Foshan Lighting: Leveraging the development opportunities in the new energy market, headlight products are expected to see a simultaneous increase in volume and price

Foshan Lighting's recently released investor relations activity record shows that under the historical opportunity of new energy vehicles reshaping the industry landscape, the automotive lighting industry has welcomed the dividends brought by industrial transformation, and automotive lighting products are expected to see a simultaneous increase in volume and price. In addition, General Manager Lei Zihai stated: "Foshan Lighting will continue to focus on its core lighting business, driven by the dual wheels of 'endogenous development' and 'extensive expansion', accelerating the promotion of high-quality enterprise development. "

The following is a summary of selected Q&A content:

Introduction to Nanning Liaowang

南宁燎旺的前身为南宁市汽车配件一厂，成立于1956年。2021年 8 月成为公司控股子公司，公司持有南宁燎旺 53.79%的股权。历经数十年发展，南宁燎旺已成为一家集研发、生产、检测、销售为一体的汽车灯具专业公司，主要产品包括前照灯、后组合灯、雾灯、倒车灯、室内灯、牌照灯、迎宾灯等，囊括了汽车需要的所有车灯。南宁燎旺主要客户包括长安汽车、上汽通用五菱、一汽奔腾、长城汽车、上汽大通、东风柳汽、赛力斯汽车等汽车整车制造企业，年生产能力超过 500 万台套，在南宁、柳州、重庆、青岛、印度尼西亚均有生产制造基地，良好的布局、能辐射国内不同的区域市场。

Nanning Liaowang achieved double growth in revenue and net profit year-on-year in the first half of 2022. Nanning Liaowang continues to develop mid-to-high-end customers, with the proportion of new energy vehicle lighting products gradually increasing, continuously optimizing the product structure.

What advantages does Nanning Liaowang possess in market competition?

Nanning Liaowang has been deeply engaged in the automotive lighting industry for over 60 years since its establishment, long committed to the R&D, design, production, and manufacturing of complete vehicle luminaire systems, with a stable base of OEM clients. Nanning Liaowang possesses an excellent integrated industry / supply chain platform, facilitating further expansion and integration in new technology fields such as intelligence and interactivity. During the R&D process, by connecting upstream and downstream segments of the industry / supply chain, the level of customization in product development is further enhanced, while cost competitiveness is solidly strengthened.

In terms of R&D investment and layout, first, establish a 'One Institute and Three Centers' to recruit high-end talent, deploy R&D teams across multiple regions, and enhance the company's core competitiveness. Second, increase R&D expenditure, deepen industry-university-research cooperation, focus on technological development trends related to the automotive lighting industry, conduct targeted forward-looking technical research, accelerate technology transfer and commercialization, carry out technology marketing, drive R&D through projects, and stimulate projects through R&D. Third, the company's scaled [[17. 产业与经济常用词]] and continuously improving product R&D and technical capabilities play a positive role in expanding into mid-to-high-end markets.

Since the Acquisition of Nanning Liaowang, how has it helped Nanning Liaowang develop?

Company's [[17. 产业与经济常用词]] of Nanning Liaowang has empowered Nanning Liaowang to develop positively as a whole, accelerating the pace of product transformation and upgrading. Nanning Liaowang adheres to its service philosophy of being responsible to customers and providing excellent service to both new and old clients. Building on its existing customer base, it is actively expanding into new customer segments and moving towards .

Expansion into the mid-to-high-end market, with a focus on the new energy sector. After acquiring Nanning Liaowang, the company primarily empowered Nanning Liaowang in the following aspects:

First, it financially supports Nanning Liaowang by enhancing its creditworthiness for financing, improving its cash flow, reducing financing costs, and providing strong financial backing for Nanning Liaowang's development.

Secondly, in terms of market expansion, leveraging the platform and resources of a listed company to accelerate Nanning Liaowang's market development. Over the past year, Liaowang has conducted effective exchanges with relevant OEMs, laying a solid foundation for future cooperation. In the first half of this year, Nanning Liaowang added 19 new headlight development projects for different vehicle models, of which 5 have already entered mass production. The increase in new projects has laid a solid foundation for Nanning Liaowang's future development. While expanding into new customer segments, extending to mid-to-high-end models of existing customers is expected to improve capacity utilization and gradually achieve economies of scale.

三是研发上，借助公司在车灯模组和国星光电在 LED 封装领域的技术优势，南宁燎旺有望在汽车照明领域取得更多的成本和技术优势，尤其是国星光电并购风华芯电后，进一步加强了产业链上中下游的合作，为研发定制车规级 LED 产品提供了有利的条件。

Company's outlook for the future development of the automotive lighting business

The headlight industry, under the historical opportunity of new energy vehicles reshaping the Industry landscape, has welcomed the dividends brought by industrial transformation, marking a new opportunity for Nanning Liaowang's rapid development. Nanning Liaowang is currently expanding well with new energy vehicle clients; most of the 19 new model projects added in the first half of this year are high-quality new energy vehicle clients within the Industry.

New energy vehicle lighting imposes higher requirements on lighting performance, R&D, and technology. The unit price and gross margin of new energy vehicle lights are superior to those of traditional fuel vehicle projects. With the increasing penetration of new energy vehicles, the automotive lighting business is expected to see a simultaneous increase in volume and price. Nanning Liaowang will keep pace with industry trends, increase R&D investment, focus on the mid-to-high-end segment, improve product structure, and continuously enhance its market competitiveness.

What was the original intention behind Sanan Optoelectronics' acquisition? What are the synergies between Sanan Optoelectronics' business and Foshan Lighting, Nanning Liaowang?

The company's acquisition of Sanan Optoelectronics is primarily based on future strategic development considerations. Due to the increasingly fierce competition in the general lighting market, the company hopes to seek new performance growth points by exploring emerging lighting fields. However, fields with good growth potential such as automotive lighting, marine lighting, smart lighting, and healthy lighting all have high requirements for LED devices and components. Sanan Optoelectronics is located in the upstream and midstream of the LED industry supply chain. After the merger and acquisition, the company can connect its sales advantages in the terminal market with Sanan Optoelectronics' technical advantages in the LED industry to quickly launch more innovative, leading, and competitive products, helping the company expand into emerging lighting fields.

For example, in the field of [[1.3 LED]] automotive lighting, Sanan Optoelectronics can customize vehicle-grade lighting products with small angles, high power density, and compliance with various application scenarios; in the marine lighting field, Sanan Optoelectronics can provide high-power, high power-density white light [[1.3 LED]] sources, etc., further accelerating the company's process of innovation and market share capture.

Company's outlook for future development

Regarding future development, we believe that opportunities and challenges coexist.

In the general lighting sector, we are firmly committed to differentiation and functionality, accurately and keenly grasping market demands to innovate continuously, meeting customers' needs for diverse and customized lighting products while vigorously expanding into niche segments to cultivate new profit growth points.

In the automotive lighting sector, we continuously enhance our R&D capabilities, focus on mid-to-high-end products, expand partnerships with more well-known automotive manufacturers, and gradually increase market share and profitability.

In the field of LED Packaging, continue to accelerate progress in third-generation semiconductors, automotive devices, new optoelectronic devices and applications, continuously strengthen R&D reserves for core technologies in key areas such as "mini/micro LED", promote the transformation of scientific and technological achievements, and maintain a leading position in technology.

In the future, Foshan Lighting will continue to focus on its core lighting business, driving high-quality enterprise development through a dual-wheel drive of 'intensive growth' and 'extensive expansion'.