The Hidden Reefs of the "Subsidy King": The Billion-Dollar Capital Game Behind the Detention of Three-An Optoelectronics' Actual Controller

Does AI · Lin Xiucheng’s detention reveal risks in subsidy dependency models?

A thunderclap in a clear sky.

Wu Wei, Investor Network

On March 22, 2026, Sanan Optoelectronics officially announced that on March 21, the company received notice from its controlling shareholder, Fujian Sanan Group Co., Ltd., that its actual controller, Lin Xiucheng, was placed under detention by the National Supervisory Commission and is under investigation. In response to market turbulence, Sanan Optoelectronics quickly stated that Lin Xiucheng has resigned from his position as chairman since July 10, 2017, and currently holds no positions in the listed company. The company’s production and operations are normal, and this matter will not significantly impact daily business.

Source: Company Announcement

However, in the unpredictable capital markets, a detention notice often only reveals the tip of the iceberg. There are three core anomalies in this incident that warrant market attention. First is the subtle timing. The announcement coincided with Sanan Optoelectronics’ extremely pressured financial forecast, projecting a net loss attributable to shareholders of 200 million to 400 million yuan for 2025 — the first annual loss since its 2008 reverse merger listing.

Second is the special nature of the enforcement agency involved in the detention. The “detention” was carried out by the national supervisory authorities, indicating that Lin Xiucheng’s case likely involves public officials or the transfer of strategic national resources, rather than ordinary economic disputes. Lastly, there is a projection of historical connections. As a well-known “subsidy giant” in A-shares and a core target of major funds, against the backdrop of intensified national scrutiny of industrial subsidies and anti-corruption in the semiconductor sector, the downfall of the actual controller may push Sanan Optoelectronics’ long-dependent political-business deep binding model into an unknown abyss. Following the announcement on March 23, the stock price opened at the limit down.

From “Scrap Iron King” to Optoelectronic Giant, Lin Xiucheng’s Wealth Leap and Asset Portfolio

To understand this incident deeply, one might start with Lin Xiucheng’s rise. It’s a quintessential, era-defining story of Fujian businessmen’s rapid ascent.

Born in Anxi, Quanzhou, Fujian in the 1980s, Lin Xiucheng initially accumulated capital by reselling scrap steel. In 1992, he officially founded Fujian Sanan Group, expanding through mergers and asset integration in Anxi, Sanming, and other areas, building a large steel empire. He was once dubbed the “Southern Fujian Scrap Iron King” by industry peers.

However, Lin Xiucheng’s business acumen was not limited to traditional heavy industries with excess capacity. In 2000, he keenly grasped the policy shift towards high-tech industries, relocating the company headquarters to Xiamen and establishing Xiamen Sanan Electronics, officially entering the LED epitaxial wafers and chip sector, which was then heavily monopolized by US and Japanese firms.

By introducing overseas technical teams and aggressively investing in equipment, Sanan quickly established a leading position in China’s LED industry. In 2008, Lin Xiucheng achieved a pivotal moment in his capital career when Sanan Optoelectronics successfully went public via a backdoor listing (stock code 600703.SH), marking the start of a “capital operation + industrial expansion” dual-drive era.

After nearly two decades of strategic layout, Lin Xiucheng’s family built a vast capital empire spanning both listed and unlisted entities. Through Fujian Sanan Group and Xiamen Sanan Electronics, he held a combined 29% stake in Sanan Optoelectronics, maintaining tight control over this billion-yuan (at peak) listed platform.

Via the listed company, the Sanan Group also controls Sanan Integrated Circuits, focusing on compound semiconductors and RF chips, as well as multiple heavy-asset semiconductor industrial parks in Quanzhou, Changsha, Chongqing, and other locations. With this expansion, Lin Xiucheng and his son Lin Zhiqiang ranked among Xiamen’s top wealthy, with a combined wealth of 16 billion yuan in the 2026 Hurun Global Rich List. But now, it appears that the underlying logic of this vast wealth is under severe scrutiny by the national supervisory authorities.

Political-business symbiosis and capacity backlash, the rise and fall under billion-yuan subsidies

Sanan Optoelectronics’ rise is rare in the A-share market. Its development has often been deeply intertwined with local governments, summarized as “government backing, massive subsidies, and major project implementation.”

As the actual controller, Lin Xiucheng excelled at linking the company’s business expansion with local government “performance indicators,” leveraging minimal own funds to mobilize large-scale government land, fiscal subsidies, and state capital investments. This model was pushed to the extreme during the expansion in Wuhu, Anhui around 2010.

At that time, Wuhu’s government provided up to 10 million yuan in subsidies for each MOCVD equipment purchased by Sanan. Using this “government pays for equipment, company manages production” approach, Sanan rapidly accumulated initial capacity at low cost. Riding the wave of China’s semiconductor “domestic substitution” strategy, this leverage model was quickly scaled and replicated nationwide.

