In December 2024, Haichuang Photonics Technology Co., Ltd., a leading player in the laser radar industry based in Fujian, unveiled its plans for an initial public offering (IPO) on the Shanghai Stock Exchange's Science and Technology Innovation BoardThis announcement followed a shift to an "inquired" status in May 2023, which hinted at regulatory scrutiny of the company’s performance and prospects.

Despite the anticipation, projections for Haichuang’s financials were not promisingAccording to their filing, revenue and net profit for the first half of 2024 would decline by over 20% year-on-yearIn response to inquiries regarding sustained growth, the listing committee stressed the importance of clarifying their order situation.

The challenge stood as a stark contrast to the expectations associated with Haichuang, especially considering its connection to Huawei, a name that commands significant respect and attention in technology circles.

Founded in 2016 through the merging of three companies, including Fuzhou Bas Photonics, Haichuang quickly gained traction and received backing from nearly 20 investment firmsNotably, it counts Hubble Investment, a subsidiary of Huawei, among its investors, albeit a small stake of just 0.74%.

The emergence of laser radar dates back to 1960 when Theodore Maiman invented the world’s first ruby laser, laying the groundwork for future advancementsBy 1962, researchers at MIT used laser radar to measure the distance from Earth to the Moon, marking a major milestone that garnered global interest and opened doors for future applications of laser radar technology.

Over the following decades, laser radar found applications in various fields such as geology and meteorology, though high costs and cumbersome sizes restricted its usage mostly to specialized sectors with precise demands

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It wasn’t until the 21st century that the technology began to shift towards mass-market applications, particularly with the rise of the automotive industry.

By then, laser radar became a crucial component for self-driving vehicles, driving its adoption into mainstream automotive technologyToday, it is standard equipment in many domestic electric vehicles, with numerous competitive manufacturers, including Haichuang, emerging in this space.

Haichuang primarily operates in four segments: laser radar, industrial lasers, optical communications, and biomedical applicationsIt experienced explosive growth in its laser radar segment, with revenues skyrocketing from about 45 million yuan in 2021 to close to 488 million yuan in 2023, significantly benefiting from the boom in the smart automotive industry.

However, this rapid rise was met with challengesThe company projected a decrease in overall performance in 2024, attributing this downturn to slower than expected mass production from its major clients, Luminar and Tudatong, as well as price reductions in laser radar products following increased competition.

The heavy reliance on a couple of clients for revenue raised concerns about the sustainability of its growthThese clients contributed to over 48% of Haichuang's sales in 2023, further emphasizing the risks associated with such customer dependency.

Moreover, Haichuang's business faces interruptions stemming from an ongoing technological debate in the automotive industryThe two main paths are the multi-sensor fusion strategies, prominently featuring laser radar, and purely visual systems dominated by camera technology

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While visual systems, as championed by Tesla, promise lower costs, they struggle in more complex driving scenarios.

Conversely, multi-sensor systems, incorporating laser radar, while more costly, offer enhanced safety and reliability through their complementary strengthsTraditional automakers such as Volkswagen and BMW tend to favor the latter approach, reinforcing the contentious debate about the best standards for autonomous driving.

Projections suggest the debate will linger as Tesla continues to dominate a significant portion of the market, leaving many to speculate whether other automakers might pivot towards visual solutions in the futureThis uncertainty places additional pressure on laser radar suppliers like Haichuang, which must navigate these turbulent waters even as they look to expand their clientele.

Nevertheless, Haichuang also has a secondary revenue stream from industrial laser operations, which has maintained steady profitabilitySales in this arena approximated around 200 million yuan from 2021 to 2023, accounting for a good portion of their overall enterprise revenue.

The performance of industrial laser products is expected to see favorable upticks amid domestic competition and a push towards local alternatives, potentially expanding Haichuang's market space moving forward.

In summary, while Haichuang Photonics has made significant strides in the laser radar market, intertwining challenges of financial performance, customer dependencies, and technology debates place significant pressure on its IPO dreams

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