New stock preview | Yunying Valley goes to Hong Kong IPO: Can the domestic AMOLED display driver chip leader take advantage of the situation?

In 2025, driven by the dual factors of the outbreak of AI technology application and the recovery of consumer electronics demand globally, the semiconductor industry has entered a new upward cycle. At the same time, the process of indigenization in China's semiconductor industry is accelerating, especially against the backdrop of the continuous upgrade of US technology control, self-controllability has become an important part of national strategy. Unlike the past, the current semiconductor market presents a clear characteristic of "AI technology-driven" and "localization substitution", creating differentiated investment opportunities for the capital market. Recently, another semiconductor company has embarked on its journey to list on the Hong Kong Stock Exchange. Yunyinggu Technology Co., Ltd. (referred to as "Yunyinggu") has submitted a listing application to the Main Board of the Hong Kong Stock Exchange, with CICC and CITIC SEC as its joint sponsors. It is worth mentioning that in January 2023, the company signed a listing counseling agreement to be listed on the A-share market, but later, due to multiple reasons, the company shifted to the Hong Kong Stock Exchange. So what are the highlights of Yunyinggu that are worth market attention behind this move from A to Hong Kong? Leading market position, steady revenue growth The prospectus shows that Yunyinggu is a company specializing in the design of AMOLED display driver chips, dedicated to providing reliable and high-performance display driver solutions for consumer electronics brand companies. The company started focusing on the R&D and design of AMOLED display driver chips in 2017, and successfully mass-produced and supplied AMOLED display driver chips to one of the largest AMOLED panel manufacturers in China in 2021. This made the company the first mainland Chinese AMOLED display driver chip design company to supply mainstream consumer electronics brand companies. Since then, Yunyinggu has gradually grown into the number one in mainland China and the fifth largest AMOLED display driver chip supplier in the world. In terms of revenue, the company's total revenue has continued to grow in recent years. In 2022, 2023, and 2024, Yunyinggu Technology achieved total revenues of approximately RMB 551 million, RMB 720 million, and RMB 891 million, respectively. The company's losses have also increased, with losses of approximately RMB 124 million, RMB 232 million, and RMB 309 million in the respective years. In terms of products, the company mainly offers two types of products: AMOLED display driver chips, mainly used for high-end smartphones; and Micro-OLED display backplane/drivers, mainly used to support AR/VR head-mounted devices. In recent years, revenue from AMOLED display driver chips and the revenue ratio have increased year by year. The revenue has increased from RMB 3.61 million in 2022 to RMB 8.16 million in 2024, and the revenue ratio has increased from 65.5% to 91.6%. It is understood that this is related to the company's strategy. According to the prospectus, during the reporting period, the company focused mainly on increasing the sales volume of AMOLED display driver chips to consolidate its market-leading position. In contrast, revenue from Micro-OLED display backplanes/drivers products and the revenue ratio have continued to decline. Revenue from this product was RMB 1.891 million, RMB 1.188 million, and RMB 750,000 in the respective years, with revenue ratios of 34.3%, 16.5%, and 8.4%. It is also important to note that Yunyinggu's business model adopts the Fabless operation mode, which is common in the integrated circuit design industry. The company focuses on chip R&D and design, relies on third-party wafer fabs to manufacture its designed chips, and relies on OSAT suppliers for chip packaging and testing. This model allows the company to focus on innovation and core competitiveness in product design, and fully utilize the professional technology of leading manufacturers in the industry. This not only reduces capital expenditure for the company but also provides flexibility to adapt quickly to changing market demands and technological advancements. However, it is important to note that the company relies heavily on related suppliers in this model. During the reporting period, the company's purchases from TSMC accounted for 59.5%, 65.8%, and 74.5% of its total purchases, respectively. Prospects for the domestic chip market In addition, due to intensive capital requirements and technological barriers, there are currently only a few large OLED display panel manufacturers. Therefore, during the reporting period, revenue from the company's top five customers accounted for 72.9%, 91.0%, and 90.2% of total revenue, with sales to the largest customer accounting for 20.5%, 