Huacan Optoelectronics: the production capacity is tight, preheating the LED lighting market

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

“We started mass production of white light chips for LED lighting last year, but we have been in the market trial stage because of insufficient capacity.” Wang Deceng, sales director of Huacan Optoelectronics (300323.SZ), told the reporter of “High-tech LED” that by the end of this year, The company's white light chip capacity will increase to half of the total capacity.

Recently, Huacan Optoelectronics announced that the company will withdraw 300 million yuan from the 900 million yuan raised funds originally planned to invest in the "third phase LED epitaxial chip construction project" for the establishment of a wholly-owned subsidiary in Suzhou.

The total investment of the project is 1.8 billion yuan. It is planned to complete the infrastructure construction within three years, realize the equipment installation, and officially put into production. After the project is completed, the company will add 35 KK/month of blue and green light chips to the company, equivalent to 35,000 pieces of epitaxial wafers.

“Wuhan Phase III and Suzhou New Project will mainly produce white light chips.” Wang Depeng said that the original Wuhan Phase III project has completed the infrastructure construction, and the equipment is also in place, and mass production will be realized soon.

According to Ye Aimin, since the fourth quarter of 2011, the company has achieved full production of epitaxial wafers for chip production. The increase in epitaxial wafer production capacity of these two projects is a long-term plan for the company to manufacture chips.

"In terms of the supply and demand situation of the company itself, our production capacity is the most insufficient." Ye Aimin, secretary of the board of Huacan Optoelectronics, said. It is reported that Huacan Optoelectronics' current production capacity is equivalent to more than 70,000 chips/month of 2 inch epitaxial wafers, and the actual sales capacity has reached 200,000. Even if the IPO fund-raising project reaches a new epitaxial wafer production capacity of 104,400 pieces/month, there are still Great room for improvement. "In the second half of 2012, the LED industry has begun to show the trend of demand growth. Some LED chips produced by Taiwanese companies are digested in Taiwan, leaving a part of the market space for the mainland." Ye Aimin said.

The larger market demand is reserved for the LED alternative lighting market. "The display chip is our foundation. Under the premise of maintaining a certain market share, we will increase investment in lighting chips in terms of production capacity and market development. We are optimistic about the LED alternative lighting market." Wang Depeng pointed out that next year LED replacement The lighting market will have a qualitative leap.


Product transformation is imminent

Huacan Optoelectronics entered the GEM in June this year, and the bright performance in the past few years has made the capital market look impressive. According to the company's prospectus data, the company's sales revenue increased from 100 million yuan in 2009 to 474 million yuan in 2011, with a compound annual growth rate of 117.36%; net profit increased from 14.74 million yuan in 2009 to 125 million in 2011. Yuan, the compound annual growth rate reached 190.77%, showing strong profitability.

However, just one month later, the first semi-annual report released by Huacan Optoelectronics has caused many investors to stun, and the outside world has questioned the performance of Huacan Optoelectronics.

“In the past, we have been focusing on display chips, and the product line is relatively single, so it is greatly affected by market fluctuations.” Wang Depeng said that in the first half of this year, the demand for chips increased significantly, and the number of sales of the company increased by 50%-60%, but the price It also dropped by 50%, resulting in the thinning of revenue and profits of LED chips.

Huacan Optoelectronics semi-annual report shows that in the first half of 2012, the company achieved operating income of 188 million yuan, down 17.79% over the same period of last year; net profit was 37.09 million yuan, down 39.40% over the same period of last year; gross profit margin was 35.94%, It fell by 11.35% in the same period last year. For the decline in performance, Huacan Optoelectronics explained that due to the intensification of market competition, the unit price of chip sales fell more than expected, while the capacity of the company's expansion was not fully formed and released during the same period, resulting in the number of chips sold in the first half of the year. The number of production warehousing was also higher than the same period of last year, but sales revenue and gross profit still declined, and net profit was significantly lower than the same period last year.

“The market in the display field has been very large in the past few years, like a safe haven. In comparison, the profit of the products in previous years is high, but it has not been spared since the second half of last year, and the price war is very intense.” Hua Can Vice President of Optoelectronics, Bian Difei, told reporters.

In the face of the trend and the price war that may last for a long time, the operation in a single segment is obviously unable to meet the performance expectations of the capital market for listed companies, especially the single product that is vulnerable to market fluctuations and weak in risk resistance. Business strategy, perhaps only the diversification is the only way out.

"Enterprises have to change to survive, and we are actively transforming into the field of white light lighting chips," said Bian Defei.       

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