AAC TECH (02018) is rapidly expanding its automotive acoustics business, entering the global industry T0 supply chain.

With the rise of new energy vehicles and the increasing demand from consumers for vehicle intelligence and comfort, cars are no longer just a means of transportation, but also a mobile intelligent space. As in-car acoustics systems are crucial for enhancing comfort and entertainment inside the vehicle, the market demand is also rapidly increasing. Traditional car audio hardware generally suffers from issues such as heaviness, occupying large space, and difficulty in balancing high and low-range tones. However, with the continuous development of digital signal processing technology and audio codec technology, in-car audio systems can achieve higher audio resolution, lower distortion, and broader dynamic range, providing users with clearer and more realistic sound effects. Additionally, intelligent voice interaction, in-car entertainment systems, and other smart functions are constantly being integrated into in-car audio systems, making them not only audio playback devices but also a part of the intelligent car ecosystem. The concept of intelligent cockpit has emerged, with the number of car speakers increasing rapidly, and continuous innovation and upgrades of car audio devices. The application scenarios are further expanding, greatly ensuring the incremental space of the car audio market. According to the Gaishi Automotive Research Institute, the market size of in-car audio systems is expected to exceed 90 billion yuan by 2025, showing tremendous market potential. Currently, many domestic manufacturers are enhancing brand awareness and market share through technological innovation, cost control, and market expansion, securing a place in the in-car audio market. AAC TECH has 30 years of experience in the acoustic field and deep technical expertise in designing and manufacturing acoustic products such as micro-speakers and audio processing technology. This enables them to apply advanced acoustic technology from the consumer electronics field to the automotive industry, developing innovative products such as small-sized, high-performance, and thin-profile in-car speakers. This lays the foundation for high-quality performance of in-car audio systems, providing a unique advantage. By entering the automotive acoustic field with a comprehensive and innovative solution, AAC TECH provides advanced solutions for intelligent vehicles. They have upgraded their mobile phone acoustic production line to a car audio production line at their factory in Changzhou, and have collaborated with popular domestic new energy vehicle models to develop innovative speaker products, responding quickly to market demand. AAC TECH's speakers, amplification products, and audio signal processing technologies work seamlessly together to enhance the in-car audio experience. After expanding their product line, AAC TECH vertically iterated and upgraded their entire product line through product iteration, software development, and technical support. In terms of amplifiers, AAC TECH offers a range of car amplification products from basic to high-end. Their Amplifier and Booster products feature lightweight and compact designs, supporting multi-channel output, high-power playback, strong heat dissipation, and stable efficiency under high loads. On the software support front, AAC TECH has exclusive audio algorithms that enhance hardware performance, providing users with a premium audio experience. They also have a professional testing team that ensures the audio system is optimized for the best sound quality. The Geely Galaxy E5 in-car audio solution, highlighting "Boundless Sound," is provided by AAC TECH and has received positive feedback from users. In addition, based on customer requirements, AAC TECH's professional engineering team plans and designs car audio systems, determining speaker quantity, type, size, placement, amplifier power, performance parameters, and audio signal processing algorithms to ensure optimal sound quality and distribution in limited car interior space. To enhance global competitiveness, AAC TECH acquired an 80% stake in the leading car audio company PSS (Premium Sound Solutions) in February 2024. This acquisition is part of AAC TECH's strategy to diversify in the automotive industry and improve their portfolio of sound solutions. PSS is a global leader in acoustic components and audio systems supply, with over 50 years of experience.And is a diversified global automotive original equipment manufacturer's tier 1 supplier, with deep resources and barriers to entry on the client side, and more than 10 years of long-term cooperation with major European and American car manufacturers' OEMs, accounting for approximately 15% to 20% of the overall market share, producing over 1.1 billion amplifiers by 2023.The announcement shows that the financial situation of PSS Company is very stable, with an annual revenue of 450 to 500 million euros and a gross profit margin maintained at around 20%. The company has overall low debt, high operating efficiency, and can be considered a net cash flow company. It is expected to bring gains to AAC TECH after the merger. Regarding this acquisition, AAC TECH management has stated that AAC TECH has been deepening its presence in the automotive field for at least 3 years, mainly focusing on innovative speaker products, with billions of dollars in fixed projects and scale. PSS, on the other hand, mainly focuses on automotive speakers, and the two businesses complement each other well. The acquisition not only enriches the product structure of the company, but also achieves significant business transformation. Currently, the synergy between PSS and AAC TECH is gradually becoming evident. PSS products cover various specifications of high-performance innovative speaker products, and are actively expanding their market share among top-tier global automotive companies. AAC TECH, on the other hand, with its technology and manufacturing advantages accumulated in consumer electronics, has the ability to quickly introduce new product categories to domestic OEMs. Regarding the barriers of PSS products, industry insiders believe that the barriers in the automotive field are quite deep, different from the consumer electronics industry. In comparison, smartphones iterate every year or even every six months, while the product cycle of cars, especially in Europe and America, may be 3 to 5 years or even longer. Rapidly introducing new emerging car brands, AAC TECH possesses sustainable growth potential. With regards to the synergy with downstream customers, AAC TECH could consolidate its overseas market share while accelerating its expansion in the domestic market. As a primary supplier of automotive OEM components, PSS can tailor sound system solutions according to the positioning, characteristics, and target customer group of different car brands, ensuring that the sound system blends seamlessly with the overall design and style of the vehicle. After completing the acquisition, AAC TECH has rapidly made inroads into the applications of new emerging car brands, such as Xiaopeng MONA M03, WENJIE M9, and LI XIANG L series, all of which have adopted PSS speakers. In addition to customized cooperation with automotive brands, PSS speaker products can also meet different users' personalized sound effect needs to a certain extent. For example, some high-end car models equipped with PSS sound systems support users to adjust the sound effects according to their preferences. Users can adjust parameters such as volume, balance, bass enhancement, treble enhancement, and can also choose from various preset sound effect modes, such as "original hi-fi", "immersive surround", "spacious space", to meet the needs of users in different music types and listening scenarios. In the future, the competition among automotive OEMs will become increasingly fierce. In the context of severe homogenization in appearance, size, and configuration, the perception and interaction experience in the cabin have become important differentiating competitive dimensions. More and more speakers on board are becoming a trend, and the automotive field, as an emerging growth point in the consumer electronics industry, will have strong sustainable growth potential. AAC TECH can provide automotive manufacturers with a comprehensive car audio solution from hardware to software, from architecture design to system tuning, to meet the high-quality and high-performance requirements of car audio systems, thereby enhancing the depth and breadth of cooperation with automotive manufacturers. In fact, after completing the acquisition of PSS Company, AAC TECH has quietly become a globally competitive top automotive audio solution provider.