San'an Optoelectronics announced in the evening of October 19th that its controlling subsidiary Suncore Photovoltaic Technology Co., Ltd. has received special financial subsidy of 30.8 million yuan from Huainan government, making the total subsidy it has received this year to nearly 300 million yuan. Some industry insider says that in the overshadowed industry, financial subsidy has become profit model for some enterprises.
Gain new huge subsidy
San'an optoelectronics’ recent announcements show continuous huge subsidies gained. In the evening of October 19th, San'an optoelectronics unveiled that its controlling subsidiary Suncore Photovoltaic Technology Co., Ltd. received financial subsidy of 30.8 million yuan; back on October 8th, its wholly-owned Anhui San’an optoelectronics secured investment credit of 20 million yuan from Wuhu City; back on September 28th, it gained financial subsidy of 60 million yuan from Anxi County; and it received 60 million yuan and 100 million yuan on June 29th and March 30th respectively.
Up to date, San'an optoelectronics has received nearly 300 million yuan in financial subsidy. Meanwhile, related announcements reflect that in the whole year of last year, San'an optoelectronics secured the financial subsidies of up to several millions yuan.
Some Xiamen-based LED manufacturer said that San'an optoelectronics is among minority in terms of high frequency and great sum of financial subsidies.
Profit largely comes from subsidy
In the eyes of outsiders, San’an optoelectronics’ frequent financial subsidy grant depends on its “large scale, high profit and healthy development”. However, some insiders hold different opinions.
“In 2011, the surge of investment in domestic LED industry depressed the prices of overall LED industry chain.” said an insider. The reporter looked through related documents and found that San’an Optoelectronics’ 2011 annual report indicated a decline of 43.47% year-over-year in gross profit margin of chips. In addition, its 2012 Q1 report showed that the total profit was 270 million yuan, yet 150 million yuan of which came from non-business income and majority was financial subsidy.
We should notice that the announcement shows that San’an Optoelectronics achieved net profit of 200 million yuan in the first quarter of this year, but net cash flow in the business operation only reached 130 million yuan. This means that product sales did not accompany with backflow of adequate current. Additionally, although Anhui San’an Optoelectronics has started to release its capacity, it has not shown apparent scale effect.
“In the overshadowed industry, financial subsidy has become profit model for some enterprises.” pointed out by some insider. He also added that availing the government’s pursuit of economic growth, San’an Optoelectronics signed cooperation agreements to realize business expansion with the help of local financial subsidy.
How it will be if losing subsidy?
Some Xiamen-based LED manufacturer said that the dependence on government subsidy in a company’s development may have great impact on the company when the subsidy is reduced or cancelled.
Wuhu municipal government announced that LED industry support policy will expire after December 31th, 2012. In another way, after 2013, San’an Optoelectronics will no longer receive any financial subsidy from Wuhu government.
“If LED industry remain sluggish, it is hard for San’an Optoelectronics to keep upward momentum.” commented an industry insider. In June this year, Sinolight, a well-known LED enterprises in Shenzhen announced bankruptcy due to fund chain breaks, while before, multiple LED makers such as JDL Enterprise Group and Bright closed down. “It can be alert to San’an Optoelectronics”.
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