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 amount will be recognized as current period income upon receipt, and will have a positive impact on the company's 2017 interim 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 a compilation by reporters from the Daily Economic News, San'an Optoelectronics recorded 502 million yuan in government subsidies included in current profit and loss in 2016.

　　However, some industry insiders pointed out that a decline in industry subsidies began in 2016, with many areas canceling related subsidies. Small and medium-sized LED companies 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 suffered from overcapacity, and corporate profits have fallen sharply. Government subsidies account for a significant portion of the performance of some companies, and has become an industry phenomenon.

　　San'an Optoelectronics, jokingly called the "subsidy king" by the industry, received more than 1.5 billion yuan in subsidies from 2014 to 2016. In addition, Huacan Optoelectronics, Qianzhao Optoelectronics and other companies also benefited from these subsidies.

　　Guo Xiu, secretary-general of the Guangdong Lighting Association, told reporters from the Daily Economic News that government subsidies to enterprises can be viewed differently. For large-scale enterprises such as San'an Optoelectronics, the government generally has a "cultivation plan", providing key support for high-growth companies, which will have a significant boost to the local economy, employment, and tax revenue.

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

　　Reporters from the Daily Economic News noted that the 100 million yuan government subsidy received by San'an Optoelectronics this time was in the form of a reward. San'an Optoelectronics' first-quarter report shows that government subsidies included in the current profit and loss were 94.54 million yuan. Compared to the first quarter of 2016, San'an Optoelectronics' government subsidies included in the current profit and loss were 198 million yuan.

　　According to OFweek Semiconductor Lighting Network statistics, 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, Guoxin Securities' research report pointed out that judging from the 2016 annual reports and 2017 first-quarter reports of domestic LED companies, overall performance reported positive results. Among the 43 listed LED companies in the first quarter of 2017, 40 saw year-on-year revenue growth, and 35 saw year-on-year growth in their net profit attributable to the parent company. Among these, 27 companies (over 60%) saw their net profit increase by more than 30%.

　　Guojin Securities believes that before 2016, because the downstream LED applications, midstream LED packaging beads, and upstream LED chips were all in a trend of price decline and sales increase, overall revenue was still growing, although the growth rate was slowing. In 2016, the total revenue of listed LED companies reached 160 billion yuan, with growth exceeding 25%. By the first quarter of 2017, the industry's overall revenue growth rate and net profit attributable to the parent company both exceeded 30%, reaching a new high in nearly five years.

　　"The entire industry is still growing, but the growth rate is slowing." Guo Xiu believes that the exit and transformation of many traditional enterprises is also normal, and the industry is undergoing accelerated reshuffling, with concentration further increasing, and 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 3 years, the output value of the LED lighting industry will gradually slow down due to factors such as increased proportion due to macro-environmental influences, volatility in the real estate market, rapid price declines of products at various stages of the industrial chain, and rapid growth of the LED lighting output value base. The future fifth and sixth channel models - e-commerce and mobile - are also one of the main reasons for the slowdown in the output value of the LED lighting industry. Industry integration 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?

　　In this regard, Guo Xiu believes that international giants are also exploring "plant factories", but are still constrained by cost factors. At present, it still lacks the conditions for industrialization.