Get rid of government subsidies and rely on domestic chips to break through

[Source: "High-tech LED - Research and Review" September issue Hu Yanling]

“Sanan Optoelectronics is very interested in investing in LED chip factories in Taiwan, and will soon see results. The two places can jointly establish a world-class LED factory.” This is the mainland LED chip factory Sanan Optoelectronics (600703.SH Lin Xiucheng, the chairman of the board, made a few statements to the outside world.

In the past few years, mainland companies have been bumpy in the research and development of LED chips. Due to various reasons such as talents and industrial chains, they have not formed true market competitiveness. Nowadays, with the gradual opening of the downstream lighting application market, including a number of domestic listed companies such as Sanan Optoelectronics, Huacan Optoelectronics (300323.SZ), Ganzhao Optoelectronics (300102.SZ), and Dehao Runda (002005.SZ) The impact was once again launched. This time, the breakthrough was chosen by the Taiwan LED chip factory represented by Jingyuan Optoelectronics.

In the eyes of the industry, this is the second breakout of the mainland chip factory from the cornering, selling chips, to the stage of mergers and acquisitions.

The development of LED industry in mainland China is very similar to that in Taiwan, starting from the package. But the difference is that the field of LED upstream chips in Taiwan relies on single-handedness, while mainland companies benefit from local government subsidies.

Gaogong LED Industry Research Institute (GLII) statistics show that in the first half of 2012, Sanan Optoelectronics achieved revenue of 1.37 billion yuan, a year-on-year increase of 90.53%, and net profit of 466 million yuan, an increase of 1.55%. However, the financial subsidy included in the current profit and loss reached 198 million yuan.

The reporter noted that this is a huge contrast with the semi-annual report of Jingyuan Optoelectronics. The data shows that the company achieved revenue of NT$8.499 billion in the first half of the year, a decrease of 13.09% year-on-year, a loss of NT$138 million, and a gross profit margin of 21.95 from the same period in 2011. % dropped to 16.43%.

"Chip prices continue to fall, companies will certainly be affected, and we are no exception. Now is the integration period of the chip industry, in this wave, everyone must suffer at least three years." Li Yuanjie, chairman of Jingyuan Optoelectronics said frankly Since last year, the price of chips has dropped by at least 50%, and they have made the worst plans.

In Li Bingjie's view, mainland government's LED subsidies and LED application orders are the main reasons for the decline in LED chip prices. "The decline in the price of LED chips is so fast that it is caused by abnormal market competition."

For domestic chip companies seeking to break through, it is imperative to get rid of the government subsidy dependence and return to normal market competition.

Grievance

As the two most representative LED chip companies in the mainland and Taiwan, the grievances of Sanan Optoelectronics and Jingyuan Optoelectronics began with the “digging corner door” two years ago.

In 2010, thanks to the MOCVD high purchase subsidies issued by local governments in the mainland, LED companies began to expand wildly. As of June 2012, the number of MOCVDs in the mainland is about 700, and more than half of them are purchased during 2010-2011. Among them, only the MOCVD possession of Sanan Optoelectronics is about 140 units. Such a large-scale purchase of equipment once caused a shortage of "engineers who opened the furnace", which is also the cause of San'an Optoelectronics digging the LED extension talents in Taiwan. The rumor is the most serious of the excavation is the crystal photoelectric.

For the rumors in the industry that Sanan Optoelectronics digs out 70 or 70 core technicians of Jingyuan Optoelectronics, Lin Zhiqiang, general manager of Sanan Optoelectronics, denied: "We have introduced some talents from Taiwan, but only a few people. More is still from South Korea and the United States."

In the meantime, it was also the stage where Jingyuan Optoelectronics started its layout in the mainland, including four joint ventures including Shandong Guanxi, Jiangsu Jingpin Optoelectronics, Xiamen Development Crystal and Guangzhou Jingzhengxin Optoelectronics.

In an exclusive interview with Gaogong LED reporters in 2010, Li Bingjie said: "The company plans to invest 30 billion Taiwan dollars (about 6.7 billion yuan) in the mainland in five years, of which the first three years will be 50%. ”

However, during that period, the mainland chip factory spared no expense to dig corners and directly issued an annual salary of up to 10 million yuan. The position given by the engineers also jumped directly to the vice president and even the general manager. Feeling serious, Li Bingjie has publicly stated that the mode of operation of the mainland joint venture company will be adjusted.

According to Jingyuan Optoelectronics' 2011 financial report, the company's total investment in these four joint ventures between 2010 and 2011 was only $121 million, only 10% of the previous planned investment.


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