Visionox Shakes 8.6-Gen OLED Market with $55B Investment

Recently, the panel leader Visionox has joined hands with Hefei state-owned capital to plan an investment of 55 billion yuan in the 8.6th generation flexible AMOLED production line. It is reported that Visionox is currently heavily indebted and has poor performance; even so, the company still chooses to expand production on a large scale, perhaps to secure a share in the 8.6th generation OLED market.

Visionox is once again planning a new round of expansion plans.

On August 29, Visionox announced that the company will invest a total of 55 billion yuan with the Hefei municipal government to establish a project company and increase investment in the 8.6th generation flexible AMOLED production line.

The event has caused a sensation in the market. As the project investor, Visionox is not financially comfortable. As of the first half of the year, Visionox's debt-to-asset ratio is close to 80%, and the amount of monetary funds it holds is also unable to cover the sum of interest-bearing debt. In addition, the company's short-term debt repayment ability ranks at the bottom of the optoelectronics industry, with cumulative losses exceeding 8 billion yuan in less than four years.

Even though the cash flow is not abundant, why does Visionox still choose to expand production on a large scale? First, the current prosperity of the AMOLED industry is acceptable; second, leading enterprises such as Samsung and BOE have already implemented expansion orders.

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55 billion yuan investment in the 8.6th generation AMOLED production line

Visionox, with a market value of less than 10 billion yuan, plans to invest 55 billion yuan with state-owned capital.

The official announcement of Visionox shows that the company intends to sign an investment framework agreement with the Hefei municipal government on the "8.6th generation flexible AMOLED production line project", agreeing to cooperate in establishing and investing in a project company in Hefei. The total investment of the project is 55 billion yuan, including 33 billion yuan of equity investment and 22 billion yuan of debt financing.

Specifically, the project covers a glass substrate size of 2290 mm × 2620 mm, with a designed production capacity of 32K/month. According to the agreement, Visionox's wholly-owned subsidiary, Hefei Guoxian, will act as the project company, responsible for the investment, construction, and operation of the production line.

The announcement mentions that Hefei Guoxian will initially receive a registered capital of 2 billion yuan; of which Visionox will contribute 400 million yuan, accounting for 20%, and the remaining 1.6 billion yuan will be jointly undertaken by two enterprises under Hefei state-owned capital. At the same time, Visionox gives up some priority subscription rights to capital contributions, and after the completion of the initial capital increase, Hefei Guoxian will no longer be included in Visionox's consolidated financial statements.It is reported that Hefei Guoxian has not yet started its main business, and as of the end of June, the net profit has accumulated a loss of 5.1686 million yuan.

Data shows that Wei Xinuo is a leading company in the panel industry, focusing on the AMOLED field, with main products including flexible display screens, OLED, and liquid crystal panels, etc.

However, in recent years, the company's operating situation has not been good. As of the end of June 2024, Wei Xinuo had 8.587 billion yuan in monetary funds, but it could not cover the total of short-term borrowings, long-term borrowings, and non-current liabilities due within one year.

At the same time, in the second quarter, Wei Xinuo's debt ratio was as high as 77.36%, and the current ratio of 0.57 times and the quick ratio of 0.54 times ranked fifth from the bottom and seventh from the bottom among 95 secondary-level optical and optoelectronic companies of Shenwan, indicating that the company's short-term debt-paying ability is relatively weak in the industry.

It is worth mentioning that from 2021 to 2023, Wei Xinuo achieved net profits attributable to the mother company of -1.52 billion yuan, -2.066 billion yuan, and -3.726 billion yuan, respectively; and in the 2024 semi-annual report, the company's net profit attributable to the mother company still lost 1.177 billion yuan. In other words, the company has lost nearly 8.5 billion yuan in the past three and a half years.

On the one hand, there is a weak debt and profit situation, and on the other hand, it is still committed to increasing AMOLED. After Wei Xinuo's production expansion announcement, it has sparked heated discussions in the market.

In response to this, Wei Xinuo stated that the company's losses are mainly due to the large scale of fixed assets, facing a large depreciation pressure during the technology introduction period, and as the shipment volume increases, the company's revenue is also gradually recovering; and the AMOLED project will be carried out cautiously in stages and will not affect the cash flow.

The 8.6th generation OLED market is once again smoky.

Regarding the reason for "joining hands" with Hefei, Wei Xinuo stated in the announcement: investing in production lines in joint venture with state-owned shareholders can promote a long-term and stable cooperative relationship between state-owned capital and the company, and enhance the project's risk resistance ability.

