LED chip price war is not optimistic

In the Chinese market, overcapacity and declining prices may announce the end of half of China's LED panel chip makers. A few large companies with a background in state-owned enterprises are likely to weather the storm.

LED industry overcapacity, LED chip manufacturers collective panic, began dumping low-priced goods, clean-up inventory, which will once again impact the LED chip market order.

Cruel is that the mainland LED chip manufacturers' original product gross margin is not high, once again cut prices undoubtedly make the business worse.

In accordance with the current decline in the price of LED chips, the mainland LED chip manufacturers are basically operating at a loss, and profit points are completely subsidized by the government.

“The crisis of overcapacity in the LED upstream last year has not been eased and the LED chip price war will continue.” Shen Guang, vice president of Avlang Optoelectronics, said that as a result of overcapacity, the domestic company's upstream MOCVD equipment, equipment operating rate of only five Into the left and right.

On the one hand, it is because of bad market conditions. On the other hand, it is difficult for companies to produce products that meet market demands.

Analysts in the industry pointed out that the continuous decline in global sales of televisions and computers may cause this year's LED panel chip prices to drop by 20%, and for Chinese small LED chip makers, industrial integration or closure is the only choice.

Analysts also pointed out that due to the continued enjoyment of government subsidies and incentives, many large-scale state-owned enterprises in the LED chip manufacturing sector are likely to overcome this difficulty. China hopes that these large state-owned enterprises will survive the process of industrial restructuring. ”

For most Chinese LED chip manufacturers, the Chinese government is slowly tightening incentive policies, including tax cuts, free land and more than $ 1.6 billion in LED chip production equipment funds. These policies have ensured the sound development of the LED chip manufacturing industry in China for more than three years.

According to analyst estimates, in the past year, overcapacity has caused hundreds of Chinese small LED lighting companies to close down.

Bao Enzhong, executive vice president of China Semiconductor Lighting Industry Association, said: "China's financial policy has not given enough support to SMEs. We may see more factories closing down."

"The price war is getting more and more powerful. Now most packaging companies get goods from chip companies. First of all, they don't ask about product performance, but the price is not low enough. The price has gradually become the main factor in determining the purchase." Ye Guoguang said that packaging manufacturers The prices are getting lower and lower, and most of the LED chips are running at a loss.

Experts said that at present, the price of LED chips has actually not been reduced, and manufacturers can only work hard on the application of new materials and equipment yields in order to further reduce production costs.

It is reported that the MOCVD equipment yield rate of mainland enterprises is between 70% and 80%, which is still more room for improvement than the 80%-90% rate for Taiwanese companies.

Under the shadow of the price war, the performance of LED listed companies was bleak.

"Now the price war has caused great pressure on chip companies. Like our current main business is display chips. Prices have fallen so much. Huacan must ensure that the sales volume doubles to maintain the same revenue as last year."

The subsidy policy implemented by the Chinese government has helped China's LED component packaging to account for global market share, which has tripled from the same period last year, from 2% in 2012 to 6%. China's LED components, including chips, connecting lines and conductive adhesives, analysts said that these large LED companies hold a total of nearly 2 billion yuan in cash, so they can step up capacity expansion in the face of weak market demand in order to plan in China today. A larger share of the LED lighting projects launched by the government and supported by the government.

China’s Ministry of Science and Technology previously stated that it plans to increase the size of China’s LED industry to RMB 500 billion by 2015.

The collapse of weaker companies will be beneficial to the development of larger, government-supported LED companies. While many competitors in Asia report falling profits and losses, these LED companies in China will be able to better compete with regional rivals such as Epistar in Taiwan and South Korea’s LG Innotek.

It is still difficult to be optimistic about the trend of the next year, the market's cyclical decline in demand for LED chips and the market still maintains a 50% oversupply situation will continue to affect the price and profitability of LED chips.

Although market demand for LED chips increased seasonally earlier this year, market fundamentals remained weak.

"It is the integration period of the chip industry. In this wave, everyone has to suffer for at least 3 years.