(Yicai) April 10 -- Silan Microelectronics said it fell into the red last year for the first time since the Chinese semiconductor giant went public in 2003, mainly because of a decline in the fair value of two equities owned by the company.

The net loss was CNY35.8 million (USD5 million) in the 12 months ended Dec. 31, the Hangzhou-based firm said in a financial report released on April 8. Operating revenue rose 12.8 percent to CNY9.3 billion (USD1.3 billion) from a year earlier.

Silan's stakes in two companies, Shanghai Anlogic Infotech and Yuneng Technology, lost value, resulting in a post-tax net loss of CNY450 million (USD62.2 million), according to the firm.

Silan invested in Anlogic and Yuneng Technology before they listed, so the loss was mainly due to different valuation methods compared with before, Board Secretary Chen Yue told Yicai. Fair value is based on stock price rather than the cost method, he added.

Other reasons for the loss included the CNY197 million takeover of Xiamen Silan Advanced Compound Semiconductor; a 10 to 15 percent drop in the prices of Silan’s light-emitting diode chips amid intense competition in the LED chip market; and a 22 percent jump in research and development costs, the firm noted.

The power semiconductor supply chain in the Chinese mainland has expanded rapidly over the past two years, with intensified competition leading to price wars. Price competition and sluggish demand due to a cyclical downturn also crimped Silan’s gross profit margin. Its main business had a GPM of 22 percent last year, versus 29.3 percent the year before.

The price wars are a result of the downturn and the accelerated development and redundant capacity building in the domestic supply chain in recent years, Chen noted. Still, he is optimistic about the demand for power semiconductors this year. The domestic price war will likely last another two years, Chen said, adding that weak competitors will be pushed out.

Silicon carbide will likely become the fastest-growing field for power semiconductors in coming years, according to Chen. Companies' strategic layouts in automotive-grade and new energy directions may be key to future development, he noted.

Shares of Silan [SHA: 600460] ended 3.1 percent down at CNY19.04 (USD2.63) apiece in Shanghai today. The stock has fallen almost 17 percent since the end of last year.

Editor: Martin Kadiev