Foshan Lighting plans to list and transfer 51% equity in its subsidiary; MLS reveals future development direction; ams OSRAM plans to expand production at its Malaysia and Austria factories

Foshan Lighting plans to list and transfer 51% equity stake in lighting equipment company

Foshan Lighting increases capital in lighting equipment company

Foshan Lighting issued an announcement stating that on November 8, 2021, the Company convened the 21st meeting of the 9th Board of Directors, which reviewed and approved the "Proposal on Capital Increase to Wholly-owned Subsidiaries." In accordance with the Company's development plan, it was agreed to increase the capital of the wholly-owned subsidiary Foshan Lighting Light Equipment Co., Ltd. (hereinafter referred to as "Light Equipment Company") by contributing the land use rights and above-ground buildings located on Fenjiang North Road and north of Gongye Avenue in Chancheng District, Foshan City (a total of 2 land use rights with a total land area of 60,503.00 square meters, and a total of 47 above-ground buildings with a total construction area of 52,237.54 square meters) at their assessed value of RMB 363 million as of the assessment base date. The entire amount of this capital increase will be recorded in the capital reserve of Light Equipment Company, and its registered capital will remain unchanged.

This capital increase in the Lighting Equipment Company, made by contributing the land use rights of the northern plot and the buildings thereon, is primarily intended to revitalize the company's existing assets and improve asset utilization efficiency, aligning with the company's development needs. Preliminary calculations estimate that relevant taxes and fees for this capital increase will amount to approximately RMB 64.43 million (the aforementioned taxes and fees are preliminary estimates only and subject to actual incurred amounts). Upon completion of this capital increase, the Lighting Equipment Company will remain a wholly-owned subsidiary of the company, with no significant impact on the company's operations.

Foshan Lighting plans to list and transfer 51% equity stake in lighting equipment company

In addition, Foshan Lighting announced that the company plans to inject the land use rights and above-ground buildings located on Fenjiang North Road and north of Gongye Avenue in Chancheng District, Foshan City, into its wholly-owned subsidiary Foshan Lighting Lighting Equipment Co., Ltd. by increasing capital based on the assessed value. Subsequently, it will transfer a 51% equity stake in the Lighting Equipment Company through public listing, with the minimum listing price not less than 51% of the total assessed equity value of the Lighting Equipment Company, i.e., RMB 195 million.

The business scope of the Lighting Equipment Company includes research, development, and production of: electric light source products, electric light source equipment, accessories for electric light sources, materials for electric light sources, luminaires and accessories, electrical materials, motor vehicle parts, household appliances, electrical sockets, switches, fire protection products, ventilation equipment, and LED products; domestic trade, import and export of goods, and import and export of technology (excluding projects prohibited by laws and administrative regulations; projects restricted by laws and administrative regulations require permits before operation). The revenue for 2020 was RMB 61.0371 million, with a net profit of RMB 2.0289 million. Currently, the Lighting Equipment Company has ceased production and business operations.

Foshan Lighting stated that the transfer of a 51% equity stake in the lighting equipment company is primarily aimed at revitalizing corporate assets, improving asset utilization efficiency, and providing financial support for the development of its core business. The transfer of the 51% equity stake was publicly listed on the property rights exchange; the procedure complies with relevant regulations, the transaction price is fair and reasonable, and there is no harm to the interests of the company and its shareholders.

ams OSRAM plans to expand production

Malaysia and Austria factories

According to foreign media reports, ams OSRAM recently held a Q3 earnings conference call, during which it revealed plans to expand production capacity at its Malaysia and Austria factories, and hinted at continuing to dispose of non-core assets in its digital lighting business.

Reports indicate that last May, ams OSRAM stated it would seek optimization opportunities for its factories in Austria, Germany, Malaysia, China, Singapore, and the Philippines.

According to information revealed or hinted at during the conference, ams OSRAM will expand production at its Kulim plant in Malaysia and its Premstaetten plant in Austria, covering different technologies.

Among them, the expansion of the Kulim factory mainly focuses on LED manufacturing and future technologies (more precise, complex, and high-end LED technologies). ams OSRAM stated that driven by market demand in LED and automotive manufacturing, the production capacity utilization rate at the Kulim factory is very high, which is one of the reasons for the company's plan to increase investment. Meanwhile, the Austrian factory is more related to CMOS manufacturing. At the same time, ams OSRAM may reduce investment in other factories.

ams OSRAM stated that the expansion of these factories, as part of the company's capital expenditure targets, will support future production capacity demands across different technology levels. Currently, the company is preparing to readjust the complete concept of its manufacturing blueprint, with further updates expected to be announced next spring.

