News

20 September 2010

 

China government concerned about LED investment overheating

Current orders for MOCVD equipment from China have reached 1400–1600 systems, according to sources from the LED sector, and officials from China’s Ministry of Industry and Information Technology (MIIT) have expressed concerns about possible overheating in LED-related investments, report Digitimes.com.

Epitaxy and LED chip production constitutes about 70% of profit generated by the LED supply chain, and LED chip packaging accounts for about 30%. Since China’s LED industry is primarily in the chip packaging segment, the government has been active in supporting a move upstream to more profitable areas, offering generous subsidies to firms developing epitaxy and LED chip making capabilities. Currently, the government subsidizes 8–10m yuan (US$1.19–1.49m) of each MOCVD reactor installation, and has attracted many LED chip makers from mainland China, Taiwan and the USA to set up facilities in the country.

China-based players have aggressive plans to expand upstream, says Digitimes. In January Sanan Optoelectronics invested 12bn yuan to construct an LED production base and is expected to procure about 100 MOCVD reactors. Tsinghua Tongfang has plans to invest 3bn yuan over the next three years in LED optoelectronics, with an emphasis on LED chip production, and to become China’s largest supplier and one of the top three worldwide. Silan Microelectronics plans to raise 600m yuan to expand capacity for manufacturing high-brightness LED chips.

However, Taiwan-based LED companies have pointed out that LED chip production is a technology- and expertise-intensive process. Heavy investment in capacity ramps does not necessarily translate to quality products that meet industry standards. Furthermore, with rapid capacity expansion, prices from low-end to mid-range products could fall substantially, presenting another huge challenge.

MIIT officials have revealed that the government is indeed concerned that aggressive investment could overheat the LED industry. The ministry is currently designing its twelfth five-year plan for LED industry development, and is scheduled to announce up to ten new standards and policies in 2010.

See related items:

China plans to add 1200 MOCVD reactors, including 300 in 2010

Booming MOCVD market gathers pace

LED market to grow from $7bn in 2009 to $10.7bn in 2010 then $20.4bn in 2012

Taiwanese LED makers expanding to meet backlighting demand

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