LED is better than the rest of the upstream

The fact that the LED market is picking up is an indisputable fact, but the relative excess production capacity in the industry is an inevitable problem that cannot be avoided. In the past two weeks, LED industry leaders have launched expansion plans that have caused concern among the industry. From the current situation, compared to the downstream packaging industry, the excess capacity of the upstream low-end chips is still difficult to solve.

Sanan Optoelectronics is pushing capacity doubling plan

Since the evening of May 27, Sanan Optoelectronics (600703) launched a plan to raise RMB 3.3 billion for the expansion of LED projects. In the past two weeks, there have been a few companies that have oversold LEDs. Even companies that have not previously involved in the LED industry want to “divide”. A cup of cake."

According to the preplan, if Sanan Optoelectronics' smooth implementation of this plan, the company's LED chip production capacity will be doubled. At present, the company has 141 units of 2-inch MOCVD equipment, with an effective production capacity of about 130 units, and it has been fully produced except for a few technical upgrading equipment. The scheduled increase in the number of new LED epitaxial wafers with a capacity of 1.223 million wafers (calculated as 4-inch wafers), with 25.614 billion blue and green chips. According to the calculation, the company will add 100 sets of 4-inch MOCVD equipment (productivity is about 1.25 times that of the 54-chip machine), and the production capacity will double.

On May 30, the signing ceremony was held for the Shenzhen Haowei Lighting LED Application Project with a total investment of over one billion yuan. The project is jointly established by Hao Wei (a market, capital, stocks, and medical consultations) and Sanan Optoelectronics Co., Ltd., covering an area of ​​300 mu, and is mainly engaged in the research and development, manufacture, and sales of LED applications.

A week after the suspension of trading, Ausco Shunchang released a fixed-income program on the evening of June 3. It intends to raise funds not exceeding RMB 512 million to invest in LED epitaxial wafers, the first phase of chip industrialization projects and additional liquidity, of which the total investment in LED projects is 8.08. Billion yuan, plans to invest 400 million yuan.

Lianchuang Optoelectronics announced on the evening of June 2 16.72 million to acquire 51% equity of Shanghai Xinmao, plus LED business, to carry out industrial and market layout in Shanghai and its surrounding areas.

From the biological industry to the real estate industry, Qixi Holdings has recently selected LED business as a new growth point in the main downturn. Qixi Holdings announced on the evening of June 3 that the company plans to set up a joint venture with natural person Sun Debing to form a subsidiary, "Guangzhou Qixi Optoelectronics Co., Ltd." to operate LED application products and expand the company's business scope.

Among non-listed companies, there are also a few companies that expand their production. For example, Shenzhen Tiandian optoelectronics LED packaging project with a total investment of more than 2 billion yuan has recently signed a framework agreement in Anxi, Fujian. Tiandian photoelectric LED packaging project covers an area of ​​150 acres, mainly engaged in LED packaging product development, manufacturing and sales.

Domestic manufacturers have started to expand their production plans, making it easy to think of the expansion of LED manufacturers' booming market two years ago. The large-scale expansion of production capacity of China's mainland LED manufacturers from 2010 to 2011 has been a major factor in the imbalance of supply and demand in the LED industry over the past two years.

The rest of the tour is better

Recently, at the International Laser Application Technology Forum held at the Shenzhen Convention and Exhibition Center, Yu Zhenxin, honorary chairman of the Guangdong Provincial Optical Society and professor at Sun Yat-Sen University, said that, as a whole, the LED industry in China is still losing money.

Professor Yu's statement actually reveals an embarrassing situation in China's LED industry. In the upper reaches of the LED industry chain, China's LED chip companies have been highly dependent on government subsidies and government orders. If the subsidy factor is deducted, the company has actually failed to make a profit. Even the industry leader Sanan Optoelectronics has not been able to throw away this crutch.

The mid-stream packaging and downstream applications have corporate profits, but they can't escape the old path of manufacturing in China, occupying mostly mid- to low-end markets, or relying on OEM production. For lighting areas with extremely high expectations, the application of commercial lighting is still in its infancy. In particular, the domestic government is almost completely dependent on the promotion, not to mention the application of general lighting.

"The issue of overcapacity has always existed, but LED excess capacity is a structural surplus." An LED manufacturer told reporters that in the upstream chip area, low-performance, small-size chips have excess capacity, while high-performance chips rely heavily on imports. In areas such as downstream packaging and applications, although the competition of enterprises is intense and the degree of concentration is not high, due to the gradual expansion of the commercial lighting market, the current overcapacity is not serious.

Zhang Hongbiao, research director of GLII, introduced that in the packaging and application field, the utilization rate of the enterprise's capacity was relatively low last year, which was 60%-70%, and it has reached 80%-90%. Since the demand for indoor commercial lighting market starts relatively quickly and the industry trend is improving, even if the company expands its production, there is no need to worry about overcapacity in the short term, unless the company has drastically expanded production.

The overcapacity problem in the chip field is more difficult to solve. The current increasing demand for LEDs in the display area is not obvious, mainly driven by the demand for commercial lighting. However, LED chips produced in China are mainly concentrated in low-end and infiltration lighting applications are still difficult. At present, China's LED chip companies are still losing sales to seize the market, although the current order is full, but the expansion of leading enterprises, will eventually force small businesses out of the market.

The price war is not new in the LED industry, especially in the field of LED chips. Most domestic LED companies choose to sacrifice their gross margins to open up the market. The industry leader Sanan Optoelectronics began to “fight cargo” as early as in 2011, occupying the market with a low price strategy, and the emergence of “price butcher” Bund Runda made the chip market appear. The price war suddenly escalated.

An industry source told reporters that at present, the price of LED chip companies in China is still below the cost line. He predicted that if the chip sales price of these companies can be maintained, and the chip's light efficiency can be improved, by the end of this year, Sanan Optoelectronics' chip is expected to start making profits.