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ST Ganhua (SZ.000576) annual report shows that in 2012, it achieved operating income of 469 million yuan and net profit of 47.148 million yuan. However, after deducting non-recurring gains and losses of RMB 7,276,900 (including government subsidies of RMB 7,823,500 for the current profit and loss), the net profit attributable to owners of the parent company was -256.91 million yuan. This means that if there is no government subsidy for the “snow in the snowâ€, ST Ganhua’s actual loss last year was 25.6191 million yuan.
From the perspective of the company's continued growth, companies that rely on the improvement of their main business to turn losses are more valuable. In other words, the value of a company's investment that relies on non-main business to improve its operations is undoubtedly greatly reduced.
In addition, the LED epitaxial film project, which was sent to the “new profit growth point†by ST Ganhua, was officially put into production at the end of 2013.
"In the case of the epitaxial chip market is already in a red sea, and the price competition continues to be fierce, even if it has a stable LED industry senior industrialization team, taking advantage of the advantages and advantages of the day, ST Ganhua's epitaxial chip project is unlikely to be profitable. "A brokerage person pointed out sharply that the company is to take off the hat of ST in order to rely on government subsidies. "There is an urgent need to go to the hospital, and the enterprise is hoping to seize the government's life-saving straw."
Borrowing a loss hat with government subsidies
Recently, ST Ganhua released its first quarter 2013 results forecast. The company expects net profit attributable to shareholders of listed companies to be 2,200-2.5 million yuan, down 96.7%-95.9% from 60,956,700 yuan in the same period of last year.
For reasons of the decline in performance, ST Ganhua explained that the company received the second phase of support fund of RMB 60 million from the State-owned Assets Supervision and Administration Commission of Jiangmen Municipal People's Government in the first quarter of 2012. There is no such income in the first quarter of this year. Net profit for the reporting period decreased significantly compared with the same period of the previous year.
"High-tech LED" reporter compiled the revenue and net profit data of ST Ganhua since 2009. In 2009, the company's revenue was 48.577 million yuan, net profit was 12.916 million yuan; 2010 revenue was 39.342 million yuan, net profit was -7721.20 million yuan.
Since 2011, ST Ganhua has received subsidies from the local government since the company's shareholders and business restructuring. In 2011, the company received the first phase of support fund paid by the State-owned Assets Supervision and Administration Commission of Jiangmen Municipal People's Government for 60 million yuan. The government subsidy for the current profit and loss reached 66,698,200 yuan. Even so, it can't reverse the situation of ST Ganhua's 2011 loss of 195,568,300 yuan.
In 2012, the local government continued to transfuse blood. On March 22, 2012, the second phase of the support fund of the Jiangmen Municipal People's Government State-owned Assets Supervision and Administration Commission paid RMB 60 million to the account; on December 26, 2012, ST Ganhua received the LED major industry paid by Jiangmen City. Development of special support funds of RMB 10 million. According to the 2012 ST Ganhua Financial Report data disclosure, the government subsidy included in the current profit and loss was 72.832 million yuan.
In addition, according to the previously signed agreement, Jiangmen City Government has determined to subsidize 11 million yuan to 12 million yuan per MOCVD equipment of Deli Optoelectronics, a wholly-owned subsidiary of ST Ganhua. The total number of subsidies is tentatively set at 20, and the subsequent machine subsidies will be subsidized. It will depend on the specific situation.
Gansu’s government subsidies benefit from the huge determination of the local government in developing the LED industry.
Following the subsidy of up to 20 million yuan for each MOCVD equipment, in January this year, Jiangmen City issued the "Opinions on Further Supporting the Development of Strategic Emerging Industries in the City (Jiangmen Green Light Source) (Draft for Comment)" ""opinion""). The "Opinions" pointed out that subsidies for equipment investment in new or expanded investment projects in key areas such as LED industry chain extension, chip, packaging, application, substrate, and materials are given. The total investment of equipment is 50 million yuan (including 50 million yuan), and the subsidy for the total amount of equipment is 6%. If the total investment of equipment is more than 50 million yuan, more than 50 million yuan will be given to 8% of the funds.
