Hesai Technology is the global leader in three-dimensional light detection and ranging (LiDAR) solutions. Its LiDAR products enable a broad spectrum of applications across (i) passenger or commercial vehicles with advanced driver assistance systems, or ADAS, (ii) autonomous vehicle fleets providing passenger and freight mobility services, or Autonomous Mobility, and (iii) other applications such as last-mile delivery robots, street sweeping robots, and logistics robots in restricted areas, or Robotics. We believe that Hesai Technology is the most commercially successful LiDAR company globally. • Its shipment volume, revenue scale and margins validate its global leadership. It has shipped over 103,000 LiDAR units from 2017 to December 31, 2022, and it has shipped over 80,400 LiDAR units in aggregate in 2022. In particular, it has shipped approximately 62,000 AT128 LiDAR units for ADAS customers in aggregate in 2022, which demonstrates the highest estimated shipment volume of LiDAR units (excluding low-end LiDARs with 16 channels or less) for ADAS customers in 2022, according to the Frost & Sullivan Report. It generated the highest revenue as compared with listed LiDAR companies around the world for the nine months ended September 30, 2022, outperforming the second place by over 3.6 times, according to the Frost & Sullivan Report. • It is one of the few companies that have shipped LiDAR products in volume to automotive OEMs in the ADAS market and the first company in the world that delivers over 10,000 LiDAR units per month, according to the Frost & Sullivan Report. According to the Yole Intelligence Report that sampled 54 ADAS customers, it is No.1 in terms of LiDAR design wins. It paved the way for LiDARs from technology innovation to mass production and wide application, driven by the evolution for more intelligent vehicles. After volume shipment began in July 2022, it shipped approximately 62,000 AT128 LiDAR units in the six months ended December 31, 2022 to the ADAS market, which was groundbreaking in the industry. Its top ADAS customers, in terms of shipment volume as of September 30, 2022, include Li Auto, Lotus, a new electric vehicle manufacturer headquartered in Shanghai, Jidu and a leading consumer electronics manufacturer in China that has leaped into the electric vehicles industry. • It is also the global leader for LiDARs in the Autonomous Mobility market in 2021 in terms of revenue, having an approximately 60% share of the global market, according to the Frost & Sullivan Report. As of December 31, 2021, 12 out of the 15 top global autonomous driving companies used its LiDARs as their primary LiDAR solution, meaning that Hesai Technology had the largest share by purchase dollar amount for the current fleet of each of the 12 companies, according to the Frost & Sullivan Report. These top 15 companies are defined in terms of testing miles traveled as reported by the California Department of Motor Vehicles in 2021. We believe there are three attributes critical to the development of LiDARs: Performance(1), Quality, and Cost. Depending on the scenario or the application, Hesai Technology’s customers have varying needs. Its ADAS customers generally have strict requirements on all three aspects, especially on Cost. LiDAR for Autonomous Mobility requires higher performance and quality, as they are critical to the successful development and safe operation of full autonomous driving solutions, with cost tending to be a secondary consideration. For Robotics, its customers have demonstrated varying levels of cost sensitivity depending on Performance of LiDAR products refers to the detection range, point density, distance accuracy and precision, among others. Formore detailed description of Performance, Quality and Cost, the application, which range from last-mile delivery robots to street sweeping robots. Hesai Technology designs and manufactures LiDARs to push limits across each of the three elements, while striking what it believes is the optimal balance for different applications and industries, which has led to its continued success in the ADAS and Autonomous Mobility markets. LiDARs are highly sophisticated instruments, consisting of the following key components. • TX/RX system, or the laser transmitter (TX) and receiver (RX) system, is the key in the entire LiDAR unit and holds the electronic and photonic components that send and receive laser light and process the signals into distance measurements. The TX/RX system is critical to ensuring a LiDAR’s high performance and its design is one of the key areas where we excel compared to other LiDAR providers. • Beam steering system, which steers the laser light for the TX/RX system. • Other supporting infrastructure, including optics, mechanical structures, circuits, and firmware, among others. Hesai Technology’s semiconductor-based TX/RX system design uses application-specific integrated circuits, or ASICs, and offers significant