As of December 31, 2019, there were 36,434 employees, including 29,314 production personnel, accounting for 80.46%, 184 sales personnel, accounting for 0.51%, 4,739 technical personnel, accounting for 13.01%, and 188 financial personnel, accounting for 13.01%. There are 2,009 adm

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1, OFILM - Deeply engaged in the field of optical optoelectronics, consumer electronics optics leader

.1. The "optical optoelectronics + smart car" strategy drives performance growth

The company has a wide range of businesses and a high degree of intelligence. The company was listed in 2010. Its main business includes optical optoelectronics business, microelectronics business and smart car business. Its main products include micro camera module , optical lens, touch screen and touch display full lamination module, fingerprint recognition module Groups, 3D Sensing modules and smart car electronic products are widely used in consumer electronics and smart car fields represented by smartphones, tablets, smart cars, etc. In terms of patents, the company’s invention patents account for 48% and utility model patents account for 52%.

Production and technical personnel account for a large proportion, and R&D expenditures continue to increase. company attracts high-quality local technical talents through global R&D centers, continuously introduces high-end market talents, and has established a multi-level and diverse talent team ranging from outstanding fresh graduates to senior domestic and overseas industry experts. As of December 31, 2019, there were 36,434 employees, including 29,314 production personnel, accounting for 80.46%, 184 sales personnel, accounting for 0.51%, 4,739 technical personnel, accounting for 13.01%, and 188 financial personnel, accounting for 13.01%. There are 2,009 administrative staff, accounting for 5.51%. R&D expenditures have increased year by year, from 947 million yuan in 2015 to 2.613 billion yuan in 2019.

.2. Clear equity structure

has a clear equity structure. The controlling shareholder of company is Shenzhen OFILM Investment Holding Co., Ltd., which holds 12.75% of the company's shares. The second largest shareholder, Yugao (China) Co., Ltd., holds 11.55% of the shares. The company has a total of eight wholly-owned subsidiaries including Dongguan OFILM Imaging Technology Co., Ltd., Nanchang OFILM Nano Technology Co., Ltd., and Tianjin OFILM Electronics Co., Ltd.

.3. The company's revenue is increasing year by year, and business expansion is steadily advancing.

's operating income is increasing year by year. Net profit attributable to parent companies in 2018 was -519 million, a year-on-year decrease of 163.10%, mainly due to the decline in global smartphone sales in 2018, intensified competition in the company's industry, continued low market prices of downstream products, increased R&D investment, rising labor costs, etc. For this reason, the company's profitability is affected to a certain extent. In 2019, the company achieved operating income of 51.974 billion yuan, a year-on-year increase of 20.75%, and net profit attributable to the parent company reached 510 million yuan, a year-on-year increase of 198.24%. The main reason for the company's performance growth is that the company actively seizes industry development opportunities, increases high-end product research and development and Mass production and shipments, operating income and shipments of core products such as camera modules, under-screen fingerprint modules and lenses have achieved rapid growth. At the same time, the company continues to improve internal governance, strengthen cost control and inventory management, and improve overall operating efficiency. Continuous improvement. In the first quarter of 2020, the company's operating income reached 9.765 billion yuan, a year-on-year decrease of 8.36%, mainly because the company divested Anhui Jingzhuo at the end of 2019, and Anhui Jingzhuo's revenue was off the balance sheet.

The proportion of research and development expenses has increased, and the gross profit margin and net profit margin have generally shown a downward trend. From 2015 to 2019, the company's administrative expenses accounted for 26.64% of the four fees year by year, from 69.34% in 2015 to 26.64% in 2019. In the first quarter of 2020, it accounted for 24.41%. The main reason is that the company continues to Improved internal governance, strengthened cost control and inventory management, and continued to improve overall operational efficiency. In 2019, the company's gross profit margin was 9.87% and net profit margin was 0.99%.

2. The optical optoelectronics track is booming, and the camera + lens module business is booming.

.1. Deeply cultivate the camera field, performance and innovation are parallel.

.1.1. The optical camera market is booming, and the future is promising.

The global optical camera market continues to grow, and the industry is booming. develop. has benefited from the overall improvement in the prosperity of the optical industry. According to Yole data, the global camera market is expected to exceed US$45 billion in 2022, with a CAGR of 12.2% from 2016 to 2022. From the perspective of downstream applications of cameras, mobile phones have an absolute advantage. In 2019Q4, mobile phone cameras accounted for more than 80% of the market, becoming the core growth driver of the global camera market.

The market size and demand for mobile phone cameras are rising. According to data from Yole, the scale of the mobile phone camera industry is expected to grow from US$27.1 billion to US$45.7 billion in 2018-2024, with a CAGR of 7.75%; according to data from Yole and Xuri Big Data, mobile phone camera shipments will also continue to grow. Shipments in 2019 were 4.4 billion units and are expected to reach 7.5 billion units in 2021.

Camera module (CCM) has low technical barriers and the market is relatively fragmented. camera module has low technical barriers and low industry entry costs, which also leads to the fragmentation of the mobile phone camera module market. According to Qunzhi Consulting data, the camera module market shipment CR3 in 2019 was 32.7%, with the first place OFILM (12.6%), the second place Sunny Optical (11.5%), and the third place Qiu Titanium Technology (8.6%), the entire market is relatively fragmented. The domestic market is roughly divided into three pillars. According to data from the China Industry Information Network, the top three domestic mobile phone CCM shipments in 2018 were OFILM (478 million units), Sunny Optical (423 million units), and Qiu Titanium Technology (264 million units), the shipments of other manufacturers are below 200 million units, and the leading manufacturer has a certain lead.

