MLS Co., Ltd. plans to increase capital by RMB 880 million in four subsidiaries; AMEC plans to invest hundreds of millions in capital increase; Operation status of the lighting industry from January to October 2020

MLS plans to increase capital by 880 million yuan in four subsidiaries

MLS Co., Ltd. announced that on December 28, 2020, the 16th meeting of the fourth Board of Directors reviewed and approved the "Proposal on the Company's Plan to Increase Capital in its Subsidiaries".

In accordance with the Company's operational and development needs, and to better facilitate the business operations of its subsidiaries, the Company agrees to increase the capital of its subsidiary, Ji'an MLS Display Devices Co., Ltd., with self-raised funds in the amount of RMB 290 million. After the capital increase, the registered capital of Ji'an MLS Display Devices Co., Ltd. will be increased to RMB 300 million;

plans to increase capital in its subsidiary Ji'an MLS Lighting Devices Co., Ltd. with an investment of RMB 190 million, raising the registered capital of Ji'an MLS Optoelectronics Co., Ltd. to RMB 200 million;

intends to increase the capital of its wholly-owned subsidiary, Ji'an MLS Semiconductor Materials Co., Ltd., by RMB 250 million. After the capital increase, the registered capital of Ji'an MLS Semiconductor Materials Co., Ltd. will be increased to RMB 300 million;

MLS Co., Ltd. plans to increase the capital of its wholly-owned subsidiary, Xinyu MLS Printed Circuit Board Co., Ltd., by RMB 150 million. After the capital increase, the registered capital of Xinyu MLS Printed Circuit Board Co., Ltd. will rise to RMB 1.3 billion.

MLS Co., Ltd. stated that this capital increase will help its subsidiaries—MLS Display Devices, MLS Lighting Devices, MLS Semiconductor Materials, and MLS Circuit Boards—improve and adjust their asset structures, enhance their operational capabilities, and promote further business development, aligning with the company's strategic development plan.

The funds for this capital increase are sourced from MLS's self-raised capital. After the capital increase, MLS Display Devices, MLS Lighting Devices, MLS Semiconductor Materials, and MLS PCB will remain subsidiaries of the company and will not affect the scope of the company's consolidated financial statements. Following this capital increase, the development of MLS Display Devices, MLS Lighting Devices, MLS Semiconductor Materials, and MLS PCB will continue to be influenced by objective factors such as market prospects and changes in industry policies.

AMEC plans to invest hundreds of millions to increase its stake in Shanghai Ruili, laying out the field of integrated circuit process inspection equipment

To improve its business layout and expand the company's business scope, semiconductor enterprise AMEC plans to increase its capital investment in Rely Scientific Instruments (Shanghai) Co., Ltd. (hereinafter referred to as "Shanghai Rely") by 100 million yuan, positioning itself in the field of integrated circuit process inspection equipment.

On the evening of December 28, AMEC announced that it plans to increase its capital investment in Shanghai Ruili by investing RMB 100 million in cash to subscribe to RMB 83.3333 million of newly added registered capital of Shanghai Ruili, at a subscription price of RMB 1.2 per share (registered capital). Upon completion of the above transaction, the registered capital of Shanghai Ruili will increase to RMB 42.8 billion, and the company's shareholding ratio will be 20.4467%.

The announcement shows that Shanghai Ruili was established on June 27, 2005, with a registered capital of approximately RMB 345 million. It is dedicated to the research, development, and production of equipment for front-end process inspection in integrated circuit manufacturing. It is one of the few domestic high-end equipment enterprises to enter internationally leading 12-inch production lines, and the only domestic integrated circuit equipment enterprise to enter a leading South Korean chip manufacturer. In this capital increase, Shanghai Ruili's pre-money valuation was RMB 413.53 million.

Shanghai Ruili's main products include optical film thickness measurement equipment and optical defect inspection equipment, as well as silicon wafer thickness and warpage measurement equipment. The TFX3000 series of 12-inch optical measurement equipment, independently developed by Shanghai Ruili, has been applied in 65/55/40/28 nm chip production lines and has undergone 14 nm process verification. It supports the production of 64-layer 3D NAND chips in 3D memory chip production lines and is currently verifying the measurement performance for 96-layer 3D NAND chips.

Shanghai Ruili's automated optical inspection equipment, applied to pattern inspection of LED sapphire substrates, has also been successfully sold to numerous domestic LED PSS substrate and LED chip production lines.

Shanghai Ruili is developing next-generation film thickness and OCD measurement equipment capable of supporting more advanced chip manufacturing processes, as well as defect inspection equipment for integrated circuit chip production, further expanding the addressable market size. As of November 30, 2020, Shanghai Ruili held 87 Patents, 39 software copyrights, 8 registered trademarks, 1 work copyright, and 2 filed domain names.

AMEC stated that, based on considerations for its business strategy development, the company plans to increase its capital investment in Shanghai Leiyi. Integrated circuit chip production equipment includes various subcategories such as lithography, etching, thin film deposition, process control and inspection, cleaning, and ion implantation. Process control and inspection equipment is critical for providing monitoring data at each stage of chip production to ensure that all process parameters meet requirements, thereby improving yield rates. According to SEMI's annual statistics in recent years, the market size for process control and inspection equipment accounts for approximately 13% of semiconductor chip manufacturing process equipment, making it the fourth-largest subsector after lithography, etching, and thin film deposition. As chip processes continue to evolve toward smaller nodes, the number and frequency of inspection steps required during chip production are increasing, leading to a corresponding rise in demand for process control and inspection equipment.

AMEC stated that the company has achieved certain results in the R&D and commercialization of integrated circuit etching equipment. Previously, it laid out its presence in the field of integrated circuit thin-film equipment by investing in Shenyang Piotech Co., Ltd., a leading domestic thin-film equipment company. This investment in Shanghai RuiLi will enable the company to establish a presence in the field of integrated circuit process inspection equipment.

In addition, AMEC has a high degree of overlap with Shanghai Ruili's customers and suppliers. Through this investment, further supply chain synergies can be achieved. Investing in Shanghai Ruili is another step for the company to focus on and implement its strategy for high-end chip equipment, representing an investment made to improve its business layout. Through the investment in Shanghai Ruili, the company is expected to achieve synergistic development effects with Shanghai Ruili.

It is worth mentioning that, since Yang Zhengfan, a director of the Company, serves as a current director of Shanghai Ruili, and Zhu Min, a director of the Company, served as a director of an enterprise within the past 12 months, while Shen Weiguo, a director of the Company, is the executive director of Shanghai Venture Capital Co., Ltd., which was the largest shareholder of Shanghai Ruili in the past 12 months, this investment constitutes a related-party transaction but does not constitute a major asset restructuring.

Operation of the Lighting Industry from January to October 2020

I. Production Status

From January to October 2020, among the main products of the national lighting manufacturing industry, the production volume of luminaires and lighting devices reached 3.22 billion sets (units, pieces), a year-on-year (YoY) decrease of 13.2%.

In October, the national output of luminaires and lighting devices reached 410 million units (sets, pieces), a year-on-year (YoY) increase of 14.2%.

II. Benefit Analysis

From January to October 2020, the revenue of lighting fixture manufacturing enterprises above designated size nationwide was RMB 261.2 billion, a year-on-year decrease of 10.8%; the total profit achieved was RMB 14.52 billion, a year-on-year decrease of 20.9%.

(Data source: Compiled from data by the China National Light Industry Information Center)