“If the government subsidies are removed, the main business of Sanan Optoelectronics (600703.SH) and Dehao Runda (002005.SZ) is loss or low profit.†An industry veteran who did not want to be named told reporters.
Sanan Optoelectronics announced that in the past three years of 2012, 2011 and 2010, Sanan Optoelectronics received government subsidies of 328 million yuan, 805 million yuan and 253 million yuan respectively, accounting for 40.5% of the net profit of the year. 86% and 60.4%. The government subsidies received by Dehao Runda in the past three years were 224 million yuan, 310 million yuan and 270 million yuan respectively, accounting for 138%, 79.1% and 129% of the net profit of the year. That is to say, in 2010 and 2012, listed companies were losing money without government subsidies.
In fact, in addition to the performance of LED companies, government subsidies have deviated from its original expectations: "focus on the research and development of LED technology, and then promote the development of the industry." The industry believes that some companies "drilled the allowance of space."
Faced with such a situation, local governments that have been favoring the LED industry have chosen to "leave".
In mid-March this year, Shenzhen City suddenly abolished the "Notice on Printing and Distributing Shenzhen LED Industry Development Plan (2009-2015)", but did not announce any explanations and reasons. Some media quoted officials as saying that the government is worried about the overcapacity in the LED industry and even worried that the LED industry will become the second photovoltaic industry.
Huge subsidies
Whether photovoltaic or LED, the government played a crucial role in the early stage. This is evident from the huge subsidies received by related companies in the last three years.
In the past three years of 2012, 2011 and 2010, Sanan Optoelectronics received government subsidies of 328 million yuan, 805 million yuan and 253 million yuan respectively, accounting for 40.5%, 86% and 60.4% of the net profit of the year.
The government subsidies received by Dehao Runda in the past three years were 224 million yuan, 310 million yuan and 270 million yuan respectively, accounting for 138%, 79.1% and 129% of the net profit of the year. That is to say, in 2010 and 2012, listed companies were losing money without government subsidies.
According to the data, Sanan Optoelectronics obtained a large number of the above-mentioned subsidies, and the total number reached 24 at one time. Among them, the two largest names are: government subsidies of 911 million yuan for MOCVD equipment procurement subsidy projects and 480 million yuan for equipment purchase subsidies of Japanese core photovoltaics. In addition, there are various subsidy items such as key new products and LED chip industrialization.
Looking at another listed company in the LED industry, Dehao Runda's revenue in 2012 was 2.824 billion yuan, down 7.89% year-on-year; net profit was 168 million yuan, down 57.14% year-on-year. For the decline in performance, Dehao Runda said that an important reason was that the government subsidies that were included in the profit and loss in the fourth quarter of last year failed to meet expectations.
It can be seen from the above that how important government subsidies are for the performance of listed companies. However, it seems now that it will be doubtful that listed companies will continue to receive so many government subsidies in the future.
In the first quarter of 2013, Sanan Optoelectronics and Dehao Runda reduced their net profit attributable to shareholders of listed companies by 29.53% and 18.77%, respectively, due to the lack of substantial subsidies.
Dehao Runda forecasts that net profit for the first half of this year will fall by 30%-60% year-on-year, mainly due to the combined effect of government subsidies received in January-June 2013 compared to the same period last year and the year-on-year improvement in the main business.
While continuing to receive government subsidies, the profit margin of LED companies' main business has shown a downward trend.
Sanan Optoelectronics' 2012 annual report shows that the company's main business LED industry operating income was 2.58 billion yuan, an increase of 61.7% over the same period of the previous year; net profit of 810 million yuan, down 13.47%.
The reason for this is related to the large decline in the gross profit margin of the LED business in 2012, which has seriously affected the revenue of the LED project.
According to the data, Sanan Optoelectronics' gross profit margin in 2010 was 40.28%, and in 2011 it was 39.66%. By 2012, the gross profit margin was only 25.3%, a decrease of 14.36% from the same period of the previous year.
Dehao Runda is similar to Sanan Optoelectronics: in 2011, the company's LED business gross margin was 38.4%, in 2012 this figure fell to 33.83%, a decrease of 4.57%.
Insufficient subsidy
“The government will not give companies huge subsidies as they have in the past few years.†The industry believes that with the advent of the incubation period and the arrival of product competition, the government will not give companies huge subsidies as they did in previous years.
Enterprises have long understood this.
Dehao Runda once said that with the large number of MOCVD equipment purchased by various LED companies, the government subsidy policy may be weakened, and local governments are likely to gradually suspend or cancel subsidies for new equipment.
