2017 led "core" layout brings a new situation

There will be at most 5-10 enterprises left in the domestic LED chip market. It seems that this prediction is still too optimistic, and the LED chip enterprises require to survive, but they have to be "proficient in all 18 kinds of martial arts".

The competition of scale and price has always been an important means to promote the development of domestic LED chip enterprises. However, when overcapacity and prices hit the bottom, the above methods are obviously easy to fail. At this point, "poverty means change, and change means accommodation". At present, the LED chip industry has reached the critical moment of transformation. If chip enterprises want to change from big to strong, they must change their thinking, change from simple mass production to diversified layout, constantly strengthen technology, improve profit space, and strengthen their anti risk ability.

Industry prosperity continues to improve

In the past few years, as the LED chip industry has increased its investment scale, the release of production capacity has led to a sharp drop in prices. At the same time, in order to compete for market dominance, many small and medium-sized chip enterprises face continuous losses due to the continuous decline of product prices due to the irrational competition of market prices.

Some data show that in 2015, the price of LED chips in China decreased by 30% - 40%, and the output value of upstream epitaxial chips only increased by 8.3% year-on-year. The output value was 13billion yuan, and the growth rate slowed down significantly. Fierce market competition has gradually eliminated small and medium-sized LED epitaxial chip enterprises, and the market concentration has further improved. The top five chip enterprises in the industry account for 65% of the revenue. Large chip manufacturers including San'an optoelectronics, Huacan optoelectronics, Qianzhao optoelectronics, Tongfang Co., Ltd. and Dehao Runda occupy nearly 70% of the domestic market share.

After the industry reshuffle in 2015, in addition to the shutdown of 25% of the production capacity of Jingdian at the beginning of the year, Samsung's multiple production reductions, and the continuous reduction of domestic policy subsidies for chip enterprises this year, the expansion of new chip supply has decreased significantly, which has also changed the supply and demand structure of LED chips to a certain extent, from the previous oversupply to the balance of supply and demand or even oversupply.

Since the second quarter of this year, LED chip enterprises have shown a sustained warming trend. Prices of many LED chip enterprises in the industry have started to rise, and the revenue has improved significantly. From the three quarterly reports recently disclosed, San'an optoelectronics achieved an operating revenue of 4.486 billion yuan in the first three quarters, a year-on-year increase of 24.55%, and a net profit of 1.496 billion yuan, a year-on-year increase of 3.39%. From January to September 2016, Huacan optoelectronics achieved an operating revenue of 1.071 billion yuan, a year-on-year increase of 53.22%, and a net profit of 141 million yuan, a year-on-year increase of 1478.77%.

Chip companies have not only improved their profitability, but also their capacity has continued to be full, which also confirms the current situation of "rising prosperity of the industry". Many LED chip enterprises, such as San'an, Huacan and Aoyang, which are leading LED chip enterprises, have reached full production or are basically close to full production.

On October 19, in response to investors' questions in Shanghai Stock Exchange E interaction, San'an optoelectronics said that all MOCVD equipment disclosed in the company's interim report had been in full production by the end of the year. The company's orders were divided into monthly orders and quarterly orders, and the quarterly orders had been booked until the end of the year. At present, the price of LED chips is stable, and the price of some varieties has increased. According to the 2016 semi annual report of San'an optoelectronics, the company has about 276 sets of MOCVD equipment (converted into 2-inch 54 chip machine), and has put into production 256 sets, of which about 80 sets have been gradually released during the reporting period.

Jingdian also said that as the demand for quad LED is still strong, and it was originally expected that the LED backlight application would enter the off-season in the fourth quarter, but orders from Korean and mainland customers are still pouring in, coupled with the synchronous growth of demand for smart phone flash, the challenge of full capacity in October is expected to drive the operation in the fourth quarter to be better than expected.

In the first half of the year, Huacan optoelectronics signed a strategic cooperation agreement with its main customer, Mu Linsen, which mainly includes that Mu Linsen will give priority to purchasing the company's products under the same conditions. The value of LED chip products purchased from the company by Mu Linsen in the next three years will be no less than 1.5 billion yuan.

Some insiders said that the rapid growth of the chip industry driven by the strong demand for LED application end will continue for three to five years. On the one hand, the full implementation of the "white ban" in China since October 1 has prompted LED lighting fixtures to further accelerate the replacement of incandescence, which will further drive 60% of the domestic LED lighting demand;  On the other hand, the indoor and outdoor small spacing LED market continues to be hot, with a compound annual growth of 28%. In 2016, there will be a demand for more than 140 billion LEDs. In the next two years, there will still be a demand for nearly 40billion LEDs each year. At present, the production capacity of small spacing LED is about 70billion, and the gap between supply and demand is 50%.

Adjust the diversified layout of chip Enterprises

In view of the sluggish market in 2015, since the fourth quarter of last year, Jingdian has started the largest production reduction in history, frozen 25% of the production capacity, and the number of Blu ray MOCVD machines in operation has decreased from 450 to 375 at present. This year, in response to the demand for Quaternion led, Jingdian began to implement the production expansion plan in the second quarter. Even though the new production capacity has been released, it is still not enough. At present, there are 47 quaternion machines. Jingdian plans to modify 13 old blue light machines into quaternion led. In addition, Jingdian is also committed to LED filament lamps, infrared LEDs, UVLED and other fields, and actively explore overseas markets.