.1.2. Camera technology innovation and upgrade, multiple cameras become an industry trend

camera upgrade trend meets the needs of all areas of life. With the rise of mobile Internet and smart phones, QQ, WeChat , short video, live broadcast and other applications continue to penetrate among consumers. People use mobile phones to take pictures, record videos and share related activities more and more frequently. Consumers also show In order to continuously pursue the performance of mobile phone photography, which is specifically reflected in various aspects such as picture color fullness, photo clarity, viewing width, imaging three-dimensionality, and lens zoom capabilities, mobile phone manufacturers have also regarded optical upgrades as an important area of ​​innovation. Limited by the appearance and hardware of mobile phones, it is difficult for a single mobile phone lens to have good performance in terms of ranging, zooming, and photosensitivity like a camera lens. So mobile phone manufacturers took a new approach and installed a lens with different performance on the mobile phone to take pictures at the same time, using the algorithm on the mobile phone to fuse the two pictures into one picture. With the development of wide-angle, telephoto, super-sensitive and other lenses, mobile phones can be equipped with More types of lenses, three-shot, four-shot, and five-shot are emerging one after another. Various lens combination solutions are flourishing. Multi-shot has become an industry trend. In 2019, Apple launched the iPhone 11 Pro Max with the performance parameters of "front 12MP + rear 12MP wide-angle main camera + 12MP telephoto lens + 12MP ultra-wide-angle lens", Huawei also launched the performance parameters of "front pixel 32MP, The Mate 30 Pro has a rear 40MP ultra-wide-angle main camera + 40MP ultra-wide-angle + 8MP telephoto + TOF depth camera. In the future, it will gradually develop in the direction of single-camera-dual-camera-multi-camera evolution. At the same time, single camera pixel improvement has also become an important direction for lens upgrade. We believe that optical upgrades will not stop, and the multi-camera trend and single-lens upgrades will become the main driving force for the continued prosperity of the optical track.

The trend of multiple cameras on mobile phones is obvious, and the penetration rate is expected to exceed 60%. As users have higher and higher requirements for mobile phone photography, the number of single-machine lens configurations has increased, and more mobile phones will be equipped with three or four lenses. According to IDC data, from 2018 to 2021, the dual-camera penetration rate of Android phones reached 53% in 2019, and will begin to decline thereafter. It is predicted to drop to 31% by 2021, but the penetration rate of three-camera and four-camera will rise rapidly. , 45% and 16% respectively in 2021. The multi-camera penetration rate of , apple and follows the same pattern as that of the Android system. The dual camera began to decline after 2019, and the multi-camera penetration rate gradually increased. It is expected that the three-camera and four-camera penetration rates of , apple and in 2021 will be 50% and 10% respectively. %. It is not difficult to see that the penetration rate of Android and Apple multi-camera will exceed 60% in 2021, and multi-camera mobile phones will occupy an absolutely dominant position in the future.

front-facing 3D camera is expected to be added. According to IHS data, from 2018 to 2021, the shipment volume of front-facing single-camera lenses and dual-camera lenses will be basically stable, while the shipment volume of 3D lenses will increase from 85 million units to 270 million units, and its proportion will also increase from 565 million units. % rose to 15.64%.

The shipments of rear-mounted multi-cameras are growing, and the industry maintains high prosperity. According to IHS data, from 2018 to 2021, the shipment volume of rear single-camera lenses will drop significantly from 853 million units to 131 million units. The shipment volume of rear-mounted dual-camera lenses will not change much. Lens and 3D lens shipments will increase from 0.21/0/001 million units to 462/218/185 million units respectively. The shipment share of rear three-camera, four-camera and 3D lenses will increase from 1.48%/0.00%/0.07% to 28.15%/13.28%/11.27% respectively.

.1.3. The company’s camera modules have performed well, and they will actively expand production in the future. With periscope technological breakthroughs,

’s camera module shipments rank first in the industry. In 2019, the company's camera module achieved operating income of 30.607 billion yuan, a year-on-year increase of 25.31%, and the comprehensive gross profit margin was 8.83%. Shipments reached 660 million units, a year-on-year increase of 19.66%. The company's camera module shipments reached a new high throughout the year, ranking first in the industry. It is a key partner of mainstream customers and a major supplier of mid-to-high-end camera products.

follows the wave of optical innovation and realizes the transformation from single camera to multi-camera. company will use its advantageous resources to deepen the camera module business, keep up with the trend of optical innovation in the mobile phone industry, and while maintaining the company's leading position in camera modules, it will vigorously develop technological innovation and develop ultra-long focal length, continuous zoom, ultra-wide angle, and anti- Focusing on technical hot spots such as camera shake, we provide customers with a complete set of solutions for under-screen cameras, heat dissipation, and wide-angle distortion, expand market space with high-end products, and build technical barriers to the industry. In 2019, the shipment volume of the company's high-end single-camera products and triple-camera products increased compared with previous years. Among them, the shipment volume of Android customer camera modules increased by 30.56%. The company's technology R&D team continues to make breakthroughs, develop technological innovations, and upgrade products. The self-developed high-pixel super resolution algorithm has been recognized and applied by customers. The super EIS anti-shake algorithm has reached the top level in the industry. New CMP packaging process products are in large quantities. Production, periscope 5x zoom and 10x continuous zoom technology have completed technical development. At the same time, the company actively deepens cooperation with major international customers and promotes upgrades from front-facing single cameras to rear-facing multi-camera projects, laying a solid foundation for future sustainable development.

is scheduled to expand production capacity and increase market share. With the wave of replacements brought about by emerging smartphones, manufacturers have actively responded to the slogan of "new functions, new experiences" by upgrading mobile phone components. The quality of mobile phone photography has been improved, and the imaging technology has become more and more sophisticated. The most critical part is that mobile phone camera modules are also being reformed day by day. Major manufacturers are actively developing into high-end fields such as dual cameras, multi-camera, wide-angle, ultra-thin, large aperture, optical image stabilization, etc. The industry is in a stage of fierce competition. In this regard, the company released a fixed-increase plan on June 3, 2020. The investment in this camera module project is 1.587 billion yuan, and the investment in raised funds is 1.206 billion yuan, accounting for 17.85% of the investment in raised funds. After the project is completed, it will focus on the research and development, production and sales of high-pixel micro camera module products. The project construction period is 18 months, and the project will reach production in T+36 months. After the project reaches full production, the annual output can reach 80 million units, and the revenue can be 10.38443 billion yuan. The after-tax internal rate of return is 12.56%. The after-tax investment payback period 8.52 years (including construction period).