As for non-core assets, ams OSRAM will continue to divest them to further streamline its business structure and adjust its product portfolio. To date, ams OSRAM has divested its North American digital systems business DS, Digital Lumens, and the lighting components factory in Bulgaria, while retaining the horticultural lighting luminaire plant Fluence by Osram, as well as the general lighting business Traxon Technologies (related to architectural lighting). (Source: LEDinside)

MLS Co., Ltd.: LED packaging orders expected to be robust

Mass production of plant growth chambers has begun.

On November 4, MLS Co., Ltd. stated during an investor survey that its UVC deep ultraviolet disinfection series products can effectively sterilize surfaces. The UVC LED chips supplied by Zhixin Semiconductor (Hangzhou) Co., Ltd., in which the company holds a stake, officially entered production in Hangzhou in April. They are currently mainly applied in the latest green disinfection equipment of Zhishan Shidai Intelligent Technology (Beijing) Co., Ltd. According to tests conducted in the P3 laboratory of the Jiangsu Provincial Center for Disease Control and Prevention (CDC) on the inactivation of the novel coronavirus, the second-level inactivation rate against SARS-CoV-2 reached 99.994%.

In the LED business, the domestic LED industry has maintained high prosperity since the beginning of this year. In the future, driven by improved industry sentiment and increased downstream demand, the company expects robust orders for its Packaging business, with production capacity utilization remaining at a high level. The company purchases chips from its invested affiliates Aoyang Shunchang and Xiamen Kaifajing, while also sourcing from major domestic and international chip manufacturers such as Epistar, Sanan Optoelectronics, HC Semitek, and MTC, to jointly ensure chip supply.

The company's plant growth chambers have begun mass production and are being gradually promoted. The company's forage biological modules mainly aim to address issues such as livestock overloading in the Northwest region, insufficient supply of fresh forage in winter, and substitution for imported alfalfa. China's consumption of beef and mutton is growing rapidly, but breeding resources such as forage remain scarce. As a major province for cattle and sheep breeding in western China and a core focus of poverty alleviation efforts, Xinjiang has huge potential demand for horticultural lighting.

The company is currently focusing on Mini LED, horticultural lighting, and UVC deep ultraviolet disinfection and air purification. These areas will serve as the company's future development directions. Meanwhile, the channel businesses of the LEDVANCE and MLS brands, along with LED packaging manufacturing, constitute the company's core businesses. The company is continuously advancing market expansion and process improvements to enhance its market share and profitability.

The specific Q&A transcript is as follows:

Q: What are the advantages of the company's plant growth chambers compared to traditional cultivation methods? What are the main downstream applications, and what is the market potential?

A: On September 26, 2021, the Company's subsidiary Kuitun MLS Optoelectronic Biotechnology signed a procurement contract for smart plant growth chamber equipment with Tianxing Animal Husbandry, with a total contract amount of RMB 160 million. The Company's plant growth chambers have begun mass production and are being gradually promoted. The Company's forage biological container modules are mainly dedicated to addressing issues such as livestock overloading in Northwest China, insufficient supply of fresh forage in winter, and import substitution of alfalfa.

Compared with traditional agriculture, the application of horticultural lighting offers advantages such as shorter growth cycles, higher yield per unit, and independence from seasonal constraints. Plant factories using horticultural lighting equipment can achieve year-round production of fresh forage. China's consumption of beef and mutton is growing rapidly, but breeding resources such as forage remain relatively scarce. As a major province for cattle and sheep farming in western China and a key focus of poverty alleviation efforts, Xinjiang has huge potential demand for horticultural lighting.

Q: What is the forecast for the future prosperity of the company's LED packaging business, and where are the main growth drivers for the company's packaging segment?

A: Since the beginning of this year, the domestic LED industry has maintained high prosperity. In the first half of the year, the company's Packaging business generated Revenue of RMB 3.535 billion, a Year-on-year (YoY) increase of 80.75%. Looking ahead, driven by improved industry sentiment and increased downstream demand, the company expects robust orders for its Packaging business, with Production capacity utilization remaining at a high level.

Q: Which upstream companies does the company mainly purchase LED chips from, and what is the current price trend for chips?

A: The company purchases chips from its invested affiliates, Aoyang Shunchang and Xiamen Development Crystal, and also procures chips from major domestic and international chip manufacturers such as Epistar, Sanan Optoelectronics, HC Semitek, and MTC, jointly ensuring chip supply. Currently, chip prices have stopped rising and are gradually returning to pre-surge levels; therefore, the production costs of the company's manufacturing business will also gradually decrease.

Q: What are the company's current main strategic focus areas?

A: We are currently focusing on Mini LED, horticultural lighting, and UVC deep ultraviolet disinfection, sterilization, and air purification. These areas will serve as the company's future development directions.