Under the leadership of Jingdian, Taiwan funded chip enterprises set off a wave of transformation. Huashang optoelectronics decided to turn around and completely withdraw from the killing battlefield of blue-green light. Resources and machines will be transferred to quaternion led. In addition, it will put heavy pressure on the iris recognition chip and stage lamp market. It is the first LED factory on both sides of the Taiwan Straits to boldly sublate the blue-green LED market and seek transformation.

In the new century, the application of green LED in wearable devices, mobile phone flash (crystal overlay), CSP applications such as car headlights, special lighting and high-level TV backlight will be taken as the major directions of transformation. In addition, in the new century, which did not take over the work orders in the past, in the third quarter, we tried to undertake the OEM orders for blue LED, mainly the special lighting orders released by large European and American manufacturers. The gross profit margin and price are better than the traditional blue LED applications.

Compared with the product structural adjustment and transformation of Taiwan funded enterprises, the land-based enterprises continue to combine large-scale mass production and capital assisted transformation. In the second half of 2016, the production capacity of Xiamen San'an optoelectronics Co., Ltd., the chip leader of San'an optoelectronics investment project, was gradually released. The company has invested 28 cavities of MOCVD equipment (converted into 2-inch 54 chip machines, equivalent to 56). The production capacity of 12 cavities invested in March will be reflected in the second quarter. The remaining equipment will also be put into production as soon as possible, and the production capacity will be further expanded. Recently, Aoyang Shunchang announced the production expansion of phase II, and it is expected that the production capacity of phase II will be expanded by three times compared with that of phase I, up to 800000 pieces / month.

The production line construction of Huacan optoelectronics Suzhou subsidiary is continuously promoted, and the production capacity of phase II red and yellow light project is gradually released, further consolidating the dominant position of Huacan Optoelectronics in the display screen market. As the phase III project of Suzhou subsidiary has gradually released some production capacity, Suzhou plant has become a 4-inch LED chip manufacturer with leading scale and technology in the world. On May 31, the LED epitaxy, chip and sapphire processing project with a total investment of 6billion yuan by Huacan optoelectronics officially launched the commencement ceremony in Yiwu Industrial Park, Zhejiang Province. After the project is completed, it will produce 3million LED epitaxial chips and 13million sapphire materials per year.

In addition to expanding production, it is also a big game for domestic chip enterprises to realize diversified and extensive development. For example, San'an optoelectronics raised funds for communication microelectronic devices, and produced gallium arsenide high-speed semiconductor devices and gallium nitride high-power semiconductor devices, filling the gap in manufacturing in China.  Huacan optoelectronics plans to invest 3million yuan to participate in Beixing and get involved in robot and radar related fields; Acquire 100% equity of harmony optoelectronics, and set foot in the sensor field; It is intended to acquire 100% equity of American Meixin Semiconductor Co., Ltd. and enter the MEMS sensor business field. Recently, Guoxing optoelectronics announced again that it agreed to invest in raysent technology company of the United States to carry out research and development of LED high-power chips and third-generation semiconductor epitaxial technology.

Battlefield from domestic to global

Today, the domestic and even global LED chip market pattern has been determined. The domestic chip market is mainly concentrated in the hands of several listed companies. With the acceleration of competition, the performance of these listed companies continues to differentiate: the performance of San'an optoelectronics and Huacan optoelectronics has maintained stable and rapid growth; However, the performance of Dehao Runda, Qianzhao optoelectronics, Guangdong Ganhua and other enterprises has stagnated or regressed. In the future, the domestic chip market will be further concentrated in the hands of 3-5 enterprises.

From a global perspective, the LED chip market is divided into three camps: the first camp represented by Japanese and European and American manufacturers;  The second camp represented by Korean and Taiwan, China manufacturers; The third camp represented by manufacturers in Chinese Mainland. At present, this situation is changing. The third camp represented by manufacturers in Chinese Mainland is constantly eroding the market of the second camp. In the next two years, the camp pattern will change significantly. The third camp will assimilate with the second camp and jointly erode the market of the first camp.

With the continuous mature development of domestic LED chip technology, the product supply is becoming more and more stable, the chip localization rate will continue to improve, and domestic chip enterprises will actively expand the overseas market. For example, San'an optoelectronics has carried out business with major international manufacturers in Southeast Asia, Europe and the United States, Japan, South Korea and other regions. Overseas sales have increased significantly, and subsequent companies will further increase their overseas market share. Huacan optoelectronics has just carried out in-depth strategic binding with Korea semiconlight; Subsequently, it announced that it would cooperate with BluGlass, an Australian company, to explore the application of aluminum nitride (AlN) low-temperature deposition on high brightness LEDs, and explore the advantages of RPCVD in green LED production. Jingdian, on the other hand, directly cooperated with mulinson to build a factory in India.

Whether it is product diversification or market diversification, China's LED chip enterprises always need to continuously strengthen their technical strength and brand influence, and step by step forward to the world brand.