Last Friday, the Chinese government announced a phase-out of incandescent light bulbs, beginning with eliminating 100-watt+ bulbs by the end of 2012 and 60-watt+ bulbs by 2014. The decision triggered a solid boost to LED makers, and we noted at the time that the move could be a real game-changer.

That’s still true, but that doesn’t mean that the companies were suddenly going to turn huge profits. LED makers, including SemiLEDs Corp. (NASDAQ: LEDS), Rubicon Technology Inc. (NASDAQ: RBCN), Cree Inc. (NASDAQ: CREE), Veeco Instruments Inc. (NASDAQ: VECO), and Aixtron SE (NASDAQ: AIXG), still have a ways to go to turn future prospects into current profit. Smaller players like Nexxus Lighting, Inc. (NASDAQ: NEXS) and Energy Focus, Inc. (NASDAQ: EFOI) probably have even further to go.

SemiLEDs reported a larger-than-expected loss this morning, and the shares are giving back about half the 20% gain they made last Friday. The company reported an adjusted EPS loss of -$0.49 on revenue of $5.3 million. In its fourth fiscal quarter of 2010, the company reported an adjusted EPS loss of -$0.18 on $11.5 million in revenue. The consensus estimate for the quarter was an EPS loss of -$0.21 on $5.72 million in revenue.

Rubicon reports earnings after markets close today, and is expected to post EPS of $0.26 on $31.2 million in revenue. Veeco reported better-than-expected EPS in late October, but revised its guidance significantly downward. Aixtron just broke even in the last quarter, while EPS expectations called for $0.23/share.

The near-term outlook for the LED makers doesn’t improve for the last calendar quarter of 2011, and only Veeco, which makes the manufacturing equipment used to make the LEDs, is expected to post solid earnings in the current fiscal year. And even Veeco’s projections are weak for the 2012 fiscal year, with earnings and revenues set at about half this year’s estimates.

LED lighting is probably still too expensive for wide adoption in a shrinking global economy. A light that costs $25, even though it might last for 10 years or more, is not a casual purchase — it’s an investment. Incandescent bulbs costing a buck or so are still affordable. That’s one reason why the US Congress is re-visiting the Bush-era phase-out schedule for incandescent lighting.

It’s unlikely that China’s citizens will take to the streets over the new mandate, likely because the government will in some way subsidize the LED lights. Those subsidies, though, may be limited to LEDs from domestic Chinese makers, or perhaps a favored Taiwanese company, in which case SemiLEDs could have an inside track. The Chinese mandate is a game-changer, but exactly how the game will be changed depends on what the new rules are.

SemiLEDs’ stock is down less than -3% about an hour after the market open, after dipping by -10% earlier this morning. Shares are trading at $3.80, in a 52-week range of $2.60-$32.12. Rubicon’s shares are off more than -5%, at $11.59, in a 52-week range of $9.25-$29.79. Investors at least know the extent of the damage at SemiLEDs, but still fear the worst for Rubicon.

Paul Ausick

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