Sanan denied that the Wuhu project’s suspension of production and financing increased by 1.7 billion

LED market rebounded this year, LED chip maker Sanan Optoelectronics (600703.SH) restarted additional issuance, intending to expand the production capacity of LED chips.

Lin Xiucheng, chairman of Sanan Optoelectronics, said recently that he has not stopped considering additional issuances, but only because of environmental changes, changing the issuance method and reducing the amount of financing.

Sanan Optoelectronics terminated its public offering of A shares in March this year. On May 18, the clarification announcement that the stock rose more than 20% in three days revealed that due to the improvement of the securities market and the development environment of the industry, Sanan Optoelectronics plans to plan the non-public issuance of A shares and start its second phase of Wuhu Optoelectronics Industrialization in due course.

For the "reversal" within two months, Lin Xiucheng said that the suspension of the issuance is a misunderstanding, Sanan Optoelectronics has never said that the second phase of Wuhu production. Because the market is not very good, after communicating with the relevant departments, the way has changed, from public issuance to directional issuance. After restarting the additional issuance, the financing amount of Sanan Optoelectronics will be reduced from the previous 8 billion yuan to 6.3 billion yuan.

Lin Xiucheng said that Sanan Optoelectronics is the "big boss" of China's LED epitaxy and chip. The goal for the next five years is to enter the world's top five LED chips and strive for the top three, so it needs to expand production.

The rapid rise of Sanan Optoelectronics is inseparable from the support of local governments. In 2012, Sanan Optoelectronics' operating income was 3.36 billion yuan, up 92.48% year-on-year; net profit was affected by the decline in LED chip prices, down 13.47% year-on-year to 8.1 billion yuan; but last year it received about 20 government subsidies, the amount of subsidies reached 438 million yuan, including subsidies for MOCVD equipment.

In April this year, Sanan Optoelectronics announced that 98 of its 103 blue-green MOCVD equipments in Anhui Province have been produced normally, and have received a subsidy of 130 million yuan from the MOCVD equipment granted by the Wuhu Municipal Government.

Lin Xiucheng said frankly that in the past few years, dozens of cities in China have invested in supporting the LED industry. "If the new project is on, the government will make up."

Wang Qing, secretary of the Board of Directors of Sanan Optoelectronics, said that after the MOCVD machine is put into production, local government subsidies will be reduced, and Sanan Optoelectronics will make profits through scale, research and development, and products.

Zhang Xiaofei, director of the High-tech LED Industry Research Institute, believes that Sanan Optoelectronics wants to leverage the capital market and government subsidies to use the price and cost advantages to monopolize the domestic LED chip market. At present, the customer base and products of Sanan Optoelectronics LED chips are mainly at the low-end and mid-end, and whether their new capacity expansion is high or medium is still uncertain. However, Sanan Optoelectronics has played a fierce price war on LED chips, accounting for nearly half of the domestic low-end LED chip market.

"Although government subsidies will be gradually reduced, there will still be subsidies for MOCVD. This is one of the incentives for Sanan Optoelectronics to continue to expand." Zhang Xiaofei said that the price of Sanan's LED chips is low, so that the industry price cannot be pulled up. Enterprises can't make money, and if Sanan Optoelectronics completes this additional issuance, its market share will be even greater.

However, in Zhang Xiaofei's view, as the LED lighting market matures, the industry focus has turned to the downstream. At this point, the government continues to subsidize upstream, which is “unfair” to companies that are not subsidized. But "if the government subsidies are removed, the whole industry is losing money." This issue deserves attention.

(This article is reproduced on the Internet. The texts and opinions expressed in this article have not been confirmed by this site, nor do they represent the position of Gaogong LED. Readers need to verify the relevant content by themselves.)

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