Technical progress promotes the company's development, and the thinnest periscope continuous zoom module is officially launched. With the development of the smartphone industry, various components inside smartphones have also increased with the improvement of performance. Based on the heat wave era brought by 5G mobile phones, the number of new mobile phone antennas, heat dissipation space, camera module, and fingerprint module layout also affect the thickness and weight of the body. While constantly innovating internal stacking solutions for mobile phones, it has become crucial to develop smaller and lighter modules. The Precision Camera Technology Branch of the company's Central Research Institute announced on June 16, 2020 that it had developed the thinnest periscope continuous zoom module currently on the market. The module size is only 5.9 mm, creating a new low in module thickness in the industry. The lens of this module is composed of three groups of "1GMO6P", with an equivalent focal length of 85-170 mm and an aperture of 3.1-5.1.Such a lens group can achieve high-magnification continuous zoom and real-time focus with one module, and maintain more than 2 times of high-magnification continuous zoom resolution and high image quality capabilities within a focal length of 3-7 times. At present, the research team can also provide customized services for different customers, producing modules with different focal lengths and magnifications such as 3-5x, 5-8x, 3.5-9.5x, etc. to meet the needs of different customers.

.2. The expansion of the lens business has taken shape, and fixed-term growth has contributed to high growth.

.2.1. Optical upgrades have promoted the development of the lens business, and the leader has steadily continued to expand.

In the mobile phone stock market, optical upgrades have promoted the steady growth of lens demand. According to IHS data, from 2018 to 2021, global smartphone shipments will increase from 1.417 billion units to 1.456 billion units, with a CAGR of 0.91%; global smartphone lens demand will increase from 3.547 billion units to 5.650 billion units, with a CAGR of 0.91%. 16.79%. After our calculations, the average number of lenses per smartphone will increase from 2.50 to 3.88, with a CAGR of 15.78%. This shows that when the demographic dividend disappears and mobile phones enter the era of stock, the average number of lenses per smartphone will still maintain steady growth, and mobile phones will have multiple cameras. Increase has become a trend. The market size of

lens continues to grow, and the proportion of downstream applications is stable. has benefited from the development of mobile phones, vehicles, surveillance and other markets, and the lens market size has increased year by year. According to data from the China Industry Information Network, from 2014 to 2019, the global lens market size grew from US$2.755 billion to US$6.743 billion, with a CAGR of 16.09%. It is expected to reach approximately US$7.564 billion in 2021. From the perspective of downstream applications, mobile phones, video surveillance, and vehicle-mounted cameras are the three largest application markets. The market share has remained stable all year round. Among them, mobile phone lenses account for 72-80%, surveillance lenses account for 9-13%, and vehicle-mounted lenses Accounting for 9-14%.

The lens market is highly concentrated, with leading manufacturers absolutely leading in shipment volume. According to data from the China Industry Information Network, the global lens market competition in 2018 was highly concentrated, with a CR3 of 54%, of which Largan accounted for 35%, Sunny Optical accounted for 10%, and Yujingguang accounted for 9% . According to data from Xuri Big Data, it can be seen from the shipment volume that in February 2020, the monthly shipment volume of Sunny Optical ranked first, reaching 96 million units; Taiwan Dali's shipment volume ranked second, reaching 96 million units. 92 million units, both of which are the absolute leaders in the industry.

.2.2. P number upgrade + glass-plastic hybrid + periscope + TOF become the future trend

glass-plastic hybrid lenses are expected to become a new trend in lens development. camera lenses are mainly divided into plastic lenses, glass lenses, and glass-plastic hybrid lenses. Although there are certain disadvantages in the light transmittance of plastic lenses, due to the large demand and high cost requirements for mobile phone lenses, the advantages of plastic lenses are reflected in terms of process difficulty, mass production difficulty, cost, etc. Therefore, currently, most mobile phone lenses are made of plastic lenses. Mainly, the mobile phone market application accounts for more than 80%, which is why leading manufacturers mostly focus on plastic lenses. In the field of security vehicles, the requirements for lens transmittance are higher and they are relatively insensitive to cost, so more glass lenses are used. The light transmittance of glass-plastic hybrid lenses is higher than that of plastic lenses, it is difficult to mass-produce, the cost is lower than that of glass lenses, and it can be used in a wider range of fields, including mobile phones, security, and automotive fields. In the field of mobile phones, in order to make images clearer and more realistic, 8P lenses have been developed. However, if there are too many lenses, the thickness of the lens will increase accordingly, which is not conducive to making mobile phones thinner and lighter. Moreover, plastic lenses have limited clarity, and too many plastic lenses will also increase distortion. At this time, the emergence of glass-plastic hybrid lenses broke through the performance bottleneck. The glass-plastic hybrid lens uses a mixture of plastic lenses and glass lenses. The imaging clarity is higher than that of plastic lenses, and the cost is between plastic lenses and glass lenses. The imaging effect of a glass-plastic hybrid lens composed of 6 plastic lenses + 1 glass lens It is equivalent to 8 plastic lenses, but with fewer lenses and improved lens thickness, it is a better choice for improving photo quality. Therefore, glass-plastic hybrid lenses are expected to be widely used in the future.