Soon, this has been evident in the financial report of Dehao Runda and Sanan Optoelectronics in the first quarter of 2013: In the first quarter, the government’s subsidies to Sanan Optoelectronics decreased by 68.4% year-on-year. This is the case of Dehao Runda. The data was down 89.50% from the same period of the previous year, a decrease of more than 90 million yuan.
It is reported that Dehao Runda has purchased 80 MOVCD equipment, and another 50 are still in the procurement. As the government subsidies weaken, the input cost of equipment will undoubtedly increase.
A person close to Dehao Runda told reporters that the purchase of the remaining 50 equipment will be based on market conditions, and may not be purchased, or it may proceed as originally planned.
The reporter noted that the total price of 100 units purchased by Dehao Runda in the previous period did not exceed 261 million US dollars, and the average price per unit was not higher than 2.61 million US dollars. According to the latest exchange rate, each equipment was equivalent to about 16 million yuan.
In 2012, Dehao Runda received government subsidies totaling 224 million yuan, of which 13 million were for MOVCD equipment. If you purchase 50 units according to the original plan, Dehao Runda will pay 800 million yuan for this. Then, if you can't receive the subsidy equivalent to last year's amount, the cost of Dehao Runda will be greatly enlarged.
Industry insiders told reporters that the government initially intended to promote the research and development of LED technology through subsidies, and then promote the development of the industry. "But in fact, subsidies have been subsided in recent years. The technology research and development is not in place, and the government's subsidy supervision is not enough. The main performance is the lack of a complete set of operational system guarantees."
The source said that the regional subsidy policy is too strong. If it is subsidized in Guangdong, it will not work until it starts in Anhui. The local governments want political achievements, so it is necessary to go to Anhui for subsidies. “There are a lot of LED companies that use subsidies to cover land and buy equipment, but they don’t do well in terms of technology. Many companies will take advantage of the space, and their more assets are land and factories.â€
The second PV?
The government's support policy has enabled the LED industry to develop rapidly in a short period of time. The number of LED companies has also surged in a short period of time, but it is mostly dominated by small businesses. At the same time, in the industrial chain, there are many upstream enterprises and few downstream enterprises.
Data show that during the three years from 2009 to 2011, the country has added more than 20 LED chip projects every year, with more than 80 domestic chip companies. Due to the influx of capital, the industry quickly fell into the predicament of overcapacity and falling LED chip prices.
According to the statistics of the High-tech LED Industry Research Institute, the average price of LED chips in China dropped by 32% in 2012, and the average price of some products such as low-power LED blue-green chips for display screens fell by more than 50%. In the packaging industry in the middle of the LED industry chain, the average price of white LED packaged devices in China in 2012 dropped by more than 30%. In the downstream application industry, the average price of indoor LED lighting products such as LED fluorescent tubes, LED bulbs, LED panel lights and LED downlights in China dropped by 23% in 2012.
According to industry insiders, as the sunrise industry, LED market demand has not declined in 2012, but the capacity expansion has far exceeded demand. In the high-end lighting field, domestic manufacturers have not allocated too much market share, only in the low-end market. The price war has caused structural overcapacity.
The shuffling has begun. Previously, there were only more than 50 LED chip companies left, and more than 20 were withdrawn in 2012.
In this context, the Shenzhen Municipal Government suddenly abolished the Notice on Printing and Distributing the Shenzhen LED Industry Development Plan (2009-2015) in mid-March, but did not announce any explanations and reasons.
It is reported that the notice proposes to establish Shenzhen as a national and internationally important LED industry R&D and production base, and set a development target of an annual industrial output value of more than 130 billion yuan by 2015.
“Many small businesses in Shenzhen are very flexible and efficient. What do you do to make money? The government’s approach is to 'let the market go to market', which is a sensible approach,†said the industry source.
However, some media quoted officials as saying that the government is worried about the overcapacity in the LED industry and even worried that the LED industry will become the second photovoltaic industry.
In 2012, the photovoltaic sector was trapped in the overcapacity and double-reverse quagmire. The PV listed companies fell 24.69% overall and underperformed the Shanghai and Shenzhen 300 Index by 31.60%. In addition, the EU will make a preliminary ruling on the anti-dumping and countervailing cases of Chinese PV products on May 15. It is reported that after the United States implemented "double opposition" to China, more than 80% of China's polysilicon enterprises were forced to suspend production. China's export market share in the United States is only 20%, while in Europe it is as high as 70%. Liu Hanyuan, chairman of the Board of Directors of Tongwei Group, once said that the EU's anti-dumping case against China will undoubtedly cause a huge blow to China's photovoltaic industry.
The recent survey results show that even in the photovoltaic industry, even if the company is in a better position, the operating rate is less than 80%, and there is no profit.
