for Mini LED, focusing on cutting-edge industry technologies and solutions for LED niche application areas. In the area of Mini LED, the company has made significant breakthroughs in mass transfer technology and large-size panels, and has reached strategic cooperation with mass transfer equipment manufacturers. Regarding production capacity, the company's Mini LED will use Guangzhou as the main production base and Shenzhen as the R&D center. Multiple products have completed small-batch trial production and large-scale sampling; some models are ready for mass production. Due to increased demand for Mini LED, the company is expanding its Mini LED business according to market conditions. Mini LED products are mainly used for medium-to-large size backlighting, applied in VR, tablets, gaming laptops, TVs, computer monitors, medical displays, automotive applications, etc.

2. Which chip suppliers is the company currently purchasing for its MINI LED?

Currently, the main chip suppliers for the company's MINI LED are Epistar Optoelectronics, Sanan Optoelectronics, and HC Semitek.

3. How is the LED packaging market situation?

The LED packaging market is still growing, mainly due to the following reasons: 1. There is some growth in demand for LED lighting; 2. As international giants exit the domestic lighting market, the trend of industrial regional transfer is obvious, and the competitive landscape of LED is adjusting; 3. The concentration in the LED packaging industry is gradually increasing.

4. How is the company progressing in automotive-grade LED packaging?

The company's automotive-grade LED packaging division possesses an independent automotive production line, workshop, and a CNAS-certified automotive laboratory. It has successfully transitioned to IATF16949 certification, and its products have passed dual automotive reliability certifications: AEC-Q102 & IEC60810. After two years of market promotion and technical business services, multiple industry clients have passed factory audits, and the products have been successively included in projects for Wuling, BAIC, Isuzu, Dongfeng Nissan, Hyundai Korea, MG, Geely, Great Wall, and others. In September 2019, we signed a cooperation agreement with Tungsram (formerly GE Automotive Lighting Division). Leveraging Tungsram's brand channel advantages, we are expanding into international markets.

5. How is Yishan Automotive Lighting currently performing in terms of production and operations?

The company currently holds 85% equity in Yishan Automotive Lighting. The main products of Yishan Automotive Lighting include front combination lamps, rear combination lamps, and various small lights for vehicles. Major customers include well-known automakers such as Geely Group, Great Wall Group, and SAIC-Iveco. The main sales products are primarily various types of small lights. Currently, the new management team of Yishan Automotive Lighting has taken over the operational management of Yishan Automotive Lighting, and normal production and operation activities have resumed.

6. What are the reasons for the decline in performance of Suiyi Network?

Suiyi Network mainly provides internet marketing services and automotive internet service businesses to clients. In 2019, due to stricter financial regulation, decreased customer demand for external promotion, and a decline in domestic new car sales, the core business of Suiyi Network was continuously affected, leading to a decrease in gross profit margin. During this period, Suiyi Network sought to cope with market changes by developing new businesses and target customers through multiple channels, but the core business still fell short of expectations.

7. What are the main businesses of Jincai Hardware?

Jincai Hardware is a manufacturer of metal powder injection molding products, relying on key technologies such as precision molds, rapid prototyping, surface treatment, vacuum coating, and CNC machining centers. It primarily serves consumer electronics like mobile phones while also covering medical devices and automotive electronics markets, providing precision mold and precision structural component products and services. Main products include mobile phone camera mounts, SIM card trays, mobile phone buttons, and mobile phone metal middle frames. Major clients include VIVO, OPPO, Fuchengda, Changying, Zhongmao, Lens Technology,伯恩光学 (Borun Optics), San Ying, etc.

8. What are the reasons for Jinduo Investment becoming the controlling shareholder of the company, how is it managed, and will there be further share increases in the future?

Jinduo Investment recognized the company's past achievements and industry position in the LED Packaging field, agreed with its long-term development plan, and valued the company's future growth potential and investment returns. Jinduo Investment became the controlling shareholder of the company in November 2018, maintaining the stability of existing senior management and the independence of the operating team. Currently, Jinduo Investment holds 29.94% of the company's shares. Due to the termination of the restricted stock incentive plan for the company's white light LED device segment, its shareholding will passively increase to 30.08%. Jinduo Investment is now applying to the China Securities Regulatory Commission for an exemption from the tender offer obligation.