Subsidies in China – Alive & Well
There have been reports over the last year that high-tech money is no longer flowing to what might be considered ‘older’ technology and is only earmarked for semiconductors and AI. While we are sure that there are projects that have seen lower funding from local governments, but when it comes to China’s big boys, the funding seems to be available and even ahead of where we would have expected funding to be at this mid-point of the year.
When speaking of LEDs in China, the country’s largest LED chip manufacturer is Sanan (600703.CH), who falls within the top 10 globally, having generated $8.35b last year, growing 13.5% y/y, and while that certainly gives the company status, Sanan is spread across much of China and has to garner favor with each local or provincial government in the regions where it is located or expanding to. While the ‘elite’ status with the central government gives Sana cache, each subsidy deal has to be worked through with the particular government support group one by one.
That said, since the last day of 2020 Sanan has received the following subsidies, with each allocated to the particular Sanan subsidiary in that region, and while we understand that these subsidies are at the behest of each local or provincial government, we would expect that the rate of endowment established thus far in 2021, would continue through the year, although the largest listed below is for a specific project currently under construction, so the amount of future subsidies could change as the project progresses, in either direction. Again, Sanan is a company well recognized by all governments as one that is representative of China’s ability to become a global force in the global LED/semiconductor market, and is therefore more likely to get funding than start-ups with a leading edge process, but the idea that subsidies are only going to semiconductor foundry, advanced packaging, or Ai companies is a false one.
When speaking of LEDs in China, the country’s largest LED chip manufacturer is Sanan (600703.CH), who falls within the top 10 globally, having generated $8.35b last year, growing 13.5% y/y, and while that certainly gives the company status, Sanan is spread across much of China and has to garner favor with each local or provincial government in the regions where it is located or expanding to. While the ‘elite’ status with the central government gives Sana cache, each subsidy deal has to be worked through with the particular government support group one by one.
That said, since the last day of 2020 Sanan has received the following subsidies, with each allocated to the particular Sanan subsidiary in that region, and while we understand that these subsidies are at the behest of each local or provincial government, we would expect that the rate of endowment established thus far in 2021, would continue through the year, although the largest listed below is for a specific project currently under construction, so the amount of future subsidies could change as the project progresses, in either direction. Again, Sanan is a company well recognized by all governments as one that is representative of China’s ability to become a global force in the global LED/semiconductor market, and is therefore more likely to get funding than start-ups with a leading edge process, but the idea that subsidies are only going to semiconductor foundry, advanced packaging, or Ai companies is a false one.
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