The number of lenses gradually increases, and 6P evolves to 7P and 8P. When light passes through the lens of the lens, the lens can filter stray light, the number of lenses increases, the higher the image contrast and resolution, the clearer and more realistic the image; in addition, the mobile phone camera module is limited by the volume, lens movement range and focal length Shorter, multi-lens lenses can be used to simulate ultra-short focal length lenses. In order to optimize the imaging effect, the lens is expected to evolve from the current mainstream 6P lens to 7P and 8P lenses. According to data from the Huajing Industrial Research Institute, among Chinese smartphones in 2018, 35.6% of smartphones had a 5P lens as the main camera lens, 64.3% of the smartphones had a 6P lens as the main camera, and 0.1% of the smartphones had a 7P lens as the main camera. OPPO R17 Pro launched in 2018, Xiaomi 9 Transparent Discovery Edition launched in 2019, Huawei P30 Pro, etc. are all equipped with 7P lenses. The CC9 Pro released by Xiaomi in 2019 is the first mobile phone to use an 8P lens.

periscope lens solves the optical zoom bottleneck and is expected to become the mainstream of the market. The traditional zoom method of mobile phone lens is difficult to satisfy long-range shooting. The periscope lens enables high-power and clear zoom. The periscope lens arranges the telephoto lens horizontally and forms a vertical layout with the wide-angle lens. It uses prism refraction to achieve imaging. It can greatly increase the focal length of the camera while ensuring the thin appearance of the mobile phone. However, the suppression of lens dispersion is difficult, which is a problem for the prism. The refractive transmittance and placement accuracy requirements are very high. Many mobile phones are already equipped with periscope lenses, and the future market prospects are broad. Currently, Huawei P30 Pro/P40 Pro/P40 Pro+, OPPO Reno series, and Vivo X30 are equipped with periscope lenses. Huawei P30 Pro/P40 Pro/P40 Pro+ uses a periscope lens to significantly reduce the thickness of the four-camera module to achieve 5-10X optical zoom, far exceeding the traditional 2-3x optical zoom, and can clearly shoot farther away. Scenes. According to Qunzhi Consulting data, global shipments of smartphones equipped with periscope lenses are expected to reach 83 million units in 2020, and shipments are expected to exceed 400 million units in 2023. Periscope lenses have become an important direction for optical zoom upgrades. .

In the 5G era, TOF lenses will become the future trend. The TOF lens is a type of depth camera that uses time-of-flight for distance measurement. TOF technology emits continuous infrared light pulses of specific wavelengths to the target, and then uses a specific sensor to receive the light signal returned by the object to be measured and calculate the round-trip flight of the light. Time or phase difference to obtain the depth information of the target object. In August 2018, OPPO took the lead in launching two mobile phones, the R17/R17 Pro, equipped with a TOF lens in the rear camera. It achieved a delicate background blur effect by collecting depth of field data. Later, mobile phone brands such as Huawei and Vivo also equipped it in rear modules. TOF lenses are used to enhance shooting effects and are also extended to interactive applications such as 3D and AR. In 2019, mainstream Android mobile phone manufacturers have launched mobile phone models equipped with TOF lenses. At the same time, this configuration is moving towards mid-to-low-end models. In the future, the TOF penetration rate of Android mobile phone manufacturers will further increase. From face recognition to AR/VR virtual reality, TOF is expected to bring a new upgrade to the mobile phone industry. Front-facing face recognition + rear-facing virtual reality functions may become the next development trend of mobile phones. For mobile phones, TOF is more suitable for 3D visual imaging technology than structured light. The TOF front lens can also be used for facial recognition unlocking. Coupled with the excellent characteristics of TOF itself, the user experience is good, and the cost of TOF is lower and the application range is wider. It is more favored by mobile phone manufacturers, and more and more manufacturers are beginning to try it. Rear camera TOF solution. The commercial use of 5G has ushered in new development opportunities for mobile phone 3D vision applications. With the support of 5G technology, TOF lenses will be gradually used to meet the needs of VR/AR game scenes. It will become a trend to equip TOF lenses in the 5G era. According to data from Techno Systems Research, the penetration rate of smartphones using TOF was 3% in 2019, and the penetration rate is expected to exceed 30% by 2023, becoming a standard feature for mid-to-high-end models. Recently, affected by the COVID-19 epidemic, the upstream and downstream markets of mobile phone terminals and suppliers have been hit hard. The mobile phone market shipments have declined, and TOF orders have also been affected.But for the TOF market, with the release of new TOF machines in the second half of the year, TOF technology applications will usher in an inflection point. Apple has an important position in the mobile phone market, and later TOF applications will be affected by Apple . Become more mature and popular. According to Xuri Big Data forecast, the shipment volume of mobile phones equipped with TOF is expected to reach 148 million units in 2020 and 267 million units in 2021.

.2.3. Private placement helps the lens business develop rapidly.

actively acquires relevant patents and expands its presence in the lens field. company began to deploy lens business in 2017 by relying on the basic advantages of modules. In 2018, the company completed lens certification for some customers and achieved batch shipments. At the end of 2018, the company acquired 100% equity of Fuji Tianjin and a total of 1,040 patents and licenses related to mobile phone and car lenses, including 985 patents and 55 patent licenses, strengthening the company's patent layout in the field of mobile phone lenses and car lenses. The

lens business has generated considerable revenue, and the 7P lens is expected to be mass-produced within the year . In 2019, the company's optical lens business progressed smoothly, achieving operating income of 685 million yuan, of which operating income from customers was 502 million yuan, and internal self-supplied optical lenses achieved business Revenue was 183 million yuan. In terms of shipments, the company's total shipments of optical lens products to customers and internal supply reached 142 million units, including 135 million mobile phone lenses and 7.71 million vehicle lenses. The company's comprehensive gross profit margin of lens products is 25.51%. In the future, as the number of lens P increases, the company's gross profit margin is also expected to increase. At the same time, the company is expected to achieve mass production and shipment of 7P lenses within the year. The fixed increase of

helps the company to firmly develop its lens business. In recent years, the markets for smartphones, vehicle cameras, security monitoring and other products have emerged rapidly, driving the development of the optical lens industry. At the same time, the company's current production and sales of mobile phone lenses have reached over 95%, and its production capacity is basically operating at full capacity. In order to meet the upward demand of the industrial chain and adapt to the trend of increasing demand in the downstream market, the company released a scheduled increase plan on June 3, 2020 to vigorously develop the lens business. The investment in the lens construction project was 2.364 billion yuan, and the actual investment in raised funds was 2.074 billion yuan, accounting for 30.69% of the investment in raised funds. The construction period of this project is 18 months, and the production will be reached in T+48. After the project is fully reached, the annual output will reach 980 million pieces. The annual operating income is 3.62625 billion yuan, the after-tax internal rate of return is 23.20%, and the after-tax investment recovery period is 5.54 years (including the construction period).

