China's State Council (central government) has ordered its subordinate agencies and local governments to stop offering subsidies and tax incentives for China-based LED epitaxial wafer and chip makers because such offering has disrupted market mechanisms and may violate WTO rules, leading to international trade disputes, according to LED industry sources in Taiwan.
Government subsidies and tax incentives have led to China-based LED wafer and chip makers' large-scale expansion of production capacities, resulting in overcapacity and consequently aggravating price-cut competition, the sources said.
China-based San'an Optoelectronics, Xiamen Changelight and HC SemiTek are the three largest recipients of government subsidies, the sources indicated. For example, Xiamen City Government has offered a subsidy of CNY1 billion (US$163 million) plus orders worth CNY3 billion for San'an and thus the company has planned to invest CNY10 billion to add 200 MOCVD sets, the sources said. San'an has placed an order for 50 MOCVD sets with US-based Veeco Instruments and another 50 sets with Germany-based Aixtron SE, the sources noted.
The termination of government subsidies and tax incentives is expected to curb capacity expansion by China-based makers and consequently supply and demand of LED chips may return to balance in 2015, the sources indicated.
