In 2007, Zhang Wanzhen, who had once again taken up the position of Vice Chairman of the Chaozhou Municipal Political Consultative Conference, decided to step down and redirect his focus to Sanhuan Group.

Back then, few could have foreseen that Zhang Wanzhen's decision would ultimately catapult him to the status of the wealthiest individual in Chaozhou City.

Upon returning to Sanhuan Group, the company embarked on a rapid development trajectory under Zhang Wanzhen's guidance. Around 2014, Sanhuan Group ranked among the top ten Chinese electronic component companies and made a successful debut on the ChiNext board of the Shenzhen Stock Exchange in the same year. Today, Sanhuan Group has emerged as a 'hidden champion' in the realm of electronic ceramic materials. By 2024, its alumina ceramic substrate will command over 50% of the global market share, securing the top spot in the industry. Its solid oxide fuel cell (SOFC) diaphragm also leads the world in market share. Additionally, its resistive paste holds approximately 13% of the global market share, ranking fourth.

As the business flourished, Sanhuan Group's stock price soared, with its market value surpassing 100 billion yuan in October of this year. Consequently, Zhang Wanzhen's personal fortune skyrocketed. According to the released by Hurun Report, Zhang Wanzhen secured the 284th position on the list with a fortune of 22 billion yuan, making him the richest person in the Chaozhou region.

However, Zhang Wanzhen's ambitions did not end there. On December 5, Sanhuan Group officially filed its listing application with the Hong Kong Stock Exchange, initiating the process of going public in Hong Kong. According to the prospectus, Sanhuan Group's objective for listing on the Hong Kong stock market is to achieve globalization. By listing in Hong Kong, the company aims to tap into the international capital market to further enhance its R&D investment, strengthen its production capacity deployment, expand its global business footprint, solidify its leading position in the high-end electronic ceramic materials and components sector, and seize long-term development opportunities arising from downstream industry upgrades and domestic substitution.

"MLCC 'Hidden Champion'"

Sanhuan Group traces its roots back to the 'Chaozhou Radio Component Factory No. 1,' established in 1970.

In 1973, shortly after the factory's inception, 24-year-old Zhang Wanzhen was recruited as an ordinary worker. Through diligent effort and a remarkable aptitude for learning, Zhang Wanzhen quickly ascended to become a workshop supervisor and later the factory director. Spurred by market economy transformations, the Chaozhou Radio Component Factory No. 1 first transformed into a locally state-owned Chaozhou Radio Ceramic Parts Factory and subsequently underwent a joint-stock restructuring in 1992, adopting the name Sanhuan Group. Zhang Wanzhen also transitioned to become the company's chairman.

In 1998, due to his outstanding performance, Zhang Wanzhen was promoted to Vice Mayor of Chaozhou City, overseeing transportation, postal services, and telecommunications. In 2001, he transitioned to serve as the Vice Chairman of the Chaozhou Municipal Political Consultative Conference. In 2007, although Zhang Wanzhen once again assumed the role of Vice Chairman of the Chaozhou Municipal Political Consultative Conference, he opted to resign and refocus on Sanhuan Group, becoming the company's actual controller through capital contributions.

Prior to entering politics, Sanhuan Group had already chosen electronic ceramics as its core business. Electronic ceramics are high-tech materials that acquire specific electrical, magnetic, optical, thermal, and acoustic properties through precise control of composition and processing. They are distinct from the ordinary household ceramics we are familiar with. In modern electronic industries, electronic ceramics play multifaceted roles as 'skeletons,' 'blood vessels,' and 'skin.' They serve as structural components supporting electronic parts, functional components conducting signals and dissipating heat, and protective packaging for precision chips.

In the 1990s, the global fiber-optic communication industry witnessed explosive growth. However, ceramic ferrules, the core components for fiber-optic connections requiring micrometer-level precision, had long been monopolized by foreign giants, resulting in exorbitant prices. Sanhuan Group identified this pain point and concentrated its efforts on developing ceramic injection molding technology. Subsequently, the company successfully overcame technological bottlenecks, producing high-precision, low-cost products and dismantling foreign monopolies. Today, Sanhuan's ceramic ferrules and sleeves account for over 70% of the global market share, establishing it as the undisputed leader in this niche.

However, the true turning point for Sanhuan Group came with its conquest of the highly challenging Multi-Layer Ceramic Capacitor (MLCC). Dubbed the 'rice of the electronic industry,' these components, smaller than sesame seeds, are indispensable miniature 'energy storers' and 'voltage regulators' in circuits. A high-end smartphone contains over a thousand MLCCs. Due to stringent technical requirements, the MLCC market was long dominated by Japanese companies after its inception.

