Han's Laser Sees Mixed Prospects With Upbeat Consumer Electronics Offset by Gluts Elsewhere

Han’s Laser Technology Industry Group is the largest laser equipment provider in China. Laser equipment makes up 85% of the firm's revenue, of which 10%-15% relates to the Apple supply chain. Han’s Laser used to benefit from preferential access to a supplier’s lasers, but in recent years, domestic laser suppliers started to offer cheaper substitutes, starting from low-end lasers. This, combined with US-China tensions, has driven the firm to develop lasers in house. While technical know-how of lasers can be valuable, a moat based on cost advantage is unlikely as Chinese laser firms are catching up with global leaders. We anticipate competitors can offer cheaper laser equipment by leveraging cheaper local lasers, which may weigh on Han’s Laser’s margins for the next three to five years.