Chinese firms continue to scoop up VC-backed cleantech startups for cheap

The trend of Chinese conglomerates snapping up venture capital-backed cleantech startups on the cheap continues. This week a subsidiary of Chinese LED and solar manufacturing company San’an Optoelectronics announced that it has acquired LED startup: Luminus Devices. According to LED News (hat tip Greentech Media) the deal was done for $22 million.

Over Luminus’ eleven-year lifetime, the company had raised at least $150 million from venture firms including Braemar Energy Ventures,¬†CMEA Ventures, Battery Ventures, DFJ, Argonaut Private Equity, Paladin Capital Group, Stata Venture Partners, DFJNE, and Eastward Capital. Luminus said it will continue to operate as an independent business unit within Lightera, San’an’s subsidiary, and previous customers include Philips, Samsung, Mitsubishi, LG and others.

Luminus DevicesAll in all it wasn’t the biggest loss investors have seen during this trend of Chinese companies buying up struggling cleantech assets. Solar startup Miasole was sold to Chinese clean power company Hanergy for $30 million, after having raised between $400 million and $500 million over its lifetime. Chinese auto tech giant Wanxiang bought up battery maker A123 Systems out of its bankruptcy, made a barebones offer for electric car company Fisker Automotive, and has made equity investments in other cleantech startups as well.

Chinese companies flush with cash have enough capital to continue to invest in some of these infrastructure-heavy innovations that are requiring longer timelines and more money than the venture capital community expected. At the same time, the Chinese government has been creating markets for energy efficient and clean power technologies through strong incentives — it’s done this with LEDs, electric cars and solar technology.

Luminus DevicesWhile Chinese government incentives are a boon to a market at the beginning, the inevitable consolidation happens when prices drop and the market gets flooded with an oversupply of products. That’s what’s happening to Chinese LEDs right now, according to an article in Bloomberg, which notes that due to tax incentives and cheap land for factories, there are 4,000 companies in China making LEDs, and one in five Chinese LED companies could fail in 2013.

The same difficult market has been happening with solar cell and panel makers in China, too. The fall of China’s massive solar maker Suntech was only the beginning.

Other cleantech startups are finding sunnier opportunities partnering with Chinese companies on manufacturing. Five-year-old EcoMotors, which is backed by Bill Gates and Khosla Ventures, is finally commercializing its efficient engine technology with a $200 million plant being built by Chinese auto giant Zhongding Power.

To learn more about the LED market, check out our GigaOM Pro report (subscription required): “The growth and promise of the LED¬†market.”