Shenzhen Tianma: TM18 is in the stage of equipment installation and flexible AMOLED will be mass-produced by the end of next year

On November 11, Tianma Microelectronics Co., Ltd. (stock code: 000050, stock abbreviation: Shenzhen Tianma) held the third extraordinary general meeting of shareholders in 2021 to review and vote on the "Proposal on the Pledge of Equity of Associated Company Tianma Display Technology by its Wholly-Owned Subsidiary Xiamen Tianma and Related Transactions". Aijiwei participated in the shareholders' meeting as its institutional shareholder and cast an affirmative vote.

At the shareholders' meeting, Shenzhen Tianma Chairman Peng Xuhui told Jiwei.com that "Tianma Display Technology (TM18) is in the equipment move-in stage, and it is expected that the AMOLED products will be lit up in the first half of next year and mass production will be launched at the end of next year or the beginning of the year after."

Pledge 15% equity of Tianma Display Technology

In January 2020, Xiamen Tianma and its partners invested in and established a joint venture project company in Xiamen, Xiamen Tianma Display Technology Co., Ltd. (hereinafter referred to as "Tianma Display Technology"), to build a 6th generation flexible AMOLED production line project with a monthly processing capacity of 48,000 flexible display substrates. The total investment was 48 billion yuan, of which 27 billion yuan was registered capital. The difference between the total project investment and the registered capital of the joint venture project company was 21 billion yuan, and the joint venture project company applied for a loan from the bank.

It is understood that the registered capital of the project is 27 billion yuan. Among them, Guomao Industry invested 12.15 billion yuan in cash and holds a 45% stake in Tianma Display Technology; Jinyuan Industry invested 5.4 billion yuan in cash and holds a 20% stake in Tianma Display Technology; Xiamen Tianma invested 4.05 billion yuan in cash and holds a 15% stake in Tianma Display Technology; Xiamen Xingma invested 2.7 billion yuan in cash and holds a 10% stake in Tianma Display Technology; Xiangyu Group invested 2.7 billion yuan in cash and holds a 10% stake in Tianma Display Technology.

In May 2020, the 6th generation flexible AMOLED production line project, implemented mainly by Tianma Display Technology, was fully started, and the main factory building was completed in May 2021, with smooth progress.

According to its business development needs, Tianma Display Technology plans to apply for a syndicated loan of 21 billion yuan. Guomao Holdings, Jinyuan Group, Torch Group and Xiangyu Group will provide guarantees for the syndicated loan. At the same time, Xiamen Tianma plans to pledge its 15% equity in Tianma Display Technology to Guomao Holdings, Jinyuan Group, Torch Group and Xiangyu Group. The total amount of equity pledge secured is 3.15 billion yuan.

Since Jinyuan Group is the actual controller of Xiamen Jincai Industrial Development Co., Ltd., a shareholder of Shenzhen Tianma holding more than 5%, according to relevant regulations, this pledge guarantee matter constitutes an affiliated transaction.

It is understood that after this pledge guarantee matter, the total amount of external guarantees provided by Shenzhen Tianma and its subsidiaries is 25.65 billion yuan (including 3.15 billion yuan of equity pledge guaranteed debt), accounting for 76.41% of the audited net assets in 2020.

In this regard, Shenzhen Tianma said that this equity pledge was carried out by its wholly-owned subsidiary Xiamen Tianma in accordance with the actual business development needs of its associated company Tianma Display Technology, and will not have a significant impact on the company's financial situation, production and operation, and there is no situation that harms the interests of the company and its shareholders. Tianma Display Technology is currently operating normally and has the ability to continue operating and repay debts. The risk of this pledge is within the controllable range of the company.

AMOLED products are expected to be mass-produced by the end of next year

As early as 2010, Shenzhen Tianma took the lead in carrying out AMOLED research and development and production in China. Based on the continuous investment and development in AMOLED pilot lines, TM15, TM17 and TM18, the company has a good accumulation and foundation in AMOLED production capacity, technology, process, talents and customers.

At present, Shenzhen Tianma's AMOLED business is progressing well overall. In the first half of this year, the company has achieved a total shipment of 10 million AMOLED products. Among them, the company's AMOLED smart wearable sales revenue increased by more than seven times year-on-year. At present, the company has become the main supplier of major brands in the wearable market and will continue to show a trend of sustained growth in the future; for flexible mobile phones, the company's mass-produced projects and projects under development have achieved full coverage of domestic brand customers, and new project orders are continuously being imported.

Peng Xuhui told Jiwei.com that "Tianma Display Technology (TM18) is in the stage of moving in equipment, and it is expected that the AMOLED products will be lit up in the first half of next year, and mass production will be launched at the end of next year or the beginning of the year after next". With the release of the company's AMOLED production capacity, Shenzhen Tianma's competitiveness in the AMOLED field will be greatly improved in the future, and the company's mid-term goal of AMOLED is to be among the top three in the world.

Regarding the difference between the company and other domestic panel manufacturers, Peng Xuhui said, "Everyone's OLED technology route is similar, similar to the current LCD products, mainly in terms of understanding customers, grasping customer needs and customer service. Market demand is volatile, and we need to work closely with customers." The company's AMOLED flexible products have been delivered in batches and recognized by brand customers. The company will continue to strengthen its comprehensive competitiveness, seize market opportunities, and continue to deepen strategic cooperation with terminal manufacturers. It is confident and capable of doing better in future competition.

At present, the market penetration rate of OLED panels for mobile phone applications has reached more than 40%. Peng Xuhui said, "OLED has a high penetration rate in the mobile phone field, mainly from Samsung and Apple, while the proportion of OLED panels used in domestic mobile phone manufacturers' models is not high, and the industry still has a large market space."

Regarding the company's Q3 performance decline, and whether the company will open up other growth points, Peng Xuhui said, "The company's future growth points are mainly in two major directions, one is the automotive field, and the other is PAD/Notebook, and the layout is towards high-end applications."