"The Opinions continued the previous support for equipment. Although the subsidy for each MOCVD equipment was up to 12 million yuan, the subsidy standard was slightly reduced. However, Jiangmen’s determination to develop the LED industry has not changed, encouraging the industry to do stronger. The big attitude has not changed." Ye Hailin, chief of the Electronic Information Section of the Economic Information Bureau of Jiangmen City, said.
The profit of the extension project is uncertain
On December 14, 2011, ST Ganhua announced that the company plans to invest 836 million yuan to invest in the construction of LED epitaxial wafer production project in Jiangmen National High-tech Industrial Development Zone by its wholly-owned subsidiary Deli Optoelectronics. This is the new LED epitaxial wafer production line and supporting chip production line for 20 MOCVD equipment. After the project is completed and put into production, it will form an annual production capacity of 960,000 high-brightness blue-green LED epitaxial wafers and chips, which can realize annual sales income of 834 million yuan.
Although the LED epitaxial film project has been highly anticipated by ST Ganhua, the progress of the project is slow. "Completion of the company's LED epitaxial film project was delayed for one year, and it was officially put into operation at the end of this year." Deli Optoelectronics insiders confirmed to the "High-tech LED" reporter.
According to the 2012 financial report released by ST Ganhua, as of the end of last year, the above projects have completed an investment of 180 million yuan, accounting for 21.5% of the total investment; 60% of the civil engineering volume has been completed; and the first batch of MOCVD has been signed with the supplier. Purchase contract for the machine and related equipment. "There is a technical team that can guarantee the product, but now the epitaxial chip market is already in the red sea, ST Ganhua rushed in, and it will be put into production at the end of this year. If it is two or three years ago, it may have a place in the market." Industry insiders said.
Chip price competition continues to be fierce, and low-cost destocking between manufacturers is an indisputable fact. "Like a dozen hungry wolves, grabbing a piece of fat meat, everyone is killing red eyes." A person in charge of an epitaxial chip factory in China described the Chinese epitaxial chip market in 2012.
According to statistics from the High-Tech LED Industry Research Institute (GLII), the average price of China's white LED low-power chips dropped by about 31% in 2012, the average price of high-power chips dropped by about 33%, and the average price of medium-power chips dropped the most. 40%. And the price decline of medium power chips continued to expand, and the price decline of large and small power chips narrowed slightly.
The first quarter 2013 results released by Huacan Optoelectronics (300323.SZ) forecast that the net profit attributable to shareholders of listed companies is expected to fall by 23.7%-45.5% compared with the same period of the previous year, and the profit is about 1500-2 million yuan. The announcement explains that the price competition of LED chips is still fierce in the first quarter, and the unit price of products continues to fall. Affected by this, although the number of chip sales exceeded the same period last year, sales revenue and gross profit still declined.
Ganzhao Optoelectronics (300102) released its 2012 annual results forecast. The company achieved a total operating income of 381 million yuan, an increase of 1.08% over the same period of the previous year; the net profit attributable to shareholders of listed companies was 108 million yuan, a decrease of 39.33% over the same period of the previous year.
“Upstream chip manufacturing is a capital and technology-intensive industry. Enterprises not only win by scale, but also have no special advantages in terms of technology and patents. It is very difficult to open product sales channels only by low-standard chips.†Tongfang Wang Lianghai, vice president of the company, said.
As a late entrant, Deli Optoelectronics has escaped the market volatility period at the same time, and it is still a big question question whether it can follow the pace of its peers in the follow-up, whether it can get a slice of the fierce market competition. 
[Source: Gaogong LED's "LED Research Review" magazine April issue reporter / Liu Qiaomei]