Demand for LED chips in domestic market rebounded

After the mad expansion in 2009-2011 led to excess production capacity and the price of products continued to fall, the current domestic LED chip industry has gradually resumed its rational development. With the gradual opening of the downstream lighting market, the backlight demand has recovered and the pace of price decline has gradually Contraction, the domestic LED chip company's competitive landscape will gradually shape and mature.

First, the overall situation and regional distribution of domestic LED chip companies

Since 2009, under the active investment promotion policies of various local governments in China and the huge TV backlight and lighting market prospects, China's LED chips, the industry has developed rapidly, the number of major production equipment MOCVD machines has grown rapidly. According to GSCresearch statistics, the number of MOCVD used for LED epitaxial production in China in 2009 was 133, of which about 100 were normally mass-produced. By the end of 2012, the number of domestic MOCVD machines had rapidly increased to 745.

The current domestic LED chip companies in the regional distribution, the domestic epitaxial chip industry is mainly concentrated in the Yangtze River Delta region, the Shu area and the Bohai Bay region. As a number of cities in the Yangtze River Delta region competed to launch the MOCVD subsidy policy, the number of LED chip companies has grown rapidly from 2009 to 2012, and investment in the upstream chip industry in Anhui, Zhejiang, Jiangsu, and Shanghai has blossomed, showing a fiery development trend. The scale of out-of-scale production enterprises in the Greater Jilin Province is relatively large, and there are more transfers to Taiwanese companies. Major companies include Xiamen Sanan and Xiamen Ganzhao. The R&D forces in the Bohai Bay region are strong in R&D, R&D institutions are more concentrated, and they have the best technology in the country. Especially in Beijing, R&D has obvious advantages; Dalian has a solid industrial base of light industry and electronics and the economic location advantage of the “center of the Northeast Asian economic circle”.

Second, the number of domestic LED chip companies and production capacity
From the second half of 2011, the domestic LED chip companies' capacity expansion rate began to slow down. With the gradual completion of the LED upstream epitaxial chip enterprise layout investment, the number of newly added MOCVD products decreased significantly in 2012. The major installed companies are Guoxing Optoelectronics and Oz. Yang Shunchang, Tongfang shares, Huacan Optoelectronics and Shilan Mingxin.

According to GSCresearch statistics, as of the end of December 2012, there were a total of more than 30 LED epitaxial wafers in China, and a total of 745 MOCVD machines were equipped, which was constrained by the current market demand for LED chips and insufficient equipment, talents, and other factors. The capacity utilization rate of chip companies is generally insufficient, and it fluctuates between 50% and 65%.

Third, domestic LED epitaxial chip patent technology level

In terms of patents, although the domestic LED epitaxial chip companies have already had certain strength, they are in a backward position as a whole. The domestic industry leader Sanan Optoelectronics has more than 200 LED-related patents, of which 80% are invention patents. As a result of strict LED patent nets deployed between foreign LED giants, especially at the level of epitaxial growth, international LED companies have completed their layout and it is difficult to make breakthroughs. A large number of core patents are in the hands of international giants such as Nichia in Japan, Kerui in the US, Osram in Germany, and lumileds in the United States. The patent strength of domestic LED companies in chip extension is relatively weak, and most companies cannot solve the intellectual property issues related to exports. The impact on the future expansion of international business has become a bottleneck restricting the development and growth of the domestic LED epitaxial chip industry.

From a technical point of view, in recent years, due to the intensive investment of government and corporate funds, as well as the introduction of a large number of overseas technical experts and teams, it has heavily recruited LED industry high-end talents in Taiwan and South Korea. The current average level of domestic LED chip companies has been Taiwanese companies are closer. In 2012, the average luminous efficiency of domestic LED chips has reached 90lm/W, and the production efficiency of mass production chips for some manufacturers has reached or even surpassed 100lm/W. The overall average luminous efficacy of Chinese LED chips in 2013 is expected to reach 100lm/W. High-end products will reach 120lm/W.

