Information on the Target

Wuxi Haoda Electronics Co., Ltd. (hereafter referred to as "Haoda Electronics") is a leading player in the domestic surface acoustic wave (SAW) device industry. The company specializes in chip design, manufacturing, and packaging, fitting the model of an integrated device manufacturer (IDM). Its product portfolio includes acoustic filters, duplexers, and resonators which find extensive applications in mobile phones, communication base stations, LTE modules, the Internet of Things (IoT), vehicle networks, smart homes, and other areas of radio frequency communication.

Haoda Electronics boasts a robust technical team, having received two National Science and Technology Progress Awards, and maintains extensive collaborations with renowned research institutions and universities. The company holds 19 patents related to surface acoustic wave devices, highlighting its strong innovation capabilities. According to its prospectus, Haoda Electronics plans to issue no more than 25,416,700 shares, representing at least 25% of the total post-issue share capital, with anticipated funds of 960 million yuan aimed at developing its research center, expanding production of SAW filters, and supplementing working capital.

Industry Overview in China

The global market for acoustic filters has surpassed 30 billion RMB, with the primary demand concentrated in domestic markets. The industry is characterized by high technological barriers, traditionally dominated by major foreign manufacturers such as Broadcom, Murata, Skyworks, and Qorvo. The pressing need for domestic substitutes for core components in radio frequency front-end setups means that there is currently a significant opportunity for growth and innovation in China’s semiconductor landscape.

Presently, the domestic market for acoustic filters has a localization rate of less than 5%, indicating an urgent need for domestic alternatives. The shift towards a capital market presence for companies like Haoda Electronics is anticipated to accelerate the localization process, unlocking vast development opportunities for industry leaders. As China pushes for a stronger semiconductor industry, regulatory support and market demand for local products continue to increase.

The emergence of 5G technology, coupled with the rise of smart vehicles and smart home applications, represents a significant growth avenue for companies in the SAW filter sector. As China's semiconductor industry moves toward self-sufficiency, we are likely to observe increased investments directed at technological advancements and scale-ups across domestic manufacturers. With emerging companies focusing on high-tech solutions, those that prioritize R&D and innovation are likely to establish themselves firmly in the market.

The competitive landscape in the SAW filter domain reflects a growing acknowledgment of local companies, as seen by the surge in demand for the products of firms like Huada Microelectronics, which has experienced rapid growth due to domestic replacement trends. As the market evolves, the shift towards utilizing homegrown technologies will play a pivotal role in shaping the future of this sector.

The Rationale Behind the Deal

The investment by Junxin Capital into Haoda Electronics comes after thorough research and a strategic commitment made as early as 2018. Junxin Capital’s decision to lead Haoda’s Pre-IPO funding round was ultimately driven by its ability to maintain a close rapport with the company's management over the past year. The professional expertise and strategic foresight demonstrated by Junxin Capital solidified their position as the preferred investor among several notable participants.

Investors recognize the substantial growth potential within the SAW filter industry, particularly within the Chinese market. As Haoda Electronics capitalizes on this momentum and enhances its innovative capabilities, the partnership fosters an opportunity for Junxin Capital to partake in a projected upward trajectory in both revenue and market share, amidst a transforming industry landscape.

Information about the Investor

Junxin Capital operates as a market-oriented private equity investment platform under the umbrella of Aijian Group. In recent years, Junxin has actively targeted investments across two key sectors: healthcare and information technology. By focusing on leading companies in various sub-sectors, Juxin Capital has strategically positioned itself to leverage the burgeoning opportunities within these markets, integrating extensive financial resources with real industry needs.

Under the leadership of Mr. Tang Zurong, who serves as Chairman, General Manager, and Chief Investment Officer, Junxin Capital has demonstrated its dedication to fostering partnerships that support real economic growth. The Group's president, Mr. Jiang Hailong, has expressed continued support for Junxin's development, intending to further collaborate with the operational team to bridge capital with industrial ventures and help bolster Shanghai's position as a technology innovation center.

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The investment in Haoda Electronics by Junxin Capital appears to be a sound choice given the company's proactive approach in a rapidly evolving industry. The critical need for localization within the SAW filter domain, coupled with Haoda's established market presence and robust R&D capabilities, presents a compelling value proposition for stakeholders.

Furthermore, with the semiconductor industry in China witnessing a significant shift toward domestic sourcing driven by governmental support and the strategic impetus towards self-sufficiency, Han's market entry is well-timed. The remarkable growth trajectory expected from 5G technology, IoT, and smart automotive sectors adds an additional layer of appeal to Haoda's offerings.

Observations of similar companies indicate that an upward trajectory is feasible in light of market demand for high-quality, locally produced components. Haoda Electronics has shown its commitment to maintaining standards that meet or exceed industry benchmarks, enhacing its competitive position. This strategic positioning aligns with national industrial priorities and presents a favorable outlook for sustained growth.

In conclusion, as Haoda progresses on its IPO journey and positions itself within this innovative sector, the prospects for Junxin Capital's investment show promise. This investment not only signifies an immediate financial growth opportunity but also contributes to the broader landscape of technological advancement within China’s semiconductor industry.

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