On June 26, San'an Optoelectronics announced that its wholly-owned subsidiary, Xiamen San'an Optoelectronics Co., Ltd., received a government subsidy of 100 million yuan. According to relevant provisions of the enterprise accounting standards, this payment will be recognized as current income upon receipt and will have a positive impact on the company's 2017 mid-year performance.

　　In recent years, it has become commonplace for LED companies to receive government subsidies, and San'an Optoelectronics, as an industry giant, has also benefited from government support. According to the Daily Economic News reporter's findings, San'an Optoelectronics' government subsidies included in current profits in 2016 reached 502 million yuan.

　　However, some industry insiders pointed out that a decline in industry subsidies began in 2016, with many regions canceling related subsidies. Small and medium-sized LED enterprises operating under the traditional model will face even more severe reshuffling in the next 3-5 years.

Industry subsidies have begun to decline.

　　In recent years, the LED industry has experienced overcapacity, leading to a significant decline in corporate profits. Government subsidies account for a large portion of the performance of some companies, becoming an industry phenomenon.

　　San'an Optoelectronics, jokingly referred to as the "subsidy king" in the industry, received more than 1.5 billion yuan in subsidies from 2014 to 2016. In addition, companies such as HC Semitek and Qianzhao Optoelectronics have also benefited from these subsidies.

　　Guo Xiu, secretary-general of the Guangdong Illumination Association, told the Daily Economic News reporter that government subsidies to enterprises can be viewed differently. For large-scale enterprises like San'an Optoelectronics, the government will have a "cultivation plan", focusing on supporting high-growth enterprises, which will have a significant impact on the local economy, employment, and tax revenue.

　　However, Guo Xiu also stated that, according to the association's understanding and investigation of enterprises nationwide, a decline in domestic subsidies for the LED industry has occurred since 2016, with local governments beginning to cancel direct subsidies. Previously, enterprises could apply for various types of subsidies, such as equipment, laboratories, and chips, but these have now been canceled.

　　The Daily Economic News reporter noted that the 100 million yuan government subsidy received by San'an Optoelectronics this time was designated as a reward. San'an Optoelectronics' first-quarter report shows that government subsidies included in current profits were 94.54 million yuan, compared to 198 million yuan in the first quarter of 2016.

　　According to statistics from OFweek Semiconductor Lighting Network, San'an Optoelectronics received a total of 359 million yuan in special support and equipment support in the first half of 2016.

Conditions for industrialization are still lacking.

　　Previously, a Guosen Securities research report pointed out that, judging from the 2016 annual reports and 2017 first-quarter reports of the domestic LED industry, overall performance has been reported as favorable. In the 2017 first-quarter report, 40 out of 43 listed LED companies saw year-on-year revenue growth, and 35 saw year-on-year growth in net profit attributable to the parent company. Among these, 27 companies, accounting for over 60%, experienced a significant increase in net profit exceeding 30%.

　　Guotai Junan Securities believes that before 2016, due to the downward trend in prices and upward trend in sales volume of terminal LED applications, mid-stream LED packaging beads, and upstream LED chips, overall revenue was still growing, although the growth rate slowed down. In 2016, the total revenue of listed LED companies reached 160 billion yuan, with a growth rate exceeding 25%. By the first quarter of 2017, the overall revenue growth rate and net profit attributable to the parent company both exceeded 30%, reaching a new high in the past five years.

　　"The entire industry is still growing, but the growth rate is slowing down." Guo Xiu believes that the exit and transformation of many traditional enterprises is also normal. The industry is undergoing accelerated reshuffling, and concentration will further increase, with large enterprises receiving more support and development. "In the next 3-5 years, more and more traditional small and medium-sized enterprises will "die".

　　Zhang Xiaofei, chairman of Gaogong LED, also previously stated that in the next three years, the output value of the LED lighting industry will gradually slow down due to the increasing proportion of macroeconomic environmental influences, the volatility of the real estate market, the rapid decline in product prices at various stages of the industrial chain, and the rapid growth of the LED lighting output value base. The fifth and sixth channel models—e-commerce and mobile—are also major reasons for the slowdown in the output value of the LED lighting industry. Industry consolidation has become apparent. Some companies, especially small ones, will be integrated or exit. The overall framework of capital, products, supply chain, and marketing will be the focus of the future LED lighting industry.

　　It is worth mentioning that San'an Optoelectronics' parent company, San'an Group, has been trying to "cross-border", using LED spectral technology to explore the path to industrialization of plant factories. Will this become a development trend for the LED industry?

　　Guo Xiu believes that international giants are also exploring "plant factories", but they are still constrained by cost factors. At present, the conditions for industrialization are still lacking.