Analysis of Foshan Lighting's Record-High Inventory and Strategic Transformation of Semiconductor Business

Based on the financial data and announcement information I obtained, I will conduct an in-depth analysis of the relationship between Foshan Lighting’s record-high inventory and the strategic transformation of its semiconductor business.

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According to the data in Foshan Lighting’s 2024 Annual Report [0][1], the company’s inventory status is as follows:

Indicator	End of 2024 (RMB 100 million yuan)	End of 2023 (RMB 100 million yuan)	YoY Change
Inventory Book Balance	22.05	21.46	+2.75%
Inventory Write-Down Provision	1.79	1.74	+0.05
Net Inventory Value	20.25	19.71	+2.74%

Category	Amount (RMB 100 million yuan)	Proportion	YoY Change
Finished Goods	12.49	56.6%	+3.8%
Raw Materials	3.15	14.3%	+5.7%
Goods in Transit	2.91	13.2%	+8.6%
Work in Progress	2.30	10.4%	-2.1%
Semi-Finished Goods	1.04	4.7%	+12.3%

After acquiring Liaowang Automotive Lighting in 2021, Foshan Lighting’s automotive lighting business has become an important growth driver for the company [1]:

• Automotive Lighting Business Revenue
  : Reached RMB 2.107 billion (21.07 hundred million yuan) in 2024, with a YoY growth of
  15.1%
  , the fastest growth among all business segments
• Capacity Expansion
  : Invested in a wholly-owned subsidiary in Suzhou in 2024 for an automotive lighting production and construction project, with an investment amount of approximately
  RMB 580 million (5.8 hundred million yuan)
• Reason for Inventory Growth
  : More raw materials and finished goods need to be reserved before the new capacity is put into production to meet market demand after capacity expansion

By controlling NationStar Optoelectronics (Stock Code: 002449), Foshan Lighting has built a complete vertically integrated LED industry chain [1][2]:

Business Segment	Subsidiary	Main Products	Application Fields
LED Epitaxial Wafers and Chips	NationStar Semiconductor	Epitaxial Wafers, Chips	Consumer Electronics, Display, Automotive
LED Packaging and Components	NationStar Optoelectronics	SMD LED, COB LED	General Lighting, Display, Automotive
Integrated Circuit Packaging and Testing	Fenghua Xindian	SOP, DFN/QFN Series	Consumer Electronics, Automotive Electronics, Industrial
Third-Generation Compound Semiconductors	NationStar Optoelectronics	SiC-SBD, SiC-MOS, Gallium Nitride	Photovoltaic Inversion, Charging Piles, Rail Transit

From the perspective of inventory classification:

• Raw materials increased by 5.7%
  : Reserved materials for the expansion of semiconductor and automotive lighting businesses
• Goods in transit increased by 8.6%
  : Reflects an increase in orders and extended delivery cycles
• Semi-finished goods increased by 12.3%
  : Capacity ramp-up of semiconductor packaging and testing business

The company clearly proposed the overall development concept of “New Type of Basic Business, Large-Scale New Track” in its annual report [1]:

“With technology and services as the main line, focusing on brand and value, upgrading to ‘mid-to-high-end intelligent manufacturing’, transforming to ‘providing products and overall solutions’, leaping to ‘intelligent, healthy, green people-oriented lighting’, and expanding to the IoT ecosystem and segmented fields.”

The company focuses on the following layouts in its new track business [1]:

• New Display
  : Micro-LED, 4K/8K Ultra-High Definition Display
• Automotive Semiconductors
  : High-Power Ceramic LED Packaging Technology for Automotive Use
• Deep Ultraviolet Semiconductors
  : High-Performance Deep Ultraviolet LEDs with Flip-Chip Structure

In 2024, R&D investment reached

, with a YoY growth of 13.5%, focusing on semiconductor-related technology R&D [1]:

• Full-colorization and integrated packaging technology of high-brightness, high-contrast Micro-LED display devices
• Key technologies for 4K/8K ultra-high definition full-color Micro-LED displays
• Key packaging technology of high-power ceramic LEDs for automotive use (supporting domestic substitution)

Through acquisitions and integration, Foshan Lighting has built a layout covering the entire LED industry chain [1]:

Upstream: NationStar Semiconductor (Epitaxial Wafers and Chips)
    ↓
Midstream: NationStar Optoelectronics (LED Packaging and Components)
    ↓
Downstream: Liaowang Automotive Lighting (Automotive Lamp Assemblies), Hule Electric (Marine Lighting)

Judgment Dimension	Evidence	Conclusion
Business Synergy	Inventory growth is synchronized with the expansion of automotive lighting (+15.1%) and semiconductor businesses	Highly Correlated
Capacity Layout	Suzhou automotive lighting project (RMB 580 million / 5.8 hundred million yuan), capacity ramp-up of semiconductor packaging and testing	Requires Inventory Support
Raw Material Reserve	Raw materials increased by 5.7% to stock up for new businesses	Transformation Signal
Order Expectation	Goods in transit increased by 8.6%, reflecting an increase in orders	Demand-Driven

1. Inventory Turnover Efficiency
   : Finished goods account for as high as 56.6% of total inventory, requiring attention to turnover efficiency
2. Inventory Write-Down Risk
   : Inventory write-down provision is RMB 179 million (1.79 hundred million yuan), requiring continuous monitoring
3. Semiconductor Industry Cycle
   : Industry cycle fluctuations may affect inventory value

1. The record-high inventory is an inevitable result of strategic transformation
   , not a signal of operational deterioration
2. By controlling NationStar Optoelectronics, the company has transformed from a traditional lighting enterprise to a comprehensive technology enterprise covering the entire LED industry chain + automotive lighting
3. The automotive lighting business (+15.1% YoY) and semiconductor business are the company’s main future growth drivers
4. The optimized inventory structure reflects the company’s strategic upgrade from a “lighting product supplier” to a “comprehensive solution provider of LED and semiconductor products”

• Progress in customer expansion of the automotive lighting business (SAIC-GM-Wuling, Seres, Changan, etc.)
• NationStar Optoelectronics’ breakthroughs in the field of third-generation semiconductors
• Production progress of the Suzhou automotive lighting project

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[0] 2024 Annual Report of Foshan Electrical Lighting Co., Ltd. (CNINFO)
[1] 2024 Annual Report Summary of Foshan Electrical Lighting Co., Ltd. (CNINFO)
[2] 2024 Annual Report of Foshan NationStar Optoelectronics Co., Ltd. (CNINFO)
[3] 2025 Semi-Annual Report of Foshan Electrical Lighting Co., Ltd. (CNINFO)