LEDinside interpretation: Sanan optoelectronics why make money?

Sanan optoelectronics is undoubtedly the most profitable company in Chinese LED industry, both the gross margin or net profit rate is too high, is not a manufacturing company.

Usually the manufacturing industry gross margin is higher than 30%, net profit rate can exceed 15% is already quite good performance, and three except 2012~2013 years of industry trough profits decline, keep the gross margin is higher than 40%, net profit rate reached above 30% level.

The data source: three company earnings, LEDinside finishing

Three net profit thanks to MOCVD equipment subsidies as everyone knows the facts, but if only three rely on subsidies stereotypes, but may be more distant from the truth. In recent years, with the development of three growth, operating income of the profit contribution ratio is more and more low, from a high of 62% in 2011 fell to 20% in 2016, its profitability is in an intensive step by step. Understand the three high gross margin, net profit rate high reason behind, it may better answer the question: why an optoelectronic money?

The data source: three company earnings, LEDinside finishing

Analysis of the causes of three high gross profit rate

First of all on the outside of the comments that the three high margin chief financial officer from the financial skills point of view I do not agree, one can't make bricks without straw, more sophisticated financial skills also can not create income, almost no way to hide the direct costs, and even one or two years can be more skills to deal with some accounting items, but could not the number of years has used to modify the skills well above the industry's gross margin.

For the high margin source of three, can be explained by the following aspects:

1) manufacturing scale effect. LED chip manufacturing is not as high as the threshold of semiconductor manufacturing, but also full of heavy asset industry, manufacturing scale effect is very significant. We understand MOCVD is expensive equipment, actually for chip production and specially prepared high pure gas supply system, ultra clean plant and other infrastructure, special assets are inseparable, the fixed cost of production will greatly raise the chip maker LED. Instead, MOCVD, from long term point of view, more like a variable cost.

The three has the world's largest LED chip production capacity, accounting for about 20% of the global chip production capacity, as long as the rate reached a reasonable level of capacity utilization, these fixed costs can be amortized in three more chip production, then the estimated average cost of only one can than the general competition on 10% hands.

The data source: LEDinside

2) R & D size effect. As one of the sub industries of semiconductor industry, LED is also a research and development industry. Because the Chinese LED enterprises to enter this field is relatively late, in the original technology accumulation and patent enclosure in a relatively inferior position, the impression of China's LED technology content is low.

Three surfaced only about 1200 patents, in fact in order to improve the competitiveness of products, keep the micro innovation, technological innovation must be continuous, but most did not translate into a patent, but in the presence of business know-how. A simple example of a product line, three is can continue to maintain the same chip area than the rival high brightness 5%, actually this is a premium product technology guarantee three.

The data source: three company earnings, LEDinside finishing

The scale effect research is reflected in the three R & D team and R & D funds on a scale of about more than and 470 people, three scale, or South Korea Taiwan team of technical experts, senior engineer and master the above personnel to reach 502 people, single LED industry talent reserves, three has the world's biggest talent pool. Direct R & D investment and indirect R & D personnel costs, a conservative estimate of more than 300 million, which is equivalent to a few years ago, a medium-sized chip factory operating income.

Such a huge spending on research and development, on a production scale of enterprises is lack of huge burden on three, amortization to R & D costs very little every single chip, the product performance brought by the premium can be covered completely.

3) customer size effect. There should be a number of economic terms to explain this phenomenon, such as the network effect, the more people use the same system, the more it can attract more people to use. But in essence can also be explained by the size of the customer, after all, the network effect depends on the size of the number of users. Three accumulatedly customer base contributed to the network effect and the time of the transaction system three.

LED chip belongs to compound semiconductor production process, the accuracy is not as precise silicon semiconductor (5 9 and 11 9 difference), so the photoelectric properties of output of the chip is in a specified range of normal distribution, while the LED manufacturers need the product according to the photoelectric properties of bin can be sold to set classification customer.

The number of products of production scale manufacturers such three single in bin is very impressive, can supply a single customer bin. The number of three customers are enough, each customer to get the bin set are very concentrated, obtained from the customer's perspective of the experience is three products in good agreement. Can do similar shipments of chip manufacturers only three, Huacan and so few.

The other is like this Linsen packaging factory, but also because the scale is large enough, the number of customers is large enough it can be dispersed, Linsen mining