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On August 23rd, Shanghai Zhongchen Electronic Technology Co., Ltd. (referred to as ZONCN Technology, 603275.SH) officially listed on the main board of the Shanghai Stock Exchange. According to the information in the prospectus, ZONCN Technology was established in 2006 and is a high-tech enterprise specializing in the research, development, production, sales and service of products in the industrial automation field. Its main products include low-voltage frequency converters and servo systems. The raised funds will be mainly used for 4 projects and to replenish working capital.

With the advent of the 21st century, industrial automation control systems have been widely applied in modern enterprises. Against the backdrop of the transformation and upgrading of the manufacturing industry, traditional industrial technology renovation, factory automation and enterprise informatization all urgently require a large number of industrial automation control systems, driving the rapid development of industrial automation. According to data from China Industrial Control Network, from 2015 to 2022, the scale of China's industrial automation market continued to grow, and the market size reached 264.2 billion yuan in 2022. It is expected that the market size will reach 322.5 billion yuan in 2025.

A frequency converter is a device that transforms fixed-voltage and fixed-frequency alternating current into variable-voltage and variable-frequency alternating current. It achieves this by altering the voltage and frequency of the power supply for the motor to control the alternating motor. It is an important component of industrial automation control equipment. The frequency converter adjusts the output voltage and frequency of the power supply through the conduction and cutoff of internal IGBTs. It provides the power supply voltage required by the motor according to its actual needs, thereby achieving the goals of energy saving and speed control. It is an important tool for improving production efficiency, reducing energy consumption, and ensuring production safety. It has the characteristics of high speed regulation accuracy, small footprint, advanced technology, rich functions, simple operation, strong versatility, and easy formation of closed-loop control. It is widely used in industrial automation in fields such as air compressors, water pumps, injection molding, metallurgy, textiles, printing, packaging, CNC machines, fans, chemical processes, water treatment, washing equipment, stone cutting, mining equipment, etc.

With the continuous expansion of China's industrial production scale, the market size of the frequency converter industry has shown an overall upward trend. According to data from China Industry Control Network, from 2020 to 2022, the market size of China's low-voltage frequency converters reached 23.6 billion yuan, 28.3 billion yuan and 29 billion yuan respectively, with year-on-year growth rates of 11.85%, 19.92% and 2.47% respectively. With the economic recovery and the increase in downstream demand, the market size is expected to reach 33.481 billion yuan by 2025. In the current competitive pattern of the domestic market, foreign-funded products occupy a dominant position. Although there are a large number of domestic brands, most of them can only supply mid-to-low-end products, and their profit margins are significantly lower than those of high-end products. To support domestic enterprises in improving their core competitiveness, enhancing brand influence and market share, the Chinese government has successively issued a series of policies to encourage the development of local enterprises. For example, the Motor Energy Efficiency Improvement Plan (2021-2023) (issued in October 2021), the 14th Five-Year Plan for Industrial Green Development (issued in November 2021), the Action Plan for Industrial Energy Efficiency Improvement (issued in June 2022), and the Implementation Plan for Carbon Peaking in the Industrial Sector (issued in July 2022), launched individually or jointly by the Ministry of Industry and Information Technology, the National Development and Reform Commission and other departments, all take supporting the development of energy-saving equipment with frequency conversion control functions such as energy-saving motors, compressors and fans as key contents, and the frequency conversion control of energy-saving motors, compressors, fans and other equipment all requires frequency converters as supporting equipment. In addition, in the Classification of Strategic Emerging Industries (2018) issued by the National Bureau of Statistics, frequency converters, high-performance variable frequency speed control equipment and high-power high-voltage frequency conversion devices are included in the list of strategic emerging industries; in the Catalogue for the Guidance of Industrial Structure Adjustment (2019 Edition) issued by the National Development and Reform Commission, high-performance servo motors and drives, high-performance controllers such as fully autonomous programming, sensors, end effectors and other industrial automation control systems and devices are included in the encouraged category. Policy support will promote the rapid development of domestic enterprises and related technologies. At present, the prospect of high-end market substitution is broad. With policy support, it is expected to further promote localization, boost industrial upgrading, and thus realize the leap from "Made in China" to "Created in China".