48.2%, and 54.1% of annual revenues, respectively. However, this also allows the company to achieve high customer stickiness. According to Frost & Sullivan's report, as of December 31, 2024, the company's AMOLED display driver chips are mass-produced and shipped to several leading smartphone brands worldwide, being used in over 10 product series, accounting for more than a quarter of the global market share. At the same time, as of December 31, 2024, the company is the first mainland Chinese company certified by brand companies and the only company with cumulative sales of over ten million AMOLED display driver chips to brand companies, with sales exceeding 50 million chips in 2024. This is also due to the company's continued high investment in research and development. R&D expenses for the reporting period were RMB 188 million, RMB 177 million, and RMB 242 million, accounting for 34.1%, 24.6%, and 27.2% of annual revenues, respectively. Looking at the industry outlook, the development prospects of the chip market are vast. It is understood that display driver chips are core components in electronic devices, establishing a connection between processing units and display panels, converting digital instructions into visible images on the display panel. Display driver chips receive instructions and data from the processing unit, generate signals with specific voltage, current, timing, and demultiplexing, and present the target image on the display panel. According to Frost & Sullivan's data, the growth of the global display driver chip industry is closely linked to the overall development of the panel supply chain. China, as the world's largest consumer electronics market, naturally drives the vigorous development of the local display panel industry with its huge demand for display panels. China, which currently dominates the global TFT-LCD panel manufacturing field, is expected to follow a similar trajectory in the development of the AMOLED panel industry. Compared to TFT-LCD display panels, AMOLED display panels have advantages such as thinness, low power consumption, and high contrast, and their penetration rate in the display panel market is expected to continue to rise. According to Frost & Sullivan's report, by 2029, the sales volume of small and medium-sized AMOLED display panels, represented by smartphones, will reach 900 million units, and with the penetration rate of smartphones equipped with AMOLED panels within the global smartphone market calculating, the penetration rate will increase from 60.1% in 2024 to 69.9% in 2029. At the same time, with improved yield rates and further cost reductions, large-sized AMOLED applications in tablets, laptops, car central control screens, TVs, and other devices will experience breakthroughs. By 2029, in the large-sized display panel market, the shipment ratio of AMOLED display panels will increase from 4.7% in 2024 to 10.4%. The increased penetration rate of AMOLED display panels will drive the continuous growth of AMOLED display driver chip sales, and from 2024 to 2029, the global sales volume of AMOLED display driver chips will increase from 1.3 billion to 2.1 billion units, with a compound annual growth rate of 10.3%. In recent years, global panel manufacturing capacity has increasingly shifted to mainland China, making mainland China gradually become the global manufacturing center for display panels. China's share of global display panel manufacturing capacity has increased from 50.0% in 2020 to 70.0% in 2024, and is expected to reach 80.0% in 2029. With the continued shift of this industry, the growth rate of the display driver chip market in mainland China has significantly exceeded the global market. The sales volume of display driver chips in mainland China increased from approximately 3.75 billion units in 2020 to 4.456 billion units in 2024, with a compound annual growth rate of 4.4%, and its share of the global market also increased from 45.3% in 2020 to 53.9% in 2024. In addition, according to Frost & Sullivan's data, by 2024, mainland China's AMOLED panel capacity accounted for about 55.0% of the global capacity. With the accelerated development of production lines in this region, this share is expected to rise to 60.8% by 2029. This development trend highlights the increasingly important position of the Chinese display driver chip industry in the global supply chain. In summary, as a market leader in a niche field, the semiconductor industry's high prosperity provides continuous growth potential for Yunyinggu in the future. However, the company's operations will also face certain challenges due to risks such as upstream and downstream concentration. With the dual drive of national policies and market demand, the market continues to favor the long-term growth potential brought by domestic substitution. Could this be a key factor in driving Yunyinggu's listing? This requires continuous attention from the market.