Qinshang Optoelectronics Lists with Initial Raise of 460 Million Yuan; 8 Billion Subsidy Boosts Civilian LED Industry

The recent development situation of China's photovoltaic industry appears unclear amid trade disputes in which China and the United States have taken turns launching 'anti-dumping, anti-subsidy' (abbreviated as 'dual anti') investigations. However, with strong support from the related development outline statements under the '12th Five-Year Plan', domestic related industry chains have not stopped their footsteps of rapid expansion.

　　On the 25th, Qinshang Optoelectronics Co., Ltd. successfully listed, raising 460 million yuan in its initial fundraising, and attracted 21 venture capital firms to invest. On November 4, the National Development and Reform Commission externally released the 'China Incandescent Lamp Phase-Out Roadmap', proposing to gradually prohibit the import and sale of ordinary incandescent lighting lamps in stages according to wattage, starting from October 1, 2012. It also plans to invest 8 billion to subsidize civilian LED. However, on the other hand, the industry believes that the short board of domestic LED in the upstream chip field will still be difficult to make up in the short term.

　　Multiple venture capital firms poured in

　　The gathering of numerous venture capital institutions in the LED industry has, to a certain extent, validated the current market prospects of the industry. On November 25, the officially listed Dongguan Kingsun Optoelectronic Co., Ltd. raised capital of 460 million yuan, attracting more than 20 venture capital institutions to participate in the investment. It is reported that the company is the 10th listed company with LED as its main business since 2010. Based on operating revenue, Kingsun Optoelectronic is the listed company with the largest revenue from LED semiconductor lighting applications in China to date.

　　According to the company's prospectus, the raised funds will mainly be used to invest in and build the "LED Outdoor Lighting and Landscape Lighting Project", "LED Indoor Lighting Project", "LED Lighting R&D Design Center Project" and "Company Operations Management Center Project". The four proposed projects mainly take into account four aspects: production capacity, product variety, R&D, and market sales. The prospectus states that if the projects funded by the raised capital reach production on schedule and achieve the expected returns, the four projects are expected to add an additional fixed asset scale of approximately 372.43 million yuan upon completion, and the production base project is expected to add a total profit of approximately 266 million yuan annually.

　　In response to doubts raised by many investors regarding the limited profits in the mid- and down-stream packaging and application technology fields, Li Xuliang, Chairman of Kingsun Optoelectronic, said in an interview with a Southern Metropolis Daily reporter, "Future profit distribution will depend on efficient resource integration, brand operation, innovative development, and many other aspects. Due to the excessively long industrial chain, the company will currently focus on its leading advantages in the packaging field."

　　"With the completion of the funded projects, the company will increase production capacity and consolidate market share. We will also conduct R&D on products and technologies to enhance the company's product pricing capability. In addition, we will explore the EMC (Energy Management Contract) model in management to improve management level and stabilize earnings," Li Xuliang told the Southern Metropolis Daily reporter.

　　Industry analysts at Guotai Junan Securities believe that the industry remains optimistic. The LED industry has gathered a batch of companies with future performance highlights in LED outdoor lighting, and coupled with the benefits of government support policies on energy conservation and emission reduction, the industry is expected to accelerate its growth.

　　LED annual growth rate remains above 50%

　　The disputes within China's photovoltaic industry have recently escalated. In response to the US Department of Commerce's initiation of an anti-dumping and countervailing duty (AD/CVD) investigation into Chinese solar cells (panels) exported to the US at the beginning of this month, the China Photovoltaic Industry Alliance stated on the 21st that it plans to apply to the Ministry of Commerce to also conduct an AD/CVD investigation into US polysilicon products, potentially triggering a trade war that could harm both sides.

　　In fact, as an emerging industry in the same supply chain, the semiconductor lighting industry has received substantial subsidies from both the Chinese and US governments in recent years. An industry insider from Dongguan Kingsun Optoelectronics told a Nandu Daily reporter that LED chip prices have shown a downward trend in recent years, while luminous efficiency has improved, driving the gradual penetration of semiconductor lighting applications.

　　Industry insiders revealed that the industry's growth rate in recent years has been above 50%. Relevant industry data shows that last year, total annual investment in the LED industry was approximately 30 billion yuan, while new investment in the first 7 months of this year reached 125.618 billion yuan. At the 8th China International Semiconductor Lighting Expo and Forum, which opened in Guangzhou on the 8th of this month, Vice Minister of Science and Technology Cao Jianlin stated that Guangdong's LED industry is expected to achieve an industrial total output value exceeding 160 billion yuan this year, doubling last year's figure.

　　According to relevant national plans, the LED industry will be vigorously developed in the future in accordance with the development model of "high starting point, high investment, high output, and cultivating leading enterprises around the core". The epitaxial chip, regarded as the core link in the LED industry chain, has received key support from the "12th Five-Year Plan" and will underpin industry development, meeting the conditions of boosting GDP, achieving industrial upgrading, cultivating industry base leaders, and gathering high-end talent.

　　It must be admitted that the relative advantages of most LED enterprises in China are currently concentrated in downstream packaging and application technologies. The most critical patents for thermal balance and long-lasting, high-efficiency phosphor technologies have long been monopolized by foreign companies. Developed countries such as the United States also favor the industry's clean, efficient, energy-saving, and environmentally friendly characteristics, providing substantial policy support to numerous photovoltaic industry chain enterprises including LEDs, further intensifying industry competition.

　　Industry Perspectives

　　●To achieve industrialization of high-brightness, high-power LED epitaxial wafers and chips in China, breakthroughs must be made in domestically produced MOCVD equipment. Numerous LED companies, including Dongguan Qinshang Optoelectronics, are temporarily investing their technology R&D and large-scale production in downstream packaging and application fields.

　　●Recently, the NDRC's "Announcement on Gradually Phasing Out the Import and Sale of Ordinary Lighting Incandescent Lamps" was interpreted by the market as the gradual phase-out of incandescent lamps, thus opening up the Chinese LED lighting market worth hundreds of billions of yuan. The secondary market responded enthusiastically, with multiple stocks in the LED lighting sector hitting the daily limit up consecutively. In stark contrast to the booming market, however, the domestic LED lighting sector still lacks core technologies.