ZONCN Technology's main products include general-purpose inverters and industry-specific machines, which can realize soft start, intelligent control, speed regulation and energy saving for various loads such as air compressors, plastic machinery, water pumps, fans, hoisting equipment, mine hoists, belt conveyors, CNC machine tools, etc., thereby significantly improving the energy utilization efficiency of industrial enterprises and enhancing the level of process control and automation. The "ZONCN" brand products such as low-voltage inverters and servo systems are independently developed and produced by the company, with a power range covering 0.4kW-1,200kW, and are widely used in multiple fields including air compressors, plastic machinery, construction machinery, water supply equipment, metallurgical equipment, textile machinery, machine tools, chemical machinery, mining machinery, printing and packaging, etc.Over the years, the company has been focusing on the R&D of inverter products, taking market demand as the orientation, continuously carrying out R&D innovation and product structure upgrading, improving product quality, and meeting the diverse needs of customers. Since its establishment, the company has launched inverter products represented by the H3000 series, which adopt V/F control technology; in 2009, the H5000 series products were launched, adopting constant pressure water supply control technology; in 2011, the H6000 series was launched; in 2013, the Z2000, Z8000 and NZ100 series products were launched; in 2015, the NZ100 and NZ200 series inverters were launched. In 2018, it launched the S8000 series of industry-specific machines specially designed for the construction hoisting industry and the Z300T series of industry-specific machines specially designed for the injection molding machine industry, which have the characteristics of strong load capacity, high power density, fast response and high control precision. In 2019, it launched the T9000 series inverters and the SP600 series of industry-specific machines for the air compressor industry. Through technological innovation, it has improved R&D capabilities and enhanced the core competitiveness of the enterprise. At present, the core technologies mastered by the company include V/F control technology for AC motors, vector control technology for AC motors, automatic parameter identification technology for AC motors, torque observation and compensation technology for AC motors, motor control and protection technology, etc. All these technologies are in the mass production stage and have successfully achieved industrialization.

Since its establishment, ZONCN has always adhered to independent R&D and innovation. With its ingenious design philosophy, advanced production technology and strict quality management system, it has won high recognition from the market and has been rated as a high-tech enterprise, a Shanghai Software Enterprise, a Shanghai Enterprise Technology Center, a Shanghai Science and Technology Little Giant Enterprise, a Shanghai "Specialized, Refined, Characteristic and Innovative" Enterprise and a national-level specialized, refined, characteristic and innovative "Little Giant" Enterprise. A number of its products have obtained EU CE certification and South Korean KC certification. Meanwhile, the company has always adhered to the "cost leadership" business strategy and strived to provide users with cost-effective products. In terms of product design, aiming at the characteristics of user needs, on the basis of maintaining stable product performance, it continuously optimizes product structure design to reduce material costs; in terms of production management, it insists on paying close attention to production and operation control, improves the level of production line automation, and continuously reduces product manufacturing costs through lean production and other methods. At the same time, the company outsources the production of some economical models and non-core processes, effectively reducing manufacturing costs. In terms of sales, the sales of the company's inverters are combined with the business strategy of "factory supporting and industry focus", closely following the habits and needs of supporting manufacturers and industry customers, continuously improving sales efficiency and supporting services, with a relatively high proportion of direct sales, thus reducing sales expenses; in terms of daily management, it adopts a flat management model to reduce unnecessary management personnel, improve management efficiency and lower management costs. Through multiple measures, the overall production, operation and management costs are effectively controlled. The significant cost and expense advantages, as well as the high-quality management team, have enabled the company to achieve rapid development and continuous expansion of its business scale. From 2020 to 2022, the company's operating income reached 626 million yuan, 620 million yuan and 536 million yuan respectively. The decline in operating income in 2022 was mainly due to the suspension of production and sales in Shanghai. With the elimination of the impact of the epidemic, production and operation have returned to normal, and the company's performance has improved significantly in the first half of 2023. In the first half of 2023, the company achieved operating income of 306 million yuan, a year-on-year increase of 15.06%; and net profit attributable to shareholders of the parent company of 94 million yuan, a year-on-year increase of 32.55%. The funds raised this time will be mainly used for 4 projects and supplementary working capital. The "Inverter and Servo System Industrialization Construction Project" and the "Inverter, Servo System, Elevator and Construction Hoist System Integration Production Base Construction Project" will upgrade and optimize the existing inverter and servo system product technologies and processes of the company, further expand the application fields of the company's products, strengthen the technical and market advantages that the company has formed under the current industry trend of energy conservation and consumption reduction, and expand the market share of the company's products. The "R&D Center Construction Project" is conducive for the company to consolidate its existing technical advantages, further improve its R&D strength and integration with the industry, enrich and improve its existing product series, and maintain its leading technical position in the industry. The "Marketing Service Network and Informatization Upgrading Construction Project" will help improve marketing capabilities and after-sales service levels, speed up the response speed of localized marketing, thereby enhancing the company's operational efficiency and brand influence. After the completion of the projects, it will expand the company's business scale, increase market share, and further promote the "cost leadership" strategy.