HB Technology is a specialized manufacturer of AOI inspection equipment and repair equipment for OLED displays, and it is a key first-tier vendor for SDC (Samsung Display). Since its establishment in 1997 and recognition as a Samsung Electronics partner in 2002, the company has been supplying LCD/OLED AOI inspection equipment to Samsung for over 20 years.
HB Technology successfully achieved the domestication of LCD AOI inspection equipment for the first time in Korea and also developed the world's first AMOLED AOI inspection equipment. Since 2016, the company has expanded its business successfully into the field of laser repair equipment, supplying it to customers.
Automated Optical Inspection (AOI) equipment is used to detect defects and foreign substances on panels and substrates using light. HB Technology's AOI inspection equipment utilizes the difference in reflected light intensity when light is projected onto panels and substrates to identify faults. It is widely used in various processes of OLED production, including TFT patterns, masks, OLED pixels, and bonding. The company's business is divided into the Equipment Division and the Component Materials Division. The Equipment Division manufactures AOI inspection equipment for OLED, repair equipment, and secondary battery inspection equipment. The Component Materials Division produces backlight units for LCDs. The Equipment Division accounted for 67.0% of the total sales in 2017 but has decreased to 55.6% due to reduced OLED investments by SDC (Samsung Display).
Since the large-scale OLED investments by SDC began in 2016, HB Technology's sales of AOI inspection equipment for OLED have significantly increased. However, there were several years of order gaps due to the delay in SDC's OLED investments after the A3 line, which resulted in poor performance for the company. As an alternative, HB Technology has expanded its market to Chinese display companies, and in 2021, AOI equipment sales from the Chinese market, including BOE and HKC, accounted for 70.3% of the total. In the second half of 2022, new investments from BOE and Tianma are expected, creating an opportunity for significant orders in the Chinese market. The OLED AOI inspection equipment market is a competitive market with a few major players, including Samsung, DIT, Orbotech (Israel), and LG PRI. HB Technology currently holds the top market share in SDC's OLED pre-process AOI inspection equipment, establishing an exclusive position within its customer base.
HB Technology is a specialized manufacturer of OLED front-end AOI inspection equipment and repair equipment. The company has secured major customers such as SDC (Samsung Display) and Chinese display companies including BOE and CSOT. Currently, HB Technology holds the top market share in SDC's OLED front-end AOI inspection equipment, with an occupancy rate of over 90%, establishing an exclusive position in the market. Like most display equipment companies, HB Technology's performance is heavily influenced by SDC's new investments.
Since the large-scale investments in SDC's A3 line began in 2016, the facility investment (CAPEX) has significantly increased from 4.7 trillion won in 2015 to 9.8 trillion won in 2016 and 13.5 trillion won in 2017. As a result, HB Technology's sales of AOI inspection equipment for OLED also experienced substantial growth, from 66.6 billion won in 2015 to 153.4 billion won in 2016 and 191 billion won in 2017.
At that time, it was estimated that the order amount for HB Technology's AOI inspection equipment in the A3 line reached approximately 270 billion won. Despite the challenging period of poor performance due to the hiatus in SDC's large-scale OLED investments, HB Technology succeeded in developing repair equipment and successfully supplied them in addition to AOI inspection equipment for the Q1 line in 2020. In the second half of 2022, SDC's investment in a small-sized line (15K/month) will commence, and it is expected that equipment orders for HB Technology will resume. With Apple's decision to adopt OLED panels for iPads starting in 2024, the small-sized line is expected to be carried out on an 8.5-generation line (15K/month).
Furthermore, as a supplier of repair equipment, the company anticipates an approximately 50% increase in order amount per panel area from 2016 to 2017. In the second half of 2022, it is expected that orders of around 100 billion won will be possible from SDC's small-sized line (15K/month). In the future, with the expected growth of the foldable market, it is anticipated that SDC's investment in the small-sized line will continue in 2023 as well. With the adoption of foldable panels, the screen area increases by 1.5 times, while the production capacity achievable on the current 6th generation line decreases to one-third. Consequently, the necessity for new line investments has arisen, and if Apple adopts foldable panels, significant investments will be required.
In addition, there is a high possibility of SDC's investment in large-sized lines in 2023. Although SDC has been producing large-sized OLED panels on the Q1 line established in 2020, its monthly production capacity of 30K is insufficient to meet global demand. If the order amount for the Q1 line was approximately 60 billion won in 2020, a similar scale of orders is expected to occur for the Q2 line in 2023.
HB Technology, as part of the HB Group, holds a 21.9% stake in HB Solution and a 12.0% stake in HB Investment. Additionally, it holds a 10.12% stake in HPSP, a semiconductor equipment company set to be newly listed on July 15th. HPSP specializes in high-pressure hydrogen annealing equipment for semiconductor front-end processes and has a global monopoly in supply. HPSP exclusively supplies equipment for the 3-nanometer and below processes of global major foundries and memory chip manufacturers. In 2021, it achieved significant growth with a revenue of 91.8 billion won (YoY +50.0%) and an operating profit of 45.2 billion won (YoY +82.4%). In the first quarter of 2022, it continued its high-growth trend with a revenue of 37.1 billion won and an operating profit of 21.1 billion won. Considering the current order amount, it is expected to achieve a revenue of 170 billion won and an operating profit of 100 billion won in 2022, indicating substantial growth.
Based on HPSP's offering price of 25,000 won, its market capitalization is 417.7 billion won. Considering the first-quarter performance and outlook, there is a high possibility of a significant increase in the stock price upon listing. Consequently, the value of HB Technology's stake in HPSP is expected to be highlighted. Currently, three listed companies hold stakes in HPSP: Hanmi Semiconductor, HP Technology, and HB Solution, with HB Technology having the highest stake. Therefore, it is expected to receive the maximum benefits from HPSP's listing.
HB Solution (21.9% stake owned by HB Technology), a subsidiary of HB Technology, is also expected to experience high growth starting in the second half of the year due to the anticipated supply of ELB equipment and new inkjet equipment. Particularly, the inkjet conversion of the color filter deposition process for cost reduction in SDC's large-sized OLED is underway with equipment supplied by HB Solution. The supply of inkjet equipment is expected within this year, and HB Technology, as a major shareholder, is projected to benefit significantly.
HB Investment (12.0% stake owned by HB Technology) is also preparing for listing within this year. HB Investment is one of the first-generation venture capitals in South Korea and achieved excellent performance in 2021 with operating revenue of 11.4 billion won (YoY +6.3%) and operating profit of 7.8 billion won (YoY +25.5%). Considering the potential listing of HB Investment, it is expected to enhance the value of HB Technology's stake. The combined value of stakes held by HB Technology in subsidiaries and related companies such as HPSP, HB Solution, and HB Investment amounts to at least 100 billion won. With the anticipated expansion of OLED AOI equipment orders in the second half of the year, the highlighted value of HPSP stakes, and the expected inkjet equipment orders for HB Solution, the company's enterprise value is expected to grow significantly in 2022.