Sanan Optoelectronics: Controlling Shareholder Receives CNY 5 Billion Capital Injection to Enter the New Energy Vehicle Market

On the evening of July 12, Sanan Optoelectronics announced that Changsha Jixin Investment Partnership (Limited Partnership) (hereinafter referred to as "Changsha Jixin") plans to inject RMB 5 billion into the company's controlling shareholder, Sanan Electronics. After this capital increase, Changsha Jixin will hold an 11.124% equity stake in Sanan Electronics, while the controlling shareholder Sanan Group's shareholding ratio will decrease from 68.539% to 60.915%. The company's controlling shareholder and actual controller remain unchanged.

Controlling shareholder receives capital increase of 5 billion

The announcement stated that the capital increase agreement signed between the company's controlling shareholder, Sanan Group, and Changsha Jixin regarding Xiamen Sanan Electronics Co., Ltd. stipulates that Changsha Jixin will inject RMB 5 billion into the company's controlling shareholder, Sanan Electronics, of which RMB 49.3103 million will be recorded as registered capital of Sanan Electronics, and the remaining RMB 4.951 billion will be recorded as capital reserve of Sanan Electronics. Upon completion of this capital increase, Changsha Jixin will become the fourth shareholder of Sanan Electronics, holding an 11.124% equity interest in Sanan Electronics.

The announcement shows that Sanan Electronics is the controlling shareholder of Sanan Optoelectronics, holding 27.10% of the company's total shares. Meanwhile, Sanan Group holds 5.44% of Sanan Optoelectronics' shares. Sanan Group is the controlling shareholder of Sanan Electronics. After this change in the shareholding structure of the controlling shareholder, the controlling shareholder of Sanan Optoelectronics has not changed.

Lin Xiucheng, the company's actual controller, holds a 59.68% equity interest in Sanan Group and indirectly controls 32.54% of the company's shares through Sanan Group and Sanan Electronics, serving as the company's actual controller. Following this change in the shareholding structure of the controlling shareholder, the company's actual controller remains unchanged.

It is worth noting that, like the second-largest shareholder Changsha Jianxin, Changsha Jixin, which is increasing its capital investment in Sanan Electronics this time, also has a state-owned background. According to Tianyancha, Changsha Urban Development Group Co., Ltd. holds a 90% stake in Changsha Jixin. As introduced on the group's official website, Changsha Urban Development Group was established in September 2019 and is a municipal investment-oriented innovative enterprise group fully funded by the Changsha Municipal State-owned Assets Supervision and Administration Commission, with total assets exceeding RMB 240 billion.

Increased investment in SiC, rapid growth of compound semiconductors and Mini LED

Sanan Optoelectronics is a leading domestic manufacturer of LED chips, and has comprehensively laid out its compound semiconductor business. Driven by applications such as new energy vehicles and 5G, the revenue scale of this business is growing rapidly.

Everbright Securities stated that silicon carbide (SiC) products demonstrate excellent performance in the main drive modules of new energy vehicles and are gradually entering a period of volume growth. According to forecasts by Cree, SiC inverters can increase driving range by 5%–10% and save $400–$800 in battery costs (based on an 80 kWh battery at $102/kWh). High-end models from automakers such as Tesla and NIO have already adopted SiC products, and more vehicle models are expected to follow suit in the future.

As the new energy vehicle industry continues to thrive, Sanan Optoelectronics is focusing on automotive-grade chips and making large-scale investments in the SiC sector. It is reported that in 2021, Sanan Optoelectronics' SiC diodes secured over 500 new sample customers, with shipments to more than 200 customers, and over 60 products have entered mass production; industrial-grade SiC MOSFET products have been sent to customers for verification, while automotive-grade products are undergoing tape-out design and testing in collaboration with multiple automakers; significant breakthroughs have been achieved in cooperation with key customers in the SiC MOSFET automotive-grade and new energy vehicle sectors.

Sanan Optoelectronics recently stated on the investor interaction platform that the company is accelerating revenue growth for its compound integrated circuit products. Currently, the production capacity for RF front-end, power electronics, optical communications, and filters within its compound semiconductor integration business is expanding, with capacity gradually being released. Its wholly-owned subsidiary, Hunan Sanan, has a silicon carbide (SiC) production capacity of 3,000 wafers/month, which has already entered production. The company has secured customers in the onboard charger sector, including VMAX and Fudi Power (BYD), and has achieved stable supply.

In addition, Hunan Sanan Semiconductor, a wholly-owned subsidiary of Sanan Optoelectronics, has jointly established a joint venture with an affiliate of Li Auto, primarily engaged in the manufacturing and sales of power electronic components, as well as the manufacturing and sales of semiconductor discrete devices.

The Mini LED market is experiencing rapid growth, supported by technological accumulation and production capacity advantages, allowing us to share the first wave of benefits with major clients. Driven by both direct display and backlighting applications, the Mini LED market size is expected to grow rapidly. According to Arizton data, the global Mini LED market size was approximately USD 150 million in 2021 and is projected to exceed USD 2.32 billion in 2024.

Sanan Optoelectronics has achieved initial success in expanding the Mini LED market and has begun collaborations with key domestic and international customers. The newly expanded production capacity at Quanzhou Sanan and Hubei Sanan is being gradually released, which will lead to a continuous increase in future Revenue scale and sustained improvement in profitability.