Financial subsidies are about to close, LED winter torture, Sanan Optoelectronics

Like many urban economic development zones, the Wuhu Economic and Technological Development Zone has brought a lot of projects through investment promotion in recent years, which makes it quite lively.

Anhui Sanan Optoelectronics Co., Ltd. (hereinafter referred to as Anhui Sanan), a subsidiary of Sanan Optoelectronics, is located at No. 8 Dongliang Road in the development zone.

The reporter found that most of the workers entering the factory area were young people in their twenties. One of the workers told the reporter that most of the equipment in the factory area was in operation. "We are very busy every day."

It is undeniable that in the winter of the LED industry, relying on government subsidies, the days of Sanan Optoelectronics have been quite moist.

On July 16, Sanan Optoelectronics announced its 2012 semi-annual performance forecast. It is expected that the net profit attributable to owners of the parent company will be 450 million yuan to 470 million yuan in the first half of this year, thanks to the company's wholly-owned subsidiary Anhui. The release of Sanan's production capacity will be released. The net profit for the same period last year was 459 million yuan.

However, it is still unknown how long such a good day can last.

Not yet fully operational
Due to the domestic investment boom in the LED industry, the overall upstream and downstream industrial chain prices of LEDs fell sharply in 2011.

Sanan Optoelectronics' 2011 annual report also showed that the gross profit margin of the company's leading product chip sales fell sharply by 43.47% year-on-year.

Sanan Opto's 2012 first quarter report showed that its total profit was 270 million yuan, but 150 million yuan of it came from non-operating income, most of which was financial subsidies.

In addition, it achieved a net profit of 200 million yuan in the first quarter of this year, but the "net cash flow from operating activities" was only 130 million yuan, which means that the sales of products did not accompany the return of full cash.

On June 29, Shenzhen's well-known LED company, Vision Optoelectronics Co., Ltd. (hereinafter referred to as Vision Optoelectronics), declared bankruptcy due to a broken capital chain. This is the second time that a well-known LED display manufacturer has closed down after the collapse of the company and the collapse of Bolent.

The LED industry is struggling and it is hard to deny.

In the winter of the industry, financial subsidies have gradually become the profit model of some enterprises.

Sanan Optoelectronics has shown a low-cost expansion path for the market: using the characteristics of local governments to pursue economic growth, signing investment cooperation agreements with local governments, and achieving local expansion subsidies.

Outside the factory in Sanan, Anhui, the reporter found that this is a large-scale enterprise. It took almost 15 minutes to walk from the third gate in the south to the door in the east.

According to the announcement of Sanan Optoelectronics, Wuhu Municipal People's Government will provide the company with about 1200 mu of land in the northern part of Wuhu Economic and Technological Development Zone as the project industrial land, and reserve 800 mu of land in the eastern area as the industrial land for the later period of the project.

However, the factory was quite deserted, and did not see the trucks waiting for transportation or the hot work scene.

A security guard told reporters that the factory is mainly a closed working environment. "The products of our factory do not need trucks to transport."

According to the announcement of Sanan Optoelectronics, Anhui Sanan is its non-public offering investment project in March 2010, and the 2.98 billion yuan of investment funds have all been used up. After the project is completed and put into production, it will form an annual output of 5.3 million pieces of ultra-high brightness LED red, yellow, blue and green light epitaxial wafers and a production capacity of 117 billion chips.

According to the announcement of Sanan Optoelectronics, the first phase investment of this plant will reach 6 billion yuan, and all the 103 equipment purchased have arrived at the company. As of the end of the first quarter of this year, 70 units have been officially put into production.

"At present, only 90 of the 103 equipments in Anhui Sanan Phase I have been put into production." A staff member told reporters.

From the current construction and operation of the entire plant area, the east side of the plant, administrative building and staff dormitory building have been completed, but in the west of the fourth door is overgrown, there is no sign of construction.

For the grass near the No. 4 gate, the above staff told reporters that this is the second phase of construction land. “In fact, construction has already started, and two factories have been capped. Near the western part of the grass, there is also a foundation to fight.”

Treasury is about to close
The completion of the first phase of Anhui Sanan and its mass production have been inseparable from the support of the local government.

During the investigation in Wuhu, the reporter learned that the Wuhu Municipal Government's policy support for Sanan Optoelectronics was very strong and gave a large amount of financial subsidies.

The reporter received a notice from the Wuhu Municipal Government on the promotion of certain policies for the development of the LED industry (hereinafter referred to as the "Notice"). It can be clearly seen that "the company purchased 50 sets of MOCVD equipment for the production of LED epitaxial wafers that have reached the international advanced level." The above, and the related industries such as chip and package, application product R&D and manufacturing are all invested and produced in Wuhu. According to the blue-green MOCVD equipment (limited to 55-chip machines and above), each of the highest not more than 12 million yuan, red and yellow MOCVD equipment (Limited to 55 tablets and above) Each of the maximum not exceeding 9.6 million yuan, given a one-time research and development subsidy support."

For the financial subsidies of Sanan Optoelectronics, the Wuhu Municipal Government subsidizes each of the total amount of 8 million yuan for each of the red and yellow MOCVD (limited to 38-piece machines and above), giving blue-green MOCVD (limited to 31-chip and above) each. The 10 million yuan subsidy was implemented.

Throughout 2011, Sanan Optoelectronics “government subsidies for the current profit and loss” reached 805 million yuan, which was more than ten times higher than the 56.06 million yuan in 2009. This does not include “closely related to the normal business of the company. A government subsidy that meets the requirements of national policies and continues to enjoy a certain amount or quantity according to certain standards."

Anhui Sanan achieved a net profit of 326 million yuan in 2011, including many financial subsidies from the Wuhu municipal government.

“There are some subsidies, but not all.” A staff member of the company told reporters that the “technical three” financial subsidies are recorded in the current profit and loss. “However, the subsidies for MOCVD equipment are confirmed upon receipt. Deferred income is amortized over profit or loss over the useful lives of related assets."

According to the "Notice" of the Wuhu Municipal Government, the policy support for the LED industry is valid until December 31, 2012. In other words, Sanan Optoelectronics will not receive financial subsidies from the Wuhu Municipal Government after 2013.

The above staff told reporters that the financial subsidies for the first phase of Anhui Sanan have all been received. "As for the second phase, there are subsidies. It is not easy to say for the time being."

If the days of the LED industry continue to be difficult, Sanan Optoelectronics may not be able to stand alone.

"Recently, several large-scale LED downstream enterprises in Shenzhen have closed down. We believe that the performance of large and medium-sized enterprises in the middle and lower reaches is a sign of industry consolidation and industry reshuffle. This is a sign that the industry is doing well. Some of them are weak. Corporate failure is not a bad thing, the key is how long it will take to wash," said Zhang Xiaoda, a researcher at Haitong Securities.

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