advantages over architectures based on discrete components of legacy LiDAR. • Its ASIC-based LiDAR approach features a large number of channels driven by ASICs, combined with a simple but robust beam steering system. In this way, it is able to deliver a system that offers greater Performance, higher Quality and consistency at lower Cost. In particular, its proprietary ASICs drive a large number (currently up to 128) of individually addressable laser channels with dynamic exposure functions in the TX/RX system. • Its AT128, a breakthrough LiDAR product for the ADAS market, for example, is based on its proprietary ASICs and is able to deliver superior performance at high precision, lower power consumption per channel, in a smaller form factor and at a lower cost compared to legacy LiDAR. From volume shipment began in July 2022, it shipped approximately 62,000 units of the AT series featuring one-dimensional solid-state electronic scanning for the six months ended December 31, 2022. • ASICs allow Hesai Technology to maximize the performance of LiDARs via fully customized signal processing while concurrently reducing power consumption. The legacy LiDAR involves assembling hundreds of discrete components, which leads to a higher likelihood of quality issues and inconsistency, whereas the ASIC-based LiDARs integrate multiple functions into a few chips, which reduces system complexity and achieves lower cost thanks to a simplified manufacturing process. Hesai Technology has completed its v1.5 ASIC upgrade and will continue to upgrade its ASICs onwards and leverage the existing advanced manufacturing processes in the semiconductor supply chain to deliver better price-to-performance. Hesai Technology’s proprietary manufacturing process constitutes another of its major advantages and has contributed to its success to date. • It integrates LiDAR design and manufacturing into an indivisible and seamless process. As the LiDAR industry continues to evolve quickly, its in-house integrated manufacturing capabilities, which cover design, manufacturing, calibration and testing, provide instant trial feedback for it to refine its LiDAR design and manufacturing process, thereby enabling rapid product development and fast iteration cycles. Given the complexity of LiDARs as an innovative product encompassing optics, electronic engineering, mechanical engineering, and semiconductor, among others, Hesai Technology is capable to design and build up the manufacturing process from scratch, leveraging its accumulated insights on various aspects of LiDARs. Moreover, given the complexity and high level of expertise required to manufacture our products, we believe in-house manufacturing allows Hesai Technology to better control product quality, ensure product consistency, improve manufacturing efficiency, and safeguard manufacturing process know-how at affordable cost. The know-how then further strengthens its in-house manufacturing capability and helps establish a virtuous cycle to solidify its advantages over its competitors. • Hesai Technology has strategically built its current manufacturing facility, which covers approximately 270,000 square feet and is certified under IATF 16949 and ISO 9001, in Jiading, Shanghai, the hub for automotive OEMs in China. This manufacturing facility, together with a transitional production line, supports an annual production capacity of 35,000 units for the non-AT series, plus a monthly production capacity of approximately 20,000 units for the AT series, which fulfills the present demand for Hesai Technology’s LiDAR products. Hesai Technology is building a new facility of approximately 740,000 square feet, which is expected to commence operation in 2023 and is expected to eventually increase its annual production capacity up to approximately 1.2 million units. Hesai Technology provides LiDAR solutions to the ADAS, Autonomous Mobility and Robotics markets. • ADAS. Hesai Technology’s advantages leading to its success in the ADAS market are manifested in: (i) its ability to design and manufacture LiDAR units in scalable production volume, (ii) its innovative approach to ASIC-based TX/RX design, and (iii) its capability to fulfill the functional safety requirement for automotive-grade standard. Hesai Technology is currently the bellwether of achieving scalable manufacturing and volume shipment in the ADAS market. It is one of the few world-leading companies that have shipped LiDAR products in volume to automotive OEMs in the ADAS market, according to the Frost & Sullivan Report. According to the Yole Intelligence Report that sampled 54 ADAS customers, it is No.1 in terms of LiDAR design wins. Its manufacturing capacity dedicated to the ADAS market has reached approximately 20,000 units per month, and it has shipped approximately 62,000 AT128 LiDAR units in aggregate in 2022 to its ADAS customers. Its commercial success in the ADAS market has substantiated its advanced technology and