Sanhuan Group commenced its MLCC research around 2000, tackling every technical hurdle—from ceramic powder formulation and nanoscale grinding to the tape casting of dielectric films (as thin as cicada wings), precision laminated printing, and microstructural control during high-temperature sintering—over more than a decade. Under Zhang Wanzhen's leadership, Sanhuan Group achieved a remarkable leap, reducing early dielectric layer film thicknesses from 5 microns to 1 micron and now below 1 micron, with stacking layers exceeding 1,000. This entails alternating and precisely aligning 1,000 ceramic films thinner than a human hair's diameter (about 80 microns) with metal electrodes and integrating them flawlessly during high-temperature sintering.

With this technological breakthrough, Sanhuan Group successfully joined the ranks of the world's major MLCC suppliers and is now the largest MLCC supplier in mainland China.

After achieving breakthroughs in the MLCC sector, Sanhuan Group embarked on a transformation into a multi-business enterprise encompassing 'materials + structures + functions.' Currently, Sanhuan Group has evolved from a single-component manufacturer into a 'hidden empire' covering the entire value chain of electronic ceramics, with businesses spanning four major areas: electronic and ceramic materials, electronic components, communication devices, and equipment components.

Accelerating Globalization 'Breakthrough'

After over two decades of technological accumulation, Sanhuan Group has emerged as a 'hidden champion' in the domestic MLCC sector.

However, the company's ambitions extend beyond the domestic market. On December 5, Sanhuan Group officially filed its listing application with the Hong Kong Stock Exchange, initiating the process of going public in Hong Kong.

According to the prospectus, Sanhuan Group's objective for this Hong Kong listing is to achieve globalization. By listing in Hong Kong, the company aims to tap into the international capital market to further enhance its R&D investment, strengthen its production capacity deployment, expand its global business footprint, solidify its leading position in the high-end electronic ceramic materials and components sector, and seize long-term development opportunities arising from downstream industry upgrades and domestic substitution.

Financial data reveals that Sanhuan Group had no overseas revenue in the first half of this year. Why, then, did it suddenly target globalization? This may be attributed to the industry landscape of MLCCs.

In the passive component industry, particularly in the MLCC segment with the highest technical barriers, global competition exhibits a distinct 'pyramid' structure.

At the pinnacle of the 'pyramid' are dominant Japanese companies—Murata Manufacturing, TDK, Taiyo Yuden, and others—that have built an insurmountable moat through decades of material science accumulation, extreme process control, and deep binding with global top-tier customers (such as Apple, NVIDIA, and Tesla). Taking Murata as an example, it not only holds approximately 28.6% of the global MLCC market share, ranking first, but also achieves defect rates measured in PPB (parts per billion) in ultra-miniature size and other high-end fields. Leveraging their technological advantages, these giants monopolize product markets in cutting-edge fields such as AI servers and high-end automotive electronics. They are not only competitors but also the dominant forces in setting industry standards and prices.

In the middle and lower tiers of the 'pyramid' lies the vast but fiercely competitive mid-to-high-end and consumer-grade market, dominated by South Korean and Taiwanese companies such as Samsung Electro-Mechanics and Yageo Corporation, which also possess robust supply chains and customer networks. Meanwhile, Chinese domestic manufacturers have rapidly risen from the mid-to-low-end market, driven by industrial policies and the wave of domestic substitution, and are vigorously penetrating the mid-to-high-end sectors. According to a report by ijiwei, the localization rate of China's MLCC market has increased from 12% in 2020 to 22% in 2024. Although significant progress has been made, there is still a substantial gap compared to the leading players.

As the largest MLCC supplier in mainland China, Sanhuan Group undoubtedly possesses strong competitiveness domestically. However, the domestic market has limited capacity. Moreover, even though short-term demand in the domestic market continues to grow, orders and pricing power for high-end demands (such as automotive-grade and high-end server MLCCs) are highly concentrated in the hands of global suppliers. If Sanhuan Group merely sticks to the domestic market, it is foreseeable that it will soon encounter a ceiling. From this perspective, going global is undoubtedly a favorable choice.

Additionally, according to industry analysis, the current AI revolution and the electrification and intelligence of automobiles are reshaping the MLCC industry landscape. In terms of the AI revolution, the MLCC usage per AI server can reach eight times that of traditional servers, creating a massive and sustained demand for high-end components. Regarding automobile electrification and intelligence, an electric vehicle uses approximately 18,000 MLCCs, six times that of a traditional fuel vehicle. It is estimated that the automotive-grade MLCC market size will exceed 20 billion yuan by 2025. However, the core customers in these incremental markets, whether North American cloud service providers, top AI chip companies, or global automotive brands, all have globalized supply chains. If Sanhuan Group wants to participate and benefit from the rapid development of these emerging industries, accelerating globalization is imperative.

From a former state-owned factory to today's 100-billion MLCC giant, Sanhuan Group's journey paints a grand narrative of how a Chinese high-end manufacturing enterprise can compete for the right to define the future industrial landscape through solid technological foundations and precise capital strategies. Listing in Hong Kong will mark a new beginning for this narrative.