However, the above-mentioned industry veterans believe that the procurement of photovoltaics is completely determined by the government's subsidy behavior, and the degree of marketization of LEDs is much higher.
(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.)
Sanan Optoelectronics announced that in the past three years of 2012, 2011 and 2010, Sanan Optoelectronics received government subsidies of 328 million yuan, 805 million yuan and 253 million yuan respectively, accounting for 40.5% of the net profit of the year. 86% and 60.4%. The government subsidies received by Dehao Runda in the past three years were 224 million yuan, 310 million yuan and 270 million yuan respectively, accounting for 138%, 79.1% and 129% of the net profit of the year. That is to say, in 2010 and 2012, listed companies were losing money without government subsidies.
In fact, in addition to the performance of LED companies, government subsidies have deviated from its original expectations: "focus on the research and development of LED technology, and then promote the development of the industry." The industry believes that some companies "drilled the allowance of space."
Faced with such a situation, local governments that have been favoring the LED industry have chosen to "leave".
In mid-March this year, Shenzhen City suddenly abolished the "Notice on Printing and Distributing Shenzhen LED Industry Development Plan (2009-2015)", but did not announce any explanations and reasons. Some media quoted officials as saying that the government is worried about the overcapacity in the LED industry and even worried that the LED industry will become the second photovoltaic industry.
Huge subsidies
Whether photovoltaic or LED, the government played a crucial role in the early stage. This is evident from the huge subsidies received by related companies in the last three years.
In the past three years of 2012, 2011 and 2010, Sanan Optoelectronics received government subsidies of 328 million yuan, 805 million yuan and 253 million yuan respectively, accounting for 40.5%, 86% and 60.4% of the net profit of the year.
The government subsidies received by Dehao Runda in the past three years were 224 million yuan, 310 million yuan and 270 million yuan respectively, accounting for 138%, 79.1% and 129% of the net profit of the year. That is to say, in 2010 and 2012, listed companies were losing money without government subsidies.
According to the data, Sanan Optoelectronics obtained a large number of the above-mentioned subsidies, and the total number reached 24 at one time. Among them, the two largest names are: government subsidies of 911 million yuan for MOCVD equipment procurement subsidy projects and 480 million yuan for equipment purchase subsidies of Japanese core photovoltaics. In addition, there are various subsidy items such as key new products and LED chip industrialization.
Looking at another listed company in the LED industry, Dehao Runda's revenue in 2012 was 2.824 billion yuan, down 7.89% year-on-year; net profit was 168 million yuan, down 57.14% year-on-year. For the decline in performance, Dehao Runda said that an important reason was that the government subsidies that were included in the profit and loss in the fourth quarter of last year failed to meet expectations.
It can be seen from the above that how important government subsidies are for the performance of listed companies. However, it seems now that it will be doubtful that listed companies will continue to receive so many government subsidies in the future.
In the first quarter of 2013, Sanan Optoelectronics and Dehao Runda reduced their net profit attributable to shareholders of listed companies by 29.53% and 18.77%, respectively, due to the lack of substantial subsidies.
Dehao Runda forecasts that net profit for the first half of this year will fall by 30%-60% year-on-year, mainly due to the combined effect of government subsidies received in January-June 2013 compared to the same period last year and the year-on-year improvement in the main business.
While continuing to receive government subsidies, the profit margin of LED companies' main business has shown a downward trend.
Sanan Optoelectronics' 2012 annual report shows that the company's main business LED industry operating income was 2.58 billion yuan, an increase of 61.7% over the same period of the previous year; net profit of 810 million yuan, down 13.47%.
The reason for this is related to the large decline in the gross profit margin of the LED business in 2012, which has seriously affected the revenue of the LED project.
According to the data, Sanan Optoelectronics' gross profit margin in 2010 was 40.28%, and in 2011 it was 39.66%. By 2012, the gross profit margin was only 25.3%, a decrease of 14.36% from the same period of the previous year.
Dehao Runda is similar to Sanan Optoelectronics: in 2011, the company's LED business gross margin was 38.4%, in 2012 this figure fell to 33.83%, a decrease of 4.57%.
Insufficient subsidy
“The government will not give companies huge subsidies as they have in the past few years.†The industry believes that with the advent of the incubation period and the arrival of product competition, the government will not give companies huge subsidies as they did in previous years.
Enterprises have long understood this.
Dehao Runda once said that with the large number of MOCVD equipment purchased by various LED companies, the government subsidy policy may be weakened, and local governments are likely to gradually suspend or cancel subsidies for new equipment.
Soon, this has been evident in the financial report of Dehao Runda and Sanan Optoelectronics in the first quarter of 2013: In the first quarter, the government’s subsidies to Sanan Optoelectronics decreased by 68.4% year-on-year. This is the case of Dehao Runda. The data was down 89.50% from the same period of the previous year, a decrease of more than 90 million yuan.