.3. The touch market has grown steadily, and the company has divested its non-A touch business.

is the leader in the touch display industry and ranks first in global sales of thin-film touch modules. In the field of touch modules, only two companies in the world, OFILM and NisshaPrinting, can mass-produce coatings. On the film material side, the mainstream product series of major mobile phone manufacturers in the world are mainly supplied by Nitto Denko and OFILM . . OFILM began mass production of thin film resistive touch modules in 2008, and began to lay out thin film capacitive touch modules in 2010. As of 2011, the company has basically completed the conversion of products to capacitive touch modules. Since 2013, the company's thin-film touch module shipments have ranked first in the world, firmly occupying the leading position in the touch industry.

Global touch display module shipments have grown moderately year by year. The popularization and popularity of touch screen laptops, tablets, smartphones, smart watches, vehicle-mounted smart touch devices, etc. have driven the increase in global demand for touch display modules. According to IHS Market statistics, global touch screen module shipments exceeded 1 billion pieces in 2019, and the market size reached US$35 billion; as of 2021, global touch screen product shipments are expected to stabilize at around 2.05 billion pieces each year.

Touch technology continues to mature, and embedded technology has become the choice for mid-to-high-end mobile phones. touch screen technology includes two types: plug-in type and in-line type. The plug-in type includes glass type and film type, and the in-line type includes On-cell and In-cell. It is mainly used in mid-to-high-end models. With the development of science and technology, various touch technologies and materials have become more and more mature, resulting in different market divisions based on the differences in characteristics and settings of different electronic products.

divested its non-A touch display business and focused on the North American major customer . On November 18, 2019, the company announced that OFILM Technology, OFILM, and OFILM Touch would hold part of the equity of Anhui Jingzhuo Transferred to Anhui Ding'en, which currently holds 51.88% of Anhui Jingzhuo's shares, with a total equity transfer amount of RMB 1.8 billion. Anhui Jingzhuo mainly engages in touch display related businesses such as touch screens and touch display full lamination modules related to non-U.S. major customers, and is no longer included in the company's consolidated statements. On the one hand, this transaction will help the company optimize resource allocation and financial structure, improve liquidity, help the company focus on its core optical business, and promote the company's long-term development; on the other hand, through the introduction of strategic investors, Anhui Jingzhuo will be able to better Make good use of the existing production capacity base and market advantages, and cooperate extensively with local industries and financial parties to further enrich the product structure, expand business areas, and steadily improve the profitability of the business. In the future, the company will focus on the touch business of major customers in North America.

3. Develop microelectronics business, focusing on under-screen fingerprint recognition and 3D Sensing

.1. Focus on under-screen fingerprint recognition, consolidating its leading position in the industry

.1.1. The scale of the fingerprint recognition market is steadily increasing

Fingerprint recognition is a biometric identification technology. biometric identification technology refers to the use of physiological characteristics or behavioral characteristics of the human body for personal identification. Currently available biometric identification technologies include fingerprints, faces, voiceprints, iris, DNA, signatures, etc. Among them, fingerprint recognition is the most widely used in biometric identification technology. In recent years, with the strengthening of awareness of personal privacy protection and the improvement of mobile payment security requirements, fingerprint recognition technology has gradually been applied to smartphones and has become one of the important technologies to support mobile phone unlocking and online payment.

China’s fingerprint recognition module shipments are rising steadily. According to statistics from the Qianzhan Industry Research Institute, the shipment volume of fingerprint identification modules in 2013 was 45.85 million, and the shipment volume of fingerprint identification modules in 2017 was 673 million, with a CAGR of 95.71%. According to CCID data, the global and Chinese fingerprint recognition chip market sizes were 3.12 billion and 1.12 billion US dollars respectively in 2017. CCID predicts that the global and Chinese fingerprint recognition chip market sizes will reach 4.72 billion and 1.72 billion US dollars respectively in 2020.

.1.2. Under-screen fingerprint recognition leads the new trend of fingerprint recognition

There are currently three fingerprint recognition methods on the market: capacitive, optical and ultrasonic.

(1) Capacitive fingerprint recognition is the earliest and most mature fingerprint recognition technology . Capacitive fingerprint recognition utilizes the voltage difference formed between the fingerprint and the subcutaneous electrolyte. Due to the overall shape of the fingerprint and the undulations of the finger surface, different voltage differences can be formed, thereby realizing fingerprint recognition. This method has a high recognition rate and does not require specific environmental conditions for use. The occupation of the internal space of the mobile phone by the relevant structural accessories is within the acceptable range of mobile phone design. Therefore, this technology was first applied in smart phones.

(2) Optical fingerprint recognition is currently the mainstream of under-screen fingerprint recognition. is mostly suitable for OLED screens. The working principle of optical under-screen fingerprint recognition is that when the user presses the OLED screen, the light generated by the OLED will be projected onto the finger texture, and then reflected through the finger texture to the fingerprint recognition sensor under the screen. According to This generates a fingerprint image, which is then compared and analyzed with the model in the database to finally achieve fingerprint identification. This technology has certain requirements on ambient temperature and humidity.

(3) Ultrasonic fingerprint recognition has strong security. ultrasonic fingerprint recognition uses signal reflection at specific frequencies to detect the specific shape and depth of fingerprints, thereby achieving the purpose of fingerprint recognition. Ultrasonic under-screen fingerprint recognition has strong resistance to stains, but the image quality is low and the recognition rate needs to be improved.

