Zhaochi Semiconductor

I. Company Profile Jiangxi Semiconductor Co., Ltd. is a wholly-owned subsidiary of Shenzhen Zhaochi Co., Ltd. established in Nanchang High-tech Industrial Development Zone, Jiangxi Province, with a registered capital of 1.6 billion yuan. It mainly engages in the production of LED epitaxial wafers and chips, and belongs to the expansion of the LED segment of Zhaochi Group. The parent company Zhaochi Co., Ltd. was founded in April 2005. It is a high-tech enterprise recognized by the Ministry of Science and Technology and a municipal high-tech enterprise recognized by the Shenzhen Municipal Government. It was listed on the SME board of the Shenzhen Stock Exchange in June 2010. Zhaochi Co., Ltd. mainly engages in the R&D, design, manufacturing and sales of home audio-visual products, and insists on developing independent innovative technologies. Its products mainly involve traditional LCD TVs, Internet TVs and Internet video, digital set-top boxes, LED products and accessories, etc. The traditional business of Zhaochi Co., Ltd. mainly operates under the ODM model, that is, designing and manufacturing products for other brand manufacturers, distributors and retailers, and selling them under their brands. In 2016, Zhaochi Co., Ltd. fully entered the Internet TV and Internet video business. Through deep integration of terminals, content, platforms and other industrial links, it created a highly creative open ecological model in the field of Internet TV and Internet video. Together with multiple partners, it launched multi-brand smart terminal products centered on Fengxing TV, and video content services centered on Fengxing.com and partners' content, rapidly advancing the strategic upgrade and transformation from a traditional manufacturing enterprise to an Internet product and service platform provider. II. Impact of the Company's Establishment and Project Operation on Zhaochi Group's LED Business The LED industry includes upstream chip production, midstream packaging, and downstream application fields. In 2011, Zhaochi began to enter the midstream packaging industry and downstream application fields of the industrial chain. After nearly several years of steady development, and relying on export business channels, it effectively promoted the rapid growth of Zhaochi's LED production scale. Packaging and lighting businesses continued to climb, possessing strong market competitiveness in the industry, and it has become a leading LED enterprise. (1) In the midstream field, the subsidiary Shenzhen Zhaochi Energy-saving Lighting Co., Ltd. (hereinafter referred to as "Energy-saving Lighting") mainly engages in the R&D, production and sales of midstream LED devices and components. Based on the midstream packaging industry of the LED industrial chain, it is positioned in two core application fields: LED lighting and LED backlight. In 2016, Energy-saving Lighting was successfully listed on the National Equities Exchange and Quotations. At present, it has ranked among the top five LED packaging plants in China and ranks third in Shenzhen. Through targeted cooperation and joint development with upstream chip suppliers and downstream customers, Energy-saving Lighting provides terminal customers with higher-tech and more cost-effective LED products. In the field of LED TV backlight, the company has become one of the main suppliers of medium- and large-sized LED backlights; in the field of LED packaging, it participated in the research on new low-cost silicon substrate LED light source module technology in the National High-Tech Research and Development Program (863 Program) and the key technology research on LED chip-scale packaging (CSP) in the Shenzhen Technology Innovation Program technical research project. At present, the company has a total of 500 LED packaging lines in its Shenzhen and Nanchang manufacturing bases, and plans to gradually invest in and build a total of 1,000 packaging production lines after the completion of the expansion of the Nanchang Industrial Park, so as to expand LED packaging capacity and market share. (2) In the downstream field, in 2017, Zhaochi began to adjust its layout in the LED application field and participated in the establishment of Shenzhen Zhaochi Lighting Co., Ltd., actively building the brand construction of "Zhaochi" in the lighting application field. 2. Entering the LED optoelectronics industry is an extension and expansion of Zhaochi Co., Ltd.'s industrial chain. Investment in chips helps improve Zhaochi's full industrial chain layout in the LED industry. With the expansion of the company's LED packaging and lighting application business scale, the company's use of LED chips has increased significantly. Chips have become an important factor restricting the further development of the company's packaging and application lighting business. To make this industry bigger and stronger, it is necessary to build a complete industrial chain to have better development opportunities. The company plans to invest in Nanchang in the design, manufacturing and sales of LED epitaxial wafers and chips, aiming to master the core technology of chips, build a full industrial chain layout in the fields of LED chips, packaging, and application lighting, give play to synergistic effects, enhance overall competitiveness, help the company's LED industry quickly enter the international market, and participate in international competition.