Sanan Optoelectronics has been experiencing record high revenues and profit margins in first-half 2012. Nevertheless, the firm's inventory turnover days is relatively high showing that it is possible for the firm to experience an oversupply of LED chips, particularly in second-half 2012. Despite the fact that inventories have been growing, the firm has yet to put a stop to its expansion plans.
To avoid the risk of oversupply, Sanan has been focused on domestic demand such as buying shares of LED lighting fixture and EMC firms. The firm has been cooperating with downstream firms to obtain government projects and expand LED chip distribution in China.
Sanan began investing in the production of sapphire substrates in 2011 and has been able to obtain government subsidies. Plant completion was scheduled for 2013-2014, however, due to subsidies and completion of the plant ahead of schedule, Sanan plans to begin production in September 2012.
The China government has set a goal in the 12th Five-Year Plan to increase the percentage of domestic LED chips to 80%. With strong support from the government, Sanan seems to be one of the favored firms among China's LED industry.
