New ideas for LED chip acquisition in 2015

At the end of 2009, Longfei Group, a private enterprise from Wenzhou, invested in Shanghai Boen WorldCom Co., Ltd. in Shanghai. Born WorldCom, registered capital of 100 million yuan, a total investment of 480 million yuan, focusing on the production of LED epitaxial materials and chip products, began mass production in January 2011, Longfei Group accounted for 90%. In January 2012, Born WorldCom was rated as a high-tech enterprise in Shanghai. In July of that year, its new epitaxial wafer production line project was recognized as a major strategic emerging project in Shanghai. In 2013, Bornstone has become one of the major LED epitaxial wafer manufacturing bases in the country, with nearly 400 employees, more than 15 MOCVD production equipments with the largest single-machine capacity in the world, and more than 200 sets of blue-green green chip production equipment. With an annual output of 500,000 pieces of epitaxial wafers and 6.5 billion chips, the annual output value is 600 million yuan.

Since its inception, Born WorldCom has been on the market with a total investment of 480 million. Today, after 6 years of business, its business is not satisfactory. It is only sold at a price of about 420 million Hong Kong dollars. It is a disappointment for the original investors. Those familiar with the LED domestic market know that from the middle of 2011, China's LED chip production has emerged as an early warning of overcapacity. Enterprises that did not have the financial strength began to get involved in the production of LED chips. The original funds were only enough to buy 2 machines. They bought 10 or more units at a time, plus state-owned enterprises and foreign capitals. In 2011, LED upstream chips were overcapacity. The situation is beginning to show. In 2012, the average price of LED chips decreased by 60% compared with 2010; the gross profit of chip production decreased by more than 30%, prices plummeted and profits were diluted, which made many chip manufacturers encounter cold winters.

During the bitter winter of many chip manufacturers, Huacan Optoelectronics caught up with the last bus of the capital market. In June 2012, it successfully listed on the A-share market and obtained a valuable financing platform. Then in November 2012, the A-share IPO began a pause of more than a year, and many other chip makers missed the listing opportunity. For the capital-intensive LED chip industry, in the cold winter period, capital strength is the key factor determining the competitiveness of the company. Born WorldCom has begun to stagnate from this development, and the competitiveness of many unlisted chip manufacturers is also on the decline.

Since 2014, with the start of the downstream lighting application market and the gradual improvement of the performance of domestic LED chips, the demand for domestic chips by midstream packaging companies has been rising, and the domestic LED chip industry capacity utilization rate has been nearly sluggish for nearly two years, but it is almost full. Still can't meet the demand. Chip makers have ushered in another spring.

At a time when LED lighting demand is rapidly increasing, expansion and mergers and acquisitions are undoubtedly two channels for chip manufacturers to rapidly increase production capacity. M&A is supposed to be the most convenient channel because of its high efficiency, but it can get huge amounts of money every year due to domestic LED chip manufacturers. Due to government subsidies and insufficient technical patents, M&A costs are high and M&A benefits are not strong.

The current high subsidy for chip manufacturers to purchase MOCVD equipment is an important basis for chip manufacturers to maintain their profitability. From the perspective of cost, chip manufacturers purchase equipment to expand their production, and the government subsidies are lower than the comprehensive cost of acquisition. many. Under the continuous price cuts of the two international MOCVD equipment giants, Aisiqiang and Veeco, the cost of equipment has been greatly reduced. If the government's equipment subsidies and hidden application contracts are added, the expansion cost of chip manufacturers is very small. It is. Therefore, many listed chip manufacturers with financial strength have chosen to expand production instead of acquiring domestic counterparts such as Sanan Optoelectronics, Huacan Optoelectronics, Aoyang Shunchang and so on.

For the unlisted chip makers such as Born WorldCom, the competitive disadvantage at this time is very obvious. The capital strength is not as good as that of listed companies and brands, and the technical level is far from the world-class enterprises. Moreover, it faces the reshuffle of the LED chip industry. If it does not actively participate in resource integration, it will be eliminated.

Lida International Group is a Hong Kong-listed company mainly engaged in the design, research and development, production and sales of packaging products and point-of-sale display products. The product portfolio is mainly for the packaging of watches, jewellery and eyewear products, including packaging boxes, bags and pouches. And display supplies. In 2013, the Group's annual revenue was only HK$436 million, and both gross profit margin and net profit margin fell, with a net profit of approximately HK$13 million. As a layman in the LED industry, the establishment of the Group has no operational management advantages, and the combination of Born WorldCom, the two sides do not have much synergy in the business. But what is important is that the establishment of the Group has a listing platform with obvious financing advantages, which is very important for the LED chip management industry of Born WorldCom.

At present, the demand for LED lighting is still in high-speed growth, and the LED chip market is still very promising. Zhou Chunlin, a senior analyst at the OFweek Industry Research Center, believes that if the Group successfully cross-border mergers and acquisitions, Bornstone enters the LED chip industry. For the establishment of the company, this is a better choice for the transition from traditional industry operations to emerging industries; For Born WorldCom, it is an inevitable move to choose a platform for capital operation. In the future, such a cross-border merger or acquisition will be the mainstream solution for LED chip M&A integration.