It is reported that Dehao Runda has purchased 80 MOVCD equipment, and another 50 are still in the procurement. As the government subsidies weaken, the input cost of equipment will undoubtedly increase.
A person close to Dehao Runda told reporters that the purchase of the remaining 50 equipment will be based on market conditions, and may not be purchased, or it may proceed as originally planned.
The reporter noted that the total price of 100 units purchased by Dehao Runda in the previous period did not exceed 261 million US dollars, and the average price per unit was not higher than 2.61 million US dollars. According to the latest exchange rate, each equipment was equivalent to about 16 million yuan.
In 2012, Dehao Runda received government subsidies totaling 224 million yuan, of which 13 million were for MOVCD equipment. If you purchase 50 units according to the original plan, Dehao Runda will pay 800 million yuan for this. Then, if you can't receive the subsidy equivalent to last year's amount, the cost of Dehao Runda will be greatly enlarged.
Industry insiders told reporters that the government initially intended to promote the research and development of LED technology through subsidies, and then promote the development of the industry. "But in fact, subsidies have been subsided in recent years. The technology research and development is not in place, and the government's subsidy supervision is not enough. The main performance is the lack of a complete set of operational system guarantees."
The source said that the regional subsidy policy is too strong. If it is subsidized in Guangdong, it will not work until it starts in Anhui. The local governments want political achievements, so it is necessary to go to Anhui for subsidies. “There are a lot of LED companies that use subsidies to cover land and buy equipment, but they don’t do well in terms of technology. Many companies will take advantage of the space, and their more assets are land and factories.â€
The second PV?
The government's support policy has enabled the LED industry to develop rapidly in a short period of time. The number of LED companies has also surged in a short period of time, but it is mostly dominated by small businesses. At the same time, in the industrial chain, there are many upstream enterprises and few downstream enterprises.
Data show that during the three years from 2009 to 2011, the country has added more than 20 LED chip projects every year, with more than 80 domestic chip companies. Due to the influx of capital, the industry quickly fell into the predicament of overcapacity and falling LED chip prices.
According to the statistics of the High-tech LED Industry Research Institute, the average price of LED chips in China dropped by 32% in 2012, and the average price of some products such as low-power LED blue-green chips for display screens fell by more than 50%. In the packaging industry in the middle of the LED industry chain, the average price of white LED packaged devices in China in 2012 dropped by more than 30%. In the downstream application industry, the average price of indoor LED lighting products such as LED fluorescent tubes, LED bulbs, LED panel lights and LED downlights in China dropped by 23% in 2012.
According to industry insiders, as the sunrise industry, LED market demand has not declined in 2012, but the capacity expansion has far exceeded demand. In the high-end lighting field, domestic manufacturers have not allocated too much market share, only in the low-end market. The price war has caused structural overcapacity.
The shuffling has begun. Previously, there were only more than 50 LED chip companies left, and more than 20 were withdrawn in 2012.
In this context, the Shenzhen Municipal Government suddenly abolished the Notice on Printing and Distributing the Shenzhen LED Industry Development Plan (2009-2015) in mid-March, but did not announce any explanations and reasons.
It is reported that the notice proposes to establish Shenzhen as a national and internationally important LED industry R&D and production base, and set a development target of an annual industrial output value of more than 130 billion yuan by 2015.
“Many small businesses in Shenzhen are very flexible and efficient. What do you do to make money? The government’s approach is to 'let the market go to market', which is a sensible approach,†said the industry source.
However, some media quoted officials as saying that the government is worried about the overcapacity in the LED industry and even worried that the LED industry will become the second photovoltaic industry.
In 2012, the photovoltaic sector was trapped in the overcapacity and double-reverse quagmire. The PV listed companies fell 24.69% overall and underperformed the Shanghai and Shenzhen 300 Index by 31.60%. In addition, the EU will make a preliminary ruling on the anti-dumping and countervailing cases of Chinese PV products on May 15. It is reported that after the United States implemented "double opposition" to China, more than 80% of China's polysilicon enterprises were forced to suspend production. China's export market share in the United States is only 20%, while in Europe it is as high as 70%. Liu Hanyuan, chairman of the Board of Directors of Tongwei Group, once said that the EU's anti-dumping case against China will undoubtedly cause a huge blow to China's photovoltaic industry.
The recent survey results show that even in the photovoltaic industry, even if the company is in a better position, the operating rate is less than 80%, and there is no profit.
However, the above-mentioned industry veterans believe that the procurement of photovoltaics is completely determined by the government's subsidy behavior, and the degree of marketization of LEDs is much higher.
(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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