Historically, Wei Xinuo has actually had multiple in-depth cooperation experiences with Hefei.On October 19, 2018, Visionox announced that the company planned to sign an agreement with the Hefei Municipal Government to establish and operate a 6th generation flexible AMOLED production line in Hefei, with a total investment of 44 billion yuan.

Four years later, in 2022, Visionox once again agreed with the Hefei Municipal Government to cooperate in the investment construction of a 6th generation flexible AMOLED production line, with a total project investment of 11 billion yuan, and successfully completed the project by the end of 2023.

Why does Hefei favor Visionox so much?

In fact, as early as 2008, Hefei joined hands with another panel giant, BOE, to invest in the construction of a 6th generation liquid crystal panel production line; currently, as a domestic new display competitive city with a continuous four-year industry scale and revenue breaking one hundred billion, Hefei also has the willingness to continue in-depth cooperation with various panel companies.

Focusing on the equity level, Hefei state-owned capital has also occupied a considerable share in Visionox's shareholder seats. As of the first half of the year, Hefei Jianshu holds 11.51% of the company's shares, making it the second-largest shareholder; while Hefei Jianshu's consistent action person, Kunshan Collective Assets, also holds 9.48% of the company's shares. At the same time, Visionox also revealed in its semi-annual report that Hefei Jianshu also forms a consistent action person with the company's team representatives Zhang Deqiang and Yan Ruoyuan.

On the other hand, the bright prospects of the AMOLED industry may also be one of the reasons for Visionox to implement this investment.

According to CINNO Research statistics, in the first half of 2024, the global market AMOLED smartphone panel shipments were about 420 million pieces, a year-on-year increase of 50.1%, and the industry recovery momentum is strong.

Looking at the medium and long term, AMOLED may maintain strong demand. According to Omdia forecasts, from 2023 to 2028, the annual compound growth rate of shipments for IT product AMOLED panels and automotive display AMOLED panels will reach 56% and 49%, respectively.

More importantly, the fierce AMOLED "arms race" may to some extent force Visionox to "have to" maintain a high level of expansion intensity.

In April 2023, Samsung announced that it would spend 4.1 trillion won, equivalent to 21.5 billion yuan, to build an 8.6th generation AMOLED panel production line; and BOE also announced in November 2023 that it plans to invest 63 billion yuan to build an 8.6th generation AMOLED production line project in Chengdu.In addition to expanding production, the "competition" for AMOLED market share has also entered a "white-hot" stage. According to CINNO Research statistics, from January to June 2024, the company's AMOLED smartphone panel accounted for 11.3% of the global market share, with a single second-quarter share of about 11%, ranking third globally, lagging behind Samsung and BOE by 35 percentage points and 4 percentage points, respectively, and leading behind China Star Optoelectronics and Shenzhen Tianma by only 2 percentage points.

The weak Visionox

Looking back, Visionox was formerly the OLED project team established by Tsinghua University in 1996. From 2001 to 2010, Visionox ushered in key moments such as the establishment of the company entity, the completion of the first PMOLED production line, and the landing of the first AMOLED pilot production line, allowing the company to grow rapidly in scale.

Starting in 2016, the listed company Black Cow Food carried out a major asset sale, gradually divesting its food and beverage business. Subsequently, after the injection of OLED assets, Visionox officially went public through a reverse takeover of Black Cow Food on the Shenzhen Stock Exchange.

However, after entering the capital market, Visionox's performance was lackluster, with increasing debt and a weak self-funding capability, highlighting the fact that the company relied more on government subsidies for "recovery" during its listing period.

In some periods when subsidies were not in place, Visionox's performance became even more "powerless." Taking the first half of 2021 as an example, the company only received 149.7 million yuan in government subsidies, a significant decrease of 810 million yuan compared to the same period in 2020; as a result, the company's loss increased to 743 million yuan.

Of course, Visionox did not "sit idly by" in the face of its own problems.

Currently, Visionox is trying to strengthen its competitiveness through asset operations. On July 27, 2024, the company announced a plan to issue additional shares, intending to purchase 40.91% of Hefei Visionox shares held by He Ping Company, Xin Ping Fund, and Xing Rong Company for a transaction amount of 6.098 billion yuan. After the transaction is completed, the company's shareholding in Hefei Visionox will increase to 59.09%, and Hefei Visionox will be officially consolidated into the company's financial statements.

According to the performance commitment, the total net profit accumulated by Hefei Visionox during the three years from 2024 to 2026 will not be less than 2.92 billion yuan. If the target's performance meets the standard, it will alleviate the company's loss to a certain extent.

With the gradual construction of new production capacity, Visionox may occupy a place in the 8.6th generation OLED market in the future.