With the promotion and popularity of full-screen mobile phones, the demand for under-screen fingerprints is also increasing. Fingerprint on Display (FOD) refers to a new technology that uses optical, ultrasonic and other penetration technologies to collect and identify fingerprints under the screen glass.The under-screen fingerprint recognition is relatively stable and can greatly reduce the impact of finger dirt, grease and sweat on unlocking. Due to the breakthrough of full-screen mobile phone technology and the increasing popularity of full-screen mobile phones, the capacitive fingerprint recognition method has been impacted, and the scale of under-screen fingerprint recognition applications has expanded significantly. Taking smartphones as an example, if capacitive fingerprint recognition is used, the fingerprint recognition sensor needs to be placed on the back or side of the phone, which has a certain impact on the overall design of the phone. In recent years, the proportion of traditional capacitive fingerprint recognition methods used in mobile phones has declined rapidly, while the proportion of under-screen fingerprint recognition has continued to increase. According to Trendforce data, under-screen fingerprint recognition accounted for only 4% of fingerprint recognition in 2018, rising to 23% in 2019, and is expected to reach 50% by 2022.

Full-screen demand drives the increase in under-screen fingerprint penetration. According to CINNO Research, global shipments of mobile phones that support under-screen fingerprint unlocking will reach 1.26 billion units in 2024, corresponding to a CAGR of 89% from 2019 to 2024. Among under-screen fingerprint recognition technologies, optical fingerprint recognition is the mainstream. The optical fingerprint recognition industry chain is mature and there are many suppliers involved. Most full-screen mobile phones on the market use under-screen optical fingerprint recognition unlocking solutions. Representative brands include Huawei P40 and Mate30 series, Xiaomi 10 series, and OPPO Reno4. series, vivo X50 series, etc.

Optical under-screen fingerprint recognition has achieved most of the market share by virtue of its technical advantages, mature supply chain and good user experience. According to Trendforce data, optical technology accounted for 82% of under-screen fingerprint recognition in 2019, and ultrasonic technology accounted for 18%. At present, full-screen mobile phones have become the mainstream choice of smartphones. As optical under-screen fingerprint recognition technology further matures, the cost will drop rapidly, and the number of mobile phone manufacturers using optical under-screen fingerprint solutions will gradually increase.

Fingerprint recognition module shipments have grown steadily . With the mass production of LCD under-screen fingerprint recognition solutions in 2020, optical under-screen fingerprint technology will sink into the market of thousand-yuan phones, and the penetration rate will increase rapidly. According to IHS Markit data, the shipment volume of optical fingerprint recognition modules in 2019 was 180 million units, and the shipment volume in 2021 is expected to reach 280 million units.

.1.3. The company ranks first in the world in fingerprint recognition modules and has leading technical reserves.

The company’s fingerprint recognition products achieved operating revenue of 6.952 billion yuan in 2019, a year-on-year increase of 41.33%; fingerprint recognition module shipments were 255 million units, a year-on-year increase of 21.87%. . The company's high-end optical under-screen fingerprint recognition products and ultrasonic fingerprint recognition products have increased their shipment share, helping the company's comprehensive gross profit margin of fingerprint recognition products increase to 16.69% compared with the same period last year, a year-on-year increase of 3.78 percentage points.

Company fingerprint identification covers a wide range of technologies. In the field of fingerprint recognition modules, the main suppliers of traditional capacitive fingerprint recognition modules include Ofilm , Qiu Titanium and Holita. There are two types of under-screen fingerprint recognition: optical and ultrasonic. The technical barriers are higher than capacitive fingerprint recognition modules. At present, only OFILM , Qiu Titanium and Truly have optical under-screen fingerprint recognition modules that can better meet the large-scale mass production needs of terminal mobile phone manufacturers, while only OFILM and GIS have achieved mass production of ultrasonic under-screen fingerprint recognition modules. Among domestic fingerprint recognition module manufacturers, only OFILM has the mass production capabilities for three types of fingerprint recognition.

.2. 3D Sensing: accelerated application in smartphones, with increasingly deeper application scope

.2.1. The 3D Sensing market is maturing

As people’s requirements for camera functions increase, the technical level of hardware such as smartphones and AR/VR is also improving. As it matures, the application of 3D Sensing in the field of smartphones will become increasingly in-depth, and the future development potential of the market cannot be ignored. According to Trendforce forecast, the 3D Sensing market size will reach US$10.849 billion in 2020, and the market size will increase to US$18 billion in 2023, with a CAGR of 18.38% from 2020 to 2023.

D Structured light uses and apple to open up the consumer electronics market .In September 2017, Apple released the first full-screen mobile phone iPhone X, which supports facial recognition and starts a new trend in biometric identification. The 3D structured light solution has also opened up the consumer electronics market. At present, 3D face recognition is still a must-have configuration for high-end mobile phones. The iPhone 11 series and Huawei Mate 30 Pro released in 2019 both use 3D face recognition and unlocking solutions, and are priced at more than 5,000 yuan. 3D face recognition is not only used to unlock mobile phones, but can also be used for face payment. The misrecognition rate is less than one in a million, the response time is only 40ms, and the generated results are highly reliable. Since the release of and Apple equipped with the structured light 3D Sensing function, the Android camp has also begun to gradually promote the 3D Sensing function.

.2.2. 3D Sensing technology is becoming mature, and structured light and TOF have become mainstream in the industry.

Currently, there are three mainstream technologies in the market to achieve 3D Sensing: binocular stereo vision, structured light, and TOF. The principles of the three technologies are different, but in the end they all achieve object recognition and three-dimensional modeling by obtaining the position and shape information of the target object.

(1) Binocular stereo vision imaging is based on the principle of parallax. By simulating human eyes, the imaging device is used to obtain two images of the target object from different positions, and then the position offset between corresponding points in the image is calculated to obtain the three-dimensional object. information.

