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China's Enterprise Integration Is Inevitable Due To Excess Capacity Of LED Chips
Jul 12, 2017

China's enterprise integration is inevitable due to excess capacity of LED chips

According to the global market research institutions TrendForce LEDinside's green can cause place according to the survey, since last August, on both sides have been at least five cases LED chip industry consolidation, including crystal electricity purchase by way of equity transfer widely gallium remaining 49% stake, three Ann photoelectric subscribe ladies circular polarization electric 120 million shares of common stock.

LED inside said that since 2010, when China's LED chip industry has been investing in the LED chip industry, there has been a huge overcapacity in the chip industry, and the price of products has been falling, and most companies have been struggling. In the short term, the problem of excess capacity of the LED upstream chip industry will not be alleviated. Therefore, industrial integration is the inevitable result.

Yangzhou city government in 2009 pioneered MOCVD cash subsidy policy, the one-time purchase LED epitaxial wafer production with new MOCVD equipment more than 5 money subsidies for new or expanding investment project, then jiangmen, wuhu, hangzhou, wuhan and other local government launched a similar policy.

According to LED inside, the number of MOCVD devices in China has exceeded 900 by the end of 2012, but in 2012 China's MOCVD capacity utilization rate was less than 50%. The subsidy policy of MOCVD directly leads to the emergence of new LED epitaxial chip projects in China. According to statistics, the total number of new LED epitaxial wafer projects in China totaled 65 in 2009-2012. However, due to the poor market environment, more than 30% of projects have now been withdrawn or shelved.

The excess capacity leads to increasingly fierce competition in the market. Moreover, some chip companies rely on government subsidies to take market strategies at low prices, which directly lead to a red sea in the chip market. The LEDinside survey found that domestic leds showed the worst price decline in 2012, with some low-end products falling by 50 percent.

example, the main business of the display chip, hangzhou shi-min core photovoltaic, has a gross margin of 5.7% in 2012. LEDinside said that in 2012 China's most local LED chip companies on the verge of loss and some money supports enterprise has fallen, China LED chip industry has been transformed from the early technological competition for capital competition.


LEDinside, points out that although the investment boom led to overcapacity problem is unlikely to ease in the short term, but from the chip prices drop narrowing trend, part of the enterprise has cost pressure upstream of the capital, at the bottom of overdraft after a few years ago, for the possibility of new financing has to a minimum.

On the other hand, the signal of industrial warming has encouraged some relatively well-capitalized manufacturers to take the courage to gamble on the scale advantages needed for future competition through equity acquisition of horizontal mergers. LEDinside predicts that the consolidation of China's LED chip industry will be accelerated in the coming year.

LED industry mergers and acquisitions in the middle of the enterprise to see the integration of the direction

After deep shuffling, the boom in light-emitting diode (LED) industries followed. After the acquisition of raishi lighting by dehaerrunda, the recent merger of SAN 'an optoelectronics has also attracted the attention of the industry.

In the recently held the 10th high LED industry peak BBS, many in the industry hot industry consolidation, think that vertical integration is beneficial to improve technical level and the market channel, while part of the listed companies there is a controversy on the direction of integration. Wang lianghai, the chairman of tongfang, believes that companies in the industry can integrate downstream, as the main lighting manufacturers. Gong weibin, chairman of rifeng photoelectric, believes that Chinese and Chinese companies should integrate upstream and more conducive to merger and acquisition.

Consolidation of the industry

Since the end of last year, some of the more powerful listed companies, such as the company, the company, the star power and SAN 'an photoelectric, have chosen to integrate the whole industry chain.

There is no greater integration than dehaida, which has been in the second half of 2012, and has been in the market since the second half of 2012. Dehorenda has completed the integrated industrial chain layout from LED epitaxial chip, chip to package to application (lamps and display).

"The lighting channel game is over." In bdo, chairman Wang Donglei view, the key is to have a terminal market of LED lighting industry conformity, only through channels to occupy a certain market share, the enterprise can be ensured, and especially the upstream chip and packaging enterprises survive in the cruel market competition. Therefore, through mergers and acquisitions, it is easier to occupy the market than new channels.

"The LED industry will be similar to the home appliance industry, with only a handful of oligarchs likely to compete in the future." Zhang xiaofei, chief executive of the company, believes that vertical integration will promote the upgrading of industrial chain technology and the development of the market. In the future, the number of enterprises in the middle and lower reaches of the industry will be greatly reduced.

Conformity is controversial

Although some LED listed companies build the whole industry chain through continuous merger and acquisition. But some listed companies remain cautious and are controversial in the direction of consolidation.

"Whether it is TV, computer, or LED, there are only two kinds of companies in the future, one is the technology leading enterprise, the other is the channel leading enterprise." Wang lianghai, the chairman of tongfang, believes that companies in the industry can learn from lenovo and integrate them downstream as soon as possible. Tongfang shares do not currently integrate lighting enterprises, the company mainly focuses on the chip technology capabilities.

Referring to bdo, and three Ann photoelectric enterprise mergers and acquisitions, Wang Lianghai said: "since so much of the upstream enterprise integrating lighting, we wouldn't have integrated lighting companies. There are many no chip lighting enterprise, need our support."

Gong weibin, chairman of rifeng photoelectric, believes that Chinese and Chinese companies should integrate upstream and more conducive to merger and acquisition. "Going downstream is a big question mark for a company like me." Gong Weibin said, such as the company has 100 important cooperative partner, downstream integration after only one partner, and completely rely on in his body, is very dangerous for the middle enterprises.

"I am likely to integrate upstream." Mr Gong argues that chips and packaging should not be two industries, and that it actually outputs light sources. The integration of a chip plant with a closure may be faster and more successful. If the closure is integrated downstream, there will be more uncontrollable factors.