Projects in Changsha with a total investment of 16 billion yuan, and Quanzhou with over 30 billion yuan, built full production lines for SiC and GaN, with local governments providing land and financing support. In Chongqing, Sanan partnered with STMicroelectronics with a total investment of about 30 billion yuan, supported by local land and financing.

Relying on government subsidies and non-recurring gains, from 2022 to 2024, despite the company’s non-recurring net losses of 310 million, 1.088 billion, and 511 million yuan respectively, Sanan still reported net profits attributable to shareholders of 685 million, 367 million, and 253 million yuan.

Source: Eastmoney PC

With major projects underway, state-owned capital at various levels has deeply involved in Sanan’s capital structure. However, according to the latest data in March 2026, apart from early-stage involvement by the first phase of the National Fund, recent state capital investments in Sanan have faced significant asset impairment pressures.

Local state assets in Xiamen, Quanzhou, Changsha, and other regions, which entered during the peak expansion period of 2021-2022, generally bought in at over 15 yuan per share. Now, they face hundreds of millions in unrealized losses and are burdened with debt from supporting industrial parks. Given Sanan’s high capital expenditure from 2020-2024, with dividends per share only around 0.05 to 0.15 yuan, these modest returns are insufficient to offset the over 15 yuan per share cost of the holdings.

The “black hole” of power semiconductor capacity may be the direct cause of the substantial losses faced by state-owned investors in Sanan. As Sanan transitions into SiC and integrated circuits, it may have encountered severe capacity digestion issues. In 2025, the projected loss of 200-400 million yuan is mainly due to its filter and SiC businesses.

On one hand, competition in power semiconductors has shifted rapidly from “blue ocean” to “red ocean.” Domestic SiC capacity has exploded, and international giants are lowering prices sharply to maintain market share, triggering early price wars. On the other hand, slowing EV sales and automakers shifting to lower-cost hybrid solutions (IGBT + SiC) have led Sanan’s hundreds-of-billion-yuan production lines to face “order shortages.” The high depreciation of semiconductor lines, combined with underutilization, is turning these high-end capacities into “money-consuming black holes” that drag down the balance sheet.

Governance reassessment and liquidity risks, under the absence of the actual controller

In response to market concerns about the detention of the actual controller, Sanan claims that Lin Xiucheng has “retreated behind the scenes for nine years.” Structurally, this is accurate. The second-generation leader, Lin Zhiqiang, has long been in charge, and a professional management team handles daily operations, with no current production stoppages. However, at the control level, Lin Xiucheng remains the “shadow controller,” influencing strategic resources and maintaining key government-business relationships. His sudden absence could increase liquidity and credit default risks.

The high pledge ratio of his equity holdings exemplifies the “large assets, large liabilities” characteristic of his family’s capital expansion. As of March 2026, the latest announcement shows that pledged shares remain high: 65.99% of Sanan Group’s holdings are pledged, and about 48% of Sanan Electronics’ holdings are pledged, with combined pledge ratios near 53%.

In the face of earnings losses and detention, if the stock price continues to decline and breaches margin call levels, forced liquidation risks increase. More critically, during detention, Lin Xiucheng cannot sign new pledge agreements or extend existing ones, risking control instability.

Referring to cases like Shanshan Group, where the disappearance of the actual controller due to death or criminal investigation triggered “key person risk” clauses, the risk of bank credit withdrawal or loan reduction for Sanan Group is high. If banks cut off credit, the company’s tight funding chain could break, especially as refinancing channels via private placements or bonds would be cut off during the investigation, severely impacting Sanan’s ability to fund SiC and new business development.

Furthermore, detention of Lin Xiucheng may undermine the political-business trust system that underpins his empire. His detention could lead to audits of existing projects, risking the collapse of his political-business cooperation model.

Many of Sanan’s billion-yuan projects are deeply tied to government and enterprise relationships. His detention could cause local governments to become more cautious or even halt subsidy payments and project approvals, and trigger regulatory scrutiny of past fund flows. For example, in 2025, Sanan planned to use funds involving state assets to acquire the bankrupt Lumileds overseas, a transaction potentially viewed as “risk transfer.” Under the current investigation, such deals face high risks of asset loss and regulatory review.

With the actual controller detained, Sanan faces more than industry cyclicality — it confronts a fundamental governance and credit crisis. Over more than a decade of rapid growth, Sanan relied heavily on political-business leverage, leading to financial dependence on government subsidies.

Now, with the first loss revealed and the controller under investigation, Sanan must address capacity digestion amid industry competition, as well as hundreds of billions in potential asset impairments and liquidity tests. Stripped of the “subsidy halo” and “strongman protection,” Sanan’s core high-tech value will be subjected to market and regulatory scrutiny. (Produced by Siwei Finance)■