(2) structured light technology is based on the measurement principle of optical triangulation. Structured light technology places a grating outside the laser. When the laser is projected through the grating, it will be refracted, causing the final landing point of the laser to be displaced on the surface of the object. The displacement caused by refraction is related to the position of the object from the laser projector: when the object is close to the laser projector, the displacement caused by refraction is small; when the object is farther away, the displacement caused by refraction becomes larger. Use cameras to detect and collect patterns projected onto the surface of objects. Through the displacement changes of the patterns, algorithms can be used to calculate the position and depth information of the object, and then restore the entire three-dimensional space.

(3) TOF is called the time-of-flight ranging method. It uses a sensor to continuously emit modulated near-infrared light pulses to the target object, and then the sensor receives the light pulses reflected back by the target object, and uses a computer to measure the time difference between the light pulses. Or phase difference, and then obtain the depth information of the target object.

The current mainstream application technologies are structured light and TOF. Due to different principles, structured light and TOF technology have different application fields. Due to its short distance measurement and high requirements on the lighting system, structured light is suitable for scenes with high safety requirements and short measurement distance, such as face recognition, AOI detection, etc. and apple are currently the main force in the application of structured light technology. , it is expected that new and Apple phones will continue to use structured light solutions in the front in the future. TOF is suitable for measuring long-distance scenes due to its characteristics of being less susceptible to external light interference and fast refresh response. In addition to mobile phones, it has a wide range of applications, such as 3D modeling, games, car navigation, AR, etc. In the future, TOF will be used in single-unit The number of applications on mobile phones will also increase. Currently, the Huawei Mate30 Pro model is equipped with front and rear TOF lenses, and the optical value of a single machine has been greatly increased. The

TOF solution will become more mature and popularize . Affected by the COVID-19 epidemic, the upstream and downstream markets of mobile phone terminals and suppliers have been affected, mobile phone shipments have decreased, and TOF orders have also been affected. But for the TOF market, according to the DigiTimes report, the iPhone released in 2020 will be equipped with a ToF sensor. With the release of new TOF machines in the second half of the year, the application of TOF technology will usher in an inflection point, and , and will play an important role in the mobile phone market. status, later TOF applications will become more mature and popular under the influence of Apple. According to IDC and Xuri Big Data forecasts, shipments of mobile phones equipped with TOF are expected to reach 148 million units in 2020 and 267 million units in 2021.

.2.3. The company’s industrial layout

TOF configuration has become a trend in mobile phones, and optical fingerprint recognition is gradually penetrating. There is continuous innovation in the application of AR on mobile terminals under the commercial use of G, and TOF has become one of the innovative trends in mobile phone cameras. The company established a 3D Sensing R&D team in September 2017 and began to lay out the 3D Sensing field, simultaneously developing structured light solutions and TOF solutions.In May 2018, 3D Sensing started mass production, taking the lead in realizing the mass production of structured light 3D Sensing modules and 3D TOF modules. It is currently the main supplier of 3D Sensing modules in China. Specific to related core devices, the company currently has mastered a full set of Diffuser design and processing and manufacturing technologies, and is developing device design and processing and manufacturing technologies for DOE, Microlens, anti-diffraction modules, polarizers, smart lighting lenses and other devices. In addition, the company has also reached a strategic partnership with the Israeli 3D algorithm company Mantis Vision. The two parties will use their respective resource advantages to carry out in-depth cooperation in the field of 3D imaging. The company's 3D Sensing module achieved operating income of 4.067 billion yuan in 2019, with shipments reaching 97.2 million units and a product gross profit margin of 11.81%.

will expand its production of 3D Sensing. In the future, will increase its investment in the research and development of 3D Sensing products, develop under-screen 3D Sensing modules, as well as D-ToF and I-ToF modules, and include smart home, smart security, AI robots and other fields into 3D Sensing applications. in the field. In response, the company released a private placement plan on June 3, 2020, to vigorously develop the 3D sensing business. The investment in the 3D optical depth sensor construction project is 1.450 billion yuan, and the investment in raised funds is 1.226 billion yuan, accounting for 18.14% of the investment in raised funds. After the project is completed, it will focus on the research and development, production and sales of 3D optical depth sensor products. The project construction period is 18 months, and the production will be reached in T+36. After reaching the production capacity, the annual output will reach 58 million pieces. The project can achieve annual operating income of 5.28675 billion yuan when it reaches capacity, with an after-tax internal rate of return of 17.47% and an after-tax investment recovery period of 6.55 years (including the construction period), which has good economic benefits.

4. Focusing on the field of smart cars, three major businesses drive performance growth

Smart cars are a comprehensive system that integrates planning and decision-making, environmental perception, multi-level assisted driving and other functions. It uses computers, modern sensing, information fusion, Technologies such as communications, artificial intelligence, and automatic control are typical high-tech complexes. The company entered the smart car field in 2015 and has completed the layout of three major branches: smart central control, ADAS, and body electronics.

.1. Competition among heroes, smart cars have broad prospects

my country’s smart cars have vast space and unlimited development potential. In Q1 of 2020, my country’s automobile production and sales were 3.47 million and 3.67 million respectively. Affected by the new crown epidemic, production and sales have shrunk. , down 42.4% and 45.2% year-on-year. In 2019, global automobile production and sales were 91.7869 million units and 91.2967 million units respectively, of which my country's automobile production and sales were 25.72 million units and 25.77 million units respectively, accounting for about 28%. The smart car industry has broad prospects. Considering only the market size of the Internet of Vehicles, the core technology of smart cars, according to the predictions of the " China Unicom Internet of Vehicles White Paper", the size of China's Internet of Vehicles market will exceed 200 billion in 2020. By 2025, the size of China's Internet of Vehicles market is expected to reach 10,000,000 The billion mark. In addition, according to Bloomberg's prediction, my country's intelligent driving market will reach 235.3 billion yuan in 2020, with a CAGR of 34.70% from 2014 to 2020.