Fourth, domestic LED epitaxial chip industry development characteristics and trends 1, product prices continue to decline

MOCVD has been introduced in large quantities since 2010, and the rapid expansion of production capacity has led to an oversupply in the domestic LED epitaxial wafer industry. The domestic LED chip competition has become more intense and LED chip prices have dropped significantly. According to GSCresearch statistics, the prices of various types of LED chips in the domestic market fell by 30% in 2012 as a whole. Entering 2013, the decline in low-power and high-power LED chips will narrow, and the prices of medium-power LED chips will continue to drop significantly.

With the LED industry entering the backlight season, and with the increasing demand of foreign markets and the gradual implementation of domestic public lighting projects to drive the rapid increase in demand for LED lighting, LED supply and demand of upstream epitaxial chip manufacturers to a certain degree of relief, capacity utilization, price declines Gradually reduce. In the first quarter of 2013, the price of LED lighting chips decreased by 9%-12%. With the rapid growth in demand in the second quarter and the increase in the price of PSS sapphire substrates, it is expected that the decline in domestic LED chip prices will further narrow in the second quarter. The profitability of LED chip companies has gradually recovered.

2. The localization rate continues to increase

On the whole, the localization rate of the LED epitaxial chip industry in China continues to increase. In addition to the domestic enterprises in the encapsulation sector that have begun to erode the share of Taiwanese companies, the trend of chip purchases turning to leading domestic companies has become even more apparent. According to the feedback from downstream companies, besides the high-brightness LED chips required for some high-end applications, lighting, display, and LED backlighting have begun to shift to more cost-effective domestic companies. In the field of display screens, the product quality and reliability indices of Shilan Mingxin's blue and green chips have reached the international advanced level; in the field of lighting, domestic LED low-power chip products have matured, occupying most of the domestic market; In the field of LED backlighting, domestic LED epitaxial chip companies also have a foothold. The “S-23 ABMUP LED backlight LED chip” developed by Sanan Optoelectronics was recognized as a key new product by the Ministry of Science and Technology of China in 2012 and began to provide backlight. Expansion; In the field of infrared light, Shenzhen Orund has occupied 60%-70% of the domestic market share, and its sales volume ranks first in the country.

3. The transformation of mergers and acquisitions and the emergence of industrial integration

Due to serious overcapacity, product prices have continued to decline, domestic LED epitaxial chip business revenue is not increasing in incremental revenue, small and medium-sized power chips can not sell the state of the state, industrial integration adjustments have begun to clue.

Starting from the “industry winter” in 2011, the overheated LED epitaxial chip industry stage has caused the domestic LED companies to suffer the consequences of overcapacity, low capacity utilization, lack of operating rate, and increased operating costs caused by inventory. At this point, the number of MOCVD machines ordered by domestic LED companies dropped drastically, and most of the LED epitaxial chip investment projects started to be delayed. Some of the projects were reduced to the original declared scale, and some projects ended without success.

In addition, the current domestic LED chips, inter-industry companies are relatively dispersed, the number is large but not large, and in the fierce market competition, mergers and acquisitions between the LED industry began to increase. Since April, there have been two cases of LED chip industry integration in the country. They have acquired Dongguan Zhoulei and Maanshan Yuanrong Optoelectronics to acquire Jiangxi Ruineng Technology. Since August 2012, there have been at least 5 LED chip industry integration cases in China.

GSCresearch believes that as the upstream LED chip industry is a capital-intensive industry, the amount of capital required for M&A integration is large, and it is limited by the interests of local governments in China. It is expected that the number of integrated M&A companies in China will not be too large in 2013. The scale of industry reshuffling is expected to occur between 2014 and 2015. By then, domestic LED chips will be eliminated. The enterprises with advantages in technology, capital, and downstream customers will come to the fore, and the industrial structure will eventually take shape.