China's LED chipmakers have been slowing down capacity expansion in 2012 due to market oversupply,but some firms have announced plans to invest in upstream epitaxial crystal processing.
Industry sources noted that some installed equipment has yet to start production,hence upstream LED chip capacity in China is likely to increase by 20-30%in 2013.Furthermore,as China-based LED chipmakers increase capacity,the firms will begin to penetrate China's TV backlight market and create competition for Taiwan-based firms.
According to market research,by the end of October 2012,MOCVD equipment in China had reached 823 units.Calculating using 2-inch epitaxial wafer equipment,annual capacity is around 40.22 million units per year.Capacity utilization rate,however,has been around 65%due to lack of staff and relatively weak demand.
China-based industry sources stated that the number of new MOCVD equipment installed in the first three quarters of 2012 was 93 units,a figure that is far lower than the expected 242 units for 2012.The price of LED chips has been falling rapidly due to oversupply causing gross margins to decrease continuously.Compared to the price of LED chips in China at the beginning of 2012,the price had fallen by more 30%by the third quarter.The price fall of entry-level products has been around 45%.
Taiwan-based LED chipmakers have been facing tough market competition in 2012.The supply chain has been relying on demand for TV backlights but gross margins have been falling.Major chipmakers such as Epistar,Formosa Epitaxy and Genesis Photonics have been reporting net losses.Nevertheless,Taiwan-based chipmakers have been cooperating with panel makers and system firms and have successfully become LED backlight providers for the six major TV brands in China.
But China-based makers such as Sanan Optoelectronics have begun to develop LED chips for backlights,this means Taiwan-based firms will see increasing competition.