The industry has distinctive regional characteristics, and Asia has a strong advantage as a latecomer. At present, North America is characterized by leading information technology and a large number of start-ups; Europe is characterized by traditional car manufacturers having obvious advantages and accelerating transformation; Asia is characterized by strong latecomer advantages and greater market potential. Features. Around 2016, foreign car companies have begun to gradually introduce L1/L2 level autonomous driving functions. Only models launched by domestic car companies after 2018 have been equipped with L2 level autonomous driving systems, which started relatively late.

The influx of Internet companies is driving the faster development of smart cars. From a domestic perspective, Internet companies Baidu, Tencent , Huawei and other companies have entered the intelligent connected car market. Since Internet companies have strong technical strength and are not restricted by the existing car business, they are more inclined to directly enter high-level smart cars. Automobile technology research and development and service work. In May 2016, Baidu announced the establishment of a self-driving car operation area in Wuhu and planned to implement commercial use within three years. Tencent's autonomous driving business team has been laying out its plans since 2016. In 2017, it officially launched the Tencent AutoLink AI in Car system, focusing on the research and development of core autonomous driving technologies.Huawei's strategy in the field of smart driving is to "focus on ICT technology and help car companies build good cars" and rely on its advantages in the ICT field to become an incremental component supplier for smart cars.

.2. In the 5G era, smart cars have ushered in a new turning point

policy and strategic support and clear industry planning. On February 24, 2020, the National Development and Reform Commission issued the "Smart Vehicle Innovation and Development Strategy", which clearly stated that by 2025, the technological innovation, industrial ecology, infrastructure, regulations and standards, product supervision and network security systems of China's standard smart vehicles will be basically formed; At the same time, large-scale production of L3 is achieved, L4 is marketed in specific environments, the automotive wireless communication network (LTE-V2X) achieves regional coverage, and the new generation of automotive wireless communication network (5G-V2X) is gradually deployed in some cities and highways. Launch the application. Among them, C-V2X (Cellular Vehicle to-Everything) is a standard developed by 3GPP in June 2017, including LTE-V2X and 5G-V2X. It is a technology used to support communication between connected vehicles and other "connected" road users and infrastructure. .

5G technology is accelerating its popularization and innovating future travel methods. G (fifth generation mobile communication system) is characterized by high speed, large connection and low latency, which can effectively meet the communication needs of smart cars. From a technical perspective, the data transmission speed of the 4G network cannot meet the needs of autonomous driving technology above the L3 level. Small delays or inaccurate positioning may threaten the safety of autonomous driving. The implementation of 5G will provide important solutions for smart cars. 5G+AI will be able to perceive and cover more scenarios, make up for the lack of road test data, make information acquisition and decision-making clearer, and autonomous driving is expected to take a big step forward. In the past two years, many car companies have begun to deploy the 5G market.

ADAS penetration rate increases, boosting demand for vehicle cameras. Currently, driverless technology is still in the assisted driving stage (ADAS). The improvement of ADAS technology will significantly increase the number of bicycles equipped with in-vehicle lenses. On the one hand, meeting the needs of high-level ADAS requires the installation of more cameras, and the transformation of cameras from monocular to binocular will improve the accuracy of ranging; on the other hand, the computing power of on-board chips has increased and can support the installation of more cameras. As the penetration rate of ADAS systems continues to increase, the automotive camera industry is growing rapidly. According to forecasts from IHS and Gaogong Intelligent Automotive, the global automotive camera market is expected to reach US$13.3 billion in 2020, and the domestic market is expected to be close to 6 billion yuan.

.3. Three major business layouts to build a core supplier of automotive intelligence.

Three major business layouts, the benefits of the layout are beginning to appear. Since 2015, company established a wholly-owned subsidiary, Shanghai OFILM Intelligent Connected Vehicle Technology Co., Ltd., and began to enter the field of smart cars. In terms of smart car business, the company has completed the three major business layouts of smart central control systems, ADAS and body electronics. Currently, it has obtained supplier qualifications from more than 20 domestic automobile manufacturers, and is actively conducting supplier qualification certification for foreign automobile manufacturers. At the same time, software and hardware products represented by vehicle cameras, 360-degree surround view systems, and reversing imaging systems began to be shipped in batches. In 2019, the company's smart car business achieved operating income of 462 million yuan, a year-on-year increase of 9.35%, and a gross profit margin of 18.88%.

Intelligent central control: company has created the country's first high-end three-screen interactive smart cockpit and the country's first fully digital smart instrument, which not only meets the safety and reliability requirements of automobiles, but also integrates infotainment functions to bring customers a relaxing experience. At the end of 2019, the company mass-produced its independently developed dual-screen smart cockpit system.

Intelligent driving: company has developed more than ten car camera products. It has the most advanced camera production line in the world and a full high-definition intelligent 360-degree 3D surround view system, and continues to integrate intelligent algorithms such as moving object detection and blind spot detection, combined with radar The technology enables intelligent driving experiences such as parking guidance and automatic parking, and provides OEMs with one-stop solutions for intelligent vehicle driving.

Automotive electronics: company already has five mature product lines, masters intelligent control algorithms such as car anti-theft, door and window control, and seat memory, and has a mature mass production platform.The company's automotive electronic products cover more than 20 OEMs and more than 70 models, and have entered a period of rapid development.

continues to focus on smart car products and technologies. In the future, the company will continue to focus on the research and development of intelligent central control, automotive electronics and intelligent driving products and technologies, and continue to lay out the standardization and platformization of in-vehicle cameras, smart cockpits, automatic parking and other products; at the same time, it will continue to increase investment in in-vehicle cameras and research and development. High-pixel high-definition surround-view cameras, forward-looking ADAS cameras, etc., to develop the next generation of intelligent driving domain controllers.

5. Profit forecast and investment advice (see the original text of the report for details)

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