proved the Performance and Quality of its products in the actual on-the-road scenarios. Its top ADAS customers, in terms of shipment volume as of September 30, 2022, include Li Auto, Lotus, a new electric vehicle manufacturer headquartered in Shanghai, Jidu and a leading consumer electronics manufacturer in China that has leaped into the electric vehicles industry. According to the Frost & Sullivan Report, the global LiDAR solution market for ADAS in terms of revenue was US$0.2 billion in 2021, and is expected to reach US$64.9 billion in 2030, representing a CAGR of 93.8%. • Autonomous Mobility. The LiDAR solution market for Autonomous Mobility has been Hesai Technology’s first battlefield to commercialize its LiDAR products and build its leadership in the industry. According to the Frost & Sullivan Report, Hesai Technology is the global No. 1 LiDAR solution provider in terms of revenue in the Autonomous Mobility application market in 2021, representing approximately 60% of the global market share. Its top five customers in terms of revenues in 2020 for LiDAR solutions in the Autonomous Mobility industry include, among others, a leading global OEM headquartered in the United States, Baidu, Inc., Aurora, Pony.ai, and a leading mobility service and technology company headquartered in the United States. Its top five customers in terms of revenues in 2021 were a leading global OEM headquartered in the United States, AutoX, Baidu, a top global OEM headquartered in Germany and WeRide. Its top five customers in terms of revenues in the nine months ended September 30, 2022 were Li Auto, AutoX, a leading global OEM headquartered in the United States, a top global OEM headquartered in Germany and an autonomous vehicle company headquartered in the United States. According to the Frost & Sullivan Report, the LiDAR solution market for Autonomous Mobility in terms of revenue was US$0.2 billion in 2021, and is expected to reach US$22.3 billion in 2030, representing a compound annual growth rate, or CAGR, of 73.6%. • Robotics. In addition to the ADAS and Autonomous Mobility markets that it strategically focuses on, Hesai Technology also leverages its proprietary TX/RX system with embedded ASICs to develop LiDAR products for the Robotics market. It has entered into multi-year agreements with Nuro, Meituan, and Neolix for deployments of last-mile delivery services in this market. According to the Frost & Sullivan Report, the global LiDAR solution market for Robotics in terms of revenue was US$0.1 billion in 2021, and is expected to reach US$16.7 billion in 2030, representing a CAGR of 71.5%. --- Hesai Technology has already started commercializing its technology and has begun shipping its LiDAR units in increasing volumes. Revenue on approximately 14,000 shipped LiDAR units was recognized in 2021 as compared to approximately 4,200 shipped units in 2020. Hesai Technology has been growing rapidly while maintaining industryleading gross margins as compared to major publicly listed LiDAR companies, according to the Frost & Sullivan Report. Our net revenues increased by 19.4% from RMB348.1 million in 2019 to RMB415.5 million in 2020, and further increased by 73.5% from RMB415.5 million in 2020 to RMB720.8 million (US$101.3 million) in 2021. Our gross margin for 2019, 2020, and 2021 was 70.3%, 57.5%, and 53.0%, respectively, and our net loss for the same periods was RMB120.2 million, RMB107.2 million, and RMB244.8 million (US$34.4 million), respectively. Our EBITDA, a non-GAAP financial measure, was negative RMB128.7 million, negative RMB109.1 million, and negative RMB250.3 million (US$35.2 million) in 2019, 2020, and 2021, respectively. For the nine months ended September 30, 2022, we recognized revenue on approximately 32,400 shipped LiDAR units, as compared to over 8,000 shipped units in the nine months ended September 30, 2021. Our net revenues increased by 72.7% from RMB459.4 million in the nine months ended September 30, 2021 to RMB793.5 million (US$111.5 million) in the nine months ended September 30, 2022. Our gross margin for the nine months ended September 30, 2021 and 2022 was 53.3% and 44.0%, respectively, and our net loss for the same periods was RMB174.8 million and RMB165.5 million (US$23.3 million), respectively. Our EBITDA, a non-GAAP financial measure, was negative RMB169.6 million and negative RMB176.1 million (US$24.8 million) in the nine months ended September 30, 2021 and 2022, respectively. (1) Performance of LiDAR products refers to the detection range, point density, distance accuracy and precision, among others. Our principal executive offices are located at 9th Floor, Building L2-B, 1588 Zhuguang Road, Qingpu District, Shanghai 201702, People’s Republic of China. Our telephone number at this address is +86 (21) 3158-8240. Our registered office in the Cayman Islands is located at the offices of Ogier Global (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located in New York, NY.
