Summary in Plain Language
Green Harmonic, the leading domestic manufacturer of core components for robotic joints, has officially initiated the process of listing on the Hong Kong Stock Exchange (HKEX) after already joining the Sci-Tech Innovation Board (STAR Market) in China and reaching a market value of over 50 billion yuan. The company aims to establish a dual-capital platform across both the A-share and H-share markets. As a key supplier in the humanoid robotics sector, Green Harmonic provides the essential reducers that all downstream robotics manufacturers need. It has already secured certifications and orders from leading customers such as Tesla, Yushu, and Zhiyuan, reaping the benefits of the current industry boom. However, it also faces challenges like intense price competition and significant market skepticism due to its current high valuation. The HKEX listing is not just about raising additional funds but also about leveraging the international presence of the HKEX to expand into overseas markets and gain a larger share of the global reducer market.
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Detailed Analysis
1. From a small factory in Suzhou to a 50-billion yuan giant: Two “lucky” moments
Green Harmonic didn’t start out as a high-tech company. It was originally a small workshop in Suzhou that processed metal materials. In 1999, Zuo Yuyu, a graduate from the Physics Department of Nanjing University, joined the company. While conducting research in Japan in 2003, he discovered the harmonic reducer—a specialized gear that converts the high-speed rotation of motors into the low-speed, high-torque motion required by robots. This technology was previously monopolized by Japanese companies, which sold them at exorbitant prices and refused to supply Chinese firms. Zuo Yuyu and his team worked tirelessly for 10 years, overcoming technical challenges and breaking the Japanese monopoly. They just happened to catch the boom in the domestic robotics industry, and as Chinese manufacturers sought to reduce their dependence on Japanese suppliers, they began using Green Harmonic’s products. With the rise in humanoid robotics, Green Harmonic became the most sought-after supplier, with each humanoid robot requiring multiple of its reducers. The two founders, Zuo Yuyu and Zuo Jing, have now amassed a fortune of over 10 billion yuan each, creating a myth of wealth from a relatively niche component.
2. Why go to the HKEX despite a 50-billion yuan market value on the STAR Market?
Many wonder why Green Harmonic wants to list on the HKEX when it’s already a large company with a 50-billion yuan market value on the A-share market. The reasons are multifaceted:
- International credibility: Currently, only 14% of Green Harmonic’s revenue comes from overseas markets. By listing on the HKEX, it gains international recognition, making it easier to attract customers in Europe, the US, and Japan.
- Global expansion: The company has recently formed a joint venture with the Swedish transmission giant SKF to expand globally. Listing on the HKEX will facilitate financing, overseas acquisitions, and the issuance of stock options to international employees, eliminating the need for complex currency exchange and approval processes.
- Capacity expansion: Green Harmonic plans to increase its production capacity from 1 million units to 1.5 million units by the end of the year, with orders already booked through the third quarter of 2027. The A-share market has strict regulations for additional financing, while the HKEX provides a flexible platform for capital allocation as needed.
3. The “lucky” reducer business is no longer so profitable
The market once believed that upstream reducer suppliers would have a guaranteed profit margin, but the reality is different:
- Price competition: The price of Green Harmonic’s reducers has dropped significantly over the years, from 1,900 yuan in 2017 to 1,100 yuan in 2024, a 42% reduction.
- Increasing competition: New players have entered the market, and Green Harmonic’s domestic market share has declined from 33% in 2019 to 25% in 2024. The competition now focuses on who can sell at lower prices and deliver faster. Once humanoid robots are mass-produced, manufacturers will likely pressure prices further, making the reducer business less profitable.
4. The high valuation: A challenge to prove its worth
Green Harmonic’s current market value of over 50 billion yuan is largely based on future expectations, not on past performance. For example, a recently listed humanoid robotics company, Yushu Technology, saw its market value plummet by 200 billion yuan within half a month. Investors on the HKEX are more cautious and require tangible evidence of performance. Green Harmonic must demonstrate its ability to generate substantial profits to justify its high valuation.
5. The significance of the HKEX listing: The industry is moving from hype to practical action
Green Harmonic’s move to the HKEX indicates a shift in the industry’s focus from conceptual speculation to mass production. The core component manufacturers are ready to increase capacity, indicating that the industry has moved beyond the initial stages of experimentation. The preparation for mass production is well underway, and Green Harmonic aims to secure global capital and customer resources before the industry experiences a significant growth spurt. This move could potentially lead to Green Harmonic breaking the Japanese monopoly in the global reducer market.