(Yicai) Aug. 6 -- Huadong Heavy Machinery’s shares soared after the port crane maker announced the end of plans to build a solar cell plant amid an ongoing decline in photovoltaic product prices, with capacity in the sector still increasing.

After surging by its 10 percent daily trading limit in Shenzhen earlier today, Huadong Heavy [SHE: 002685] closed up 5.9 percent at CNY3.79 (53 US cents).

Huadong Heavy announced the move yesterday. But the Wuxi-based maker of container handling gear is still looking to diversify and is now targeting the chip industry. On July 28, the firm said it will spend CNY142.5 million to acquire 43 percent of Xiamen Ruixin View Technology, making it the chipmaker’s largest shareholder.

Last July, Huadong Heavy said it had signed a deal with the Bozhou-Wuhu Modern Industrial Park in Bozhou, Anhui province to invest CNY6 billion (USD840 million) in the now cancelled PV project.

Huadong Heavy’s plant would have had the capacity to turn out 10 gigawatts of solar cells a year and would have created more than 1,000 local jobs. It said the project would have had annual income at least CNY10 billion (USD1.4 billion).

The overcapacity in China’s PV industry has grown further this year, reaching 102.48 GW in the first half, up 31 percent from a year earlier. But the sector’s output value tumbled fell 36.5 percent to CNY538.6 billion (USD75.4 billion) in the same period, according to data from the China Photovoltaic Industry Association.

Huadong Heavy set up a local company last August to carry out the plan and has invested just CNY1.2 million (USD167,900) in it to date, so its termination will not greatly affect the company’s performance, it said.

In its annual report for last year, the company said its solar business generated revenue of CNY77.2 million (USD10.8 million), accounting for 11.5 percent of its total income. But Huadong Heavy reported a CNY49.2 million annual net loss, swelling its cumulative loss to by 354 percent from the previous year to CNY811 million.

Editor: Tom Litting