China's LED upstream chip factory "prosperity" behind the **

In August, LED companies have released the 2012 semi-annual report. Interestingly, the growth of the performance of some of the mainland's LED chip makers is still based on local government support.

On August 10th, Sanan Optoelectronic released its first-half financial report in 2012, showing that Sanan Optoelectronics' first-half revenue was 1.37 billion yuan, an increase of 90.53% over the same period of last year, and net profit was 466 million yuan, an increase of 1.55% over the same period of last year, and included in the current profit or loss. The government subsidy is 198 million yuan.

On August 29, BDO Runda released its first-half financial report for the first half of 2012, showing that BDO Runda’s revenue for the first half of the year was RMB1.224 billion, a decrease of 1.01% year-on-year, and a net profit of RMB124 million, a year-on-year increase of 21.5%. 154 million yuan. This also means that the Bund Runda net profit growth in the first half all come from government subsidies, if you remove this part of the subsidy income, BDO Runda also lost 7.18 million yuan in the first half.

In contrast, the former "LED teacher" LED chip manufacturers, LED chip manufacturers in Taiwan are preparing for "winter", Epistar and New Century Optoelectronics Taiwan LED chip leader in the first half of this year's performance is still a loss situation.

"We are playing an unfair market competition, the mainland LED chip manufacturers rely on the support of local governments to grab the market at a low price." Epistar chairman Li Bingjie reluctantly told reporters that mainland competitors will LED chips With price cuts, Taiwanese LED chip makers have also been forced to lower their prices, leading to a loss in the company’s performance. “In fact, mainland LED chip makers are still losing money in LED chip performance.”

"Since the second half of last year, the entire LED chip industry has experienced a crisis of overcapacity due to fierce competition, which has led to a drop in chip prices and a drop in gross margins. As a result, most LED chip companies are in a state of loss." Advanced LED Industry Research Institute Advanced Analyst Yu Bin told reporters that the performance of a few LED chip companies in China has benefited from subsidies and orders from local governments.

LED industry expert Shi Weili frankly stated that mainland and Taiwan LED chip manufacturers have been in an unfair competition state from the very beginning. The high subsidies and orders of mainland Chinese local governments belong to a kind of semi-government and semi-market-oriented behavior, in terms of reliability and safety. It is not conducive to the healthy growth of the mainland LED chip manufacturers.

Distorted revenue

In fact, relying on local government subsidies and orders to achieve the company's performance growth, has become the mainland's LED manufacturers in recent years, the survival and development of unspoken rules.

In 2011, Sanan Optoelectronics revenue was 1.747 billion yuan, an increase of 102.56% year-on-year, and a net profit of 936 million yuan, an increase of 123.29% year-on-year, and the government grant included in the current profit and loss was as high as 805 million yuan.

BDO Runda achieved a net profit of 392 million yuan in 2011, an increase of 100.44% year-on-year, of which government subsidies amounted to 310 million yuan, and government subsidies contributed 79% of net profit.

"Government subsidies and orders for local LED application products are already the guarantee for the profitability of China's LED chip manufacturers." A middle layer of LED packaging manufacturer Ruifeng Optoelectronics stated that although the government supports the development of the mainland LED chip manufacturers, it deviated from the principle of market competition. However, it is also the competitive advantage of the mainland LED chip companies.

In fact, the envy of LED chip makers in Taiwan is not just government subsidies, but also lucrative local purchase orders.

In 2010, Sanan Optoelectronics obtained an order of 600 million LED street lamps from Wuhu for investment in the LED industry in Wuhu. Since 2010, the Wuhu Housing and Urban-Rural Development Committee has been one of the five largest customers of Sanan Optoelectronics for two consecutive years.

In 2011, Sanan Optoelectronics invested in a sapphire project in Quanzhou and obtained a 1.6 billion LED application product procurement contract.

Through the huge subsidies of sub-national governments and procurement of large orders to fill the revenue and profits in addition to Sanan Optoelectronics, as well as BDO Runda.

A senior executive of BDO Runda once stated to the “New Industry” that the sales of LED street lamps of BDO Runda exceeded 100,000 last year and is expected to reach 200,000 baht in 2012. Most of the orders are from local government street lamps where the company invests. Order.

Many industry veterans have stated that government subsidies and government orders are the winning weapons for the mainland's LED chips to increase their income.

Struggling for 3 years

For Taiwanese LED chip manufacturers, the hardest thing is that the mainland LED chip manufacturers will also introduce this non-market competitive factor to Taiwan's domestic market.

According to data from third-party research institutions, sales of Sanan Optoelectronics in Taiwan in the first half of 2012 were approximately 40 million yuan. In July alone, Sanan Optoelectronics sales revenue in Taiwan reached 10 million yuan.

It is estimated that the sales revenue of Sanan Optoelectronics in Taiwan will exceed the 100 million mark throughout 2012.

In this regard, Li Bingjie said that the mainland competitors will only be able to exert their productivity from the LED manufacturers in Taiwan. The future technological challenges will become the bottleneck for the development of mainland LED manufacturers.

"Kemco will also be struggling for three years. In this three years, we do not intend to make money." Li Bingjie revealed that LED chip prices will rebound after 3 years, in this 3 years, Epistar does not rule out Lower prices to fight.

Zhong Kuangren, Chairman of New Century Optoelectronics, also stated that the price war on the mainland LED chips did impact the LED chip makers in Taiwan. This impact will continue until the second half of this year. "It is estimated that the company's revenue in 2012 will be slightly higher than 2011." decline."

Industry professionals pointed out that because of the support of local governments, Sanan Optoelectronics has capital to seize the market with low prices. For enterprises, the government can rely on it for a while, but it cannot rely on a lifetime. This depends on whether the company can make use of the government’s “Yang Guan Dao” to build itself up and wait until after occupying a certain market share, even without the government. The support can still achieve the purpose of seizing the market.

Shi Weili pointed out that Taiwan's LED chip makers have relatively stable overseas orders. It is estimated that from the second half of this year, the performance of Taiwanese LED chip manufacturers will begin to turn for the better. Most of the mainland LED chip makers are operating at zero profit or even operating at a loss. How long it can survive depends largely on the length of time that local government policy supports.