Mini/Micro LED has again become a target for corporations seeking diversification.

On the evening of September 21, Pathfinder (TOREAD)—a Chinese outdoor product company—announced that it will, along with Jiaxing Yuanyang Equity Investment and Xiamen Xiyi Equity Investment, acquire an 80% stake in Beijing Xinneng Electronic Technology. The acquisition will cost 346 million yuan ($53.6 million), a price determined through negotiations between stakeholders based on the estimated value of Beijing Xinneng’s equity on May 31, 2021.

Specifically, Pathfinder will pay 260 million yuan ($40.3 million) to buy a 60% equity stake in Beijing Xinneng, whereas Jiaxing Yuanyang and Xiamen Xiyi will purchase the remaining 20% with 87 million yuan ($13.4 million).

After the acquisition deal, Beijing Xinneng will become a subsidiary of TOREAD and be included into its parental company’s consolidated financial statements.

As an Outdoor Gear Giant, TOREAD Will Diversify into the Mini/Micro LED Market

Since its founding in January 1999, TOREAD has run businesses in outdoor product markets and focused on the research, development, design, operations management and sales of outdoor products under various brands (i.e., TOREAD, Discovery Expedition, TOREADKIDS and TOREAD). The outdoor gear manufacturer’s products have covered markets in China and abroad, including outdoor clothing, footwear, backpacks, tents, sleeping bags, hiking equipment and many other related gadgets.

Beijing Xinneng was founded in October 2019 and specializes in the research and development of integrated circuits (ICs), sales of Mini/Micro LEDs and Force Touch driver ICs to related customers, provision of solutions and technical services and production of display modules.

The IC and LED provider’s research, development and design projects are mainly conducted by SiliconInside (SI; a company acquired by Beijing Xinneng with 100% ownership). SI was founded in July 2009 and focuses on the development of IC products, including ICs for Mini LED video walls and backlit products, Mini LED backplane ICs and Force Touch ICs.

Beijing Xinneng mainly offers design and technical services for LED display businesses demanding for chip research and development. The company will shift towards the development of LED-related ICs as well as production and sales of chip packaging products.

Between 2009 (when it went public) and 2015, TOREAD maintained the income growth of its major outdoor business. Since 2015, however, the company has witnessed a decline in sales of outdoor products due to slower growth and fierce competition in the outdoor gear industry in China as well as the COVID-19 pandemic in 2020.

Considering its development demand, TOREAD revealed in its acquisition announcement that Beijing Xinneng is a suitable target due to its asset scale, technologies and products. The acquisition also makes full use of the resource advantages and related experience of TOREAD’s board of directors and management.

After the deal, TOREAD will expand its business to new markets; that is, the markets of display driver IC design, research and development as well as chip packages. The company said it will run the two very different sectors all together by assigning independent teams to manage operations separately, while the headquarter looks after resource distribution and coordination. In this way, TOREAD can strengthen competitiveness in different industries and ensure sustainable development.

Additionally, Beijing Xinneng can fully utilize TOREAD’s platform and resource integration advantages to get funding and achieve market expansion, management empowerment and system protection, thereby improving its core technologies and competitiveness.

TOREAD has strived to develop its display driver IC business, seize the opportunity to develop advanced technologies and enter the market of Micro LED (the next-gen display technology), which complies with national development policies and end market demand. Moreover, products in the driver IC sector have higher technological added value. Thus, the acquisition is conducive to improved resource quality and serves as a crucial step toward structural optimization, enabling the company to strengthen sustainable development and future profitability. Therefore, the acquisition is appropriate and necessary.

The outdoor gear giant adds that the acquisition is consistent with China’s national schemes for the semiconductor industry, allowing the company to gain technological advantages as Mini LED becomes commercialized this year. Targeting at domestic and foreign markets, TOREAD can develop new business, enrich its products, enhance competitiveness and maintain profitability. In short, buying Beijing Xinneng accords with its corporate development strategies and overall benefit.

Image source: PAIXIN.COM

Mini/Micro LED Is a New Favorite among Firms Seeking Diversification

Mini/Micro LED has become a turning point of emerging industries thanks to its flexibility for small- and large-size devices including head-mounted displays, wearable monitors, vehicle mount monitors, IT monitors, TVs and large-size sliced displays.

As market research company TrendForce estimates, the use of Mini/Micro LED will soar in 2022. Specifically, passive matrix solutions for Mini LED backlights will be replaced by active matrix solutions. In comparison, Micro LED display technologies will first be used in the production of TVs (including commercial and consumer TVs), and then expand to a wide range of applications.

Because of its promising future and high development potential, the Mini/Micro LED market has attracted numerous investors and new competitors. For example, panel suppliers (e.g., TCL, BOE and Visionox) as well as consumer electronics companies (e.g., Konka, CreateLED and Huawei) have all decided to develop relevant advanced technologies.

On March 3, 2020, TCL and San’an Optoelectronics signed an MOU to establish a joint lab qualified as an independent legal entity with registered capital of 300 million yuan ($46.5 million). The joint lab focuses on the development of Micro LED display technologies.

BOE signed a strategic partnership agreement with HC Semitek in September 2019 to co-develop Mini LED technologies. In November 2020, BOE signed another partnership agreement with Aisino; the cross-sector collaboration pledged the establishment of an IoT ecosystem platform, aiming to accelerate the technological development of Mini LED and large-size smart commercial displays as well as promotion of related products.

Mini/Micro LED has also become a “magical weapon” for enterprises wishing to diversify product applications in various fields.

On October 31, 2019, Konka released its first Micro LED series, the Smart Wall. Chongqing-based Konka Optoelectronic Technology Research Institute is endeavoring to develop Mini/Micro LED technologies related to the entire supply chain. On September 13, 2021, the institute unveiled its cinema-grade Mini LED display, confirming Konka’s expansion to the movie theater market.

Leyard launched the whole-series Planar Micro LED large TVs for home use on June 16, 2021. The product series, comprising 108″, 135″, 162″ and 216″ models, signifies a milestone of the company entering the TV market.

AOTO established a strategic partnership with leading smart retailor Retail Plus on March 19, 2021, aiming to create a new business model featuring smart retail.

Conclusion

A good diversification decision helps a business connect between different markets. However, diversification also means entering an unfamiliar market, which is full of uncertainties.

As TOREAD put it in its announcement when buying Beijing Xinneng, “The business and customers of Beijing Xinneng is largely different from ours. If resources and business cannot be effectively integrated after the acquisition, our operations and management would be at risk. Moreover, the acquisition deal includes foreign subsidiaries, where the culture and management style differ from those of the headquarter. Integration of corporate culture and governance will thus be a major challenge in the future.”

Diversification is just the beginning. Companies should pay close attention to the subsequent value conversion and complementary advantages, so to avoid rendering their diversification plans overhyped. (By Lynn from LEDinside)