Meanwhile, the brand channel business of LEDVANCE and MLS, as well as the LED packaging manufacturing business, are the company's current core businesses. The company is continuously advancing market expansion and process improvements to enhance its market share and profitability. Guided by the core strategic concepts of "brand strategy" and "intelligent manufacturing," the company integrates global resources, promotes technological innovation, and provides high-quality products and lighting application solutions to global customers and strategic partners.

Q: What are the company's technical R&D advantages in horticultural lighting and air purification?

A: In the field of horticultural lighting, in August and September 2021, the Company signed Project Cooperation Agreements with the CAS Center for Excellence in Molecular Plant Sciences and the Institute of Urban Agriculture of the Chinese Academy of Agricultural Sciences, respectively, to deploy horticultural lighting projects in the fields of alfalfa and forage grass. Yang Qichang, the person in charge of the forage grass project cooperating with the Company, is the chief of the Plant Factory Innovation Team at the Institute of Urban Agriculture of the Chinese Academy of Agricultural Sciences. In August 2021, this team achieved a breakthrough in agricultural timing in the field of rice.

In the field of air purification, in May this year, the company jointly established the holding subsidiary Kongjing Shijie Intelligent Technology Co., Ltd. with the Zhong Nanshan Medical Foundation of Guangdong Province, Green Era (Guangdong) Information Consulting Center (Limited Partnership), and Yuewei Association (Guangdong) Environmental Technology Co., Ltd. It will achieve risk assessment and early warning for overall public spaces through real-time dynamic sensing, data collection, and intelligent analysis.

Q: What are the company's technical advantages in Mini LED?

A: The company began its Mini LED display layout in 2019. Mini LED displays are mainly divided into two segments: Mini LED direct display and Mini LED backlighting, with the company focusing on the Mini LED direct display segment. To address current issues regarding yield rates and display performance in mass production of Mini LED COB, the company has directed its R&D efforts towards new Mini LED COB packaging materials, processes, and equipment. The company has successfully developed a new manufacturing technology for Mini LED RGB display modules, which includes Mini LED electrode technology, anisotropic conductive adhesive bonding technology, thermocompression reflow process technology, and related supporting equipment, accumulating multiple patented technologies aligned with these innovations.

The company has collaborated with technical teams from renowned universities for many years, successfully developing a technical solution to address short-circuit issues between the positive and negative electrodes of Mini LED, along with anisotropic conductive adhesive bonding technology. Currently, most industry peers use traditional solder paste processes to connect inverted Mini LED chips to circuit boards. The company's proprietary technology helps reduce costs and improve production efficiency.

Q: What are the company's plans for the future development of LEDVANCE?

A: Since the beginning of this year, the global LED lighting market has remained robust. As a leading global lighting brand, LEDVANCE（朗德万斯） has benefited from the improved industry outlook, while also expanding new channels and continuing to integrate the supply chain, resulting in enhanced profitability. In the first half of this year, LEDVANCE（朗德万斯） contributed revenue of RMB 4.812 billion, with a gross profit margin of 41.21% and a profit contribution of RMB 389 million.

First, in emerging markets such as Asia-Pacific and Latin America, we will leverage our strong international brand effect to further expand the market and increase market share. Second, we will seize the opportunities presented by the continuous advancement of new infrastructure in Europe and the United States and the rising overseas LED penetration rate to increase our market share in these regions. Third, we will strengthen LEDVANCE's domestic business development in China; through coordination with the company's domestic supply chain and mature sales models, both revenue and profit for LEDVANCE in China will increase.

Q: What are the downstream applications of the company's UVC deep ultraviolet products and air purification products?

A: Currently, air purification products mainly cooperate with institutions such as hotels, schools, and hospitals, dedicated to solving indoor air safety issues in public spaces. The company's launched situational awareness system for public spaces can effectively monitor indoor air data indicators, allowing consumers to enter and exit public places with peace of mind; the UVC deep ultraviolet disinfection series products can effectively perform surface sterilization. The UVC LED chips provided by Zhixin Semiconductor (Hangzhou) Co., Ltd., in which the company holds a stake, officially went into production in Hangzhou in April. They are currently mainly applied in the latest green disinfection equipment of Zhishan Shidai Intelligent Technology (Beijing) Co., Ltd. After testing by the P3 laboratory of the Jiangsu Provincial Center for Disease Control and Prevention (CDC) for inactivation of the novel coronavirus, the second-level inactivation rate against SARS-CoV-2 reached 99.994%.

The company has currently launched products such as the MLS Negative Ion Oxygen Bar, UVC Disinfection Robot, Car Air Purifier, and Refrigerator Guardian.