Second, since 2009, the investment enthusiasm of enterprises has become more and more high.

1. In 2009, the total sales value of China's semiconductor lighting industry reached 100 billion yuan, a year-on-year increase of more than 30%, making China one of the fastest growing regions in the global LED industry.

According to the "Opinions on the Development of Semiconductor Lighting Energy-Saving Industry" jointly issued by the six ministries and commissions such as the National Development and Reform Commission, by 2015, the average annual growth rate of the output value of the semiconductor lighting energy-saving industry will be around 30%.

2. China's LED industry chain is complete, the space layout is wide, and the number of enterprises is large, but the strong competitiveness is mainly the downstream packaging links.

China's LED industry covers the entire chain from upstream materials, epitaxy, chips, packaging to applications.
More than 85% of LED companies are distributed in the Pearl River Delta, Yangtze River Delta, Northern Region (Beijing, Tianjin, Dalian, etc.), Jiangxi and Fujian. Currently, there are 62 LED epitaxial and chip companies in China, and more than 1,000 LED packaging companies. Nearly 2,000 application companies

3. In 2009, the domestic LED package output value was about 20.4 billion yuan, becoming the world's largest packaging area; but the upstream chip production output value is only 2.3 billion yuan, and mainly low-end products in the low-end, but the compound annual growth rate is also 30 %

Since 2010, China's LED industry investment has accelerated, and many companies have begun to expand on a large scale.

In 2009, Sanan Optoelectronics, the largest LED company in China, invested 900 million yuan to build LED production lines in Tianjin. In January 2010, it announced that it will invest 12 billion yuan to build LED production bases in Wuhu, Anhui, such as Dehao Runda and Silan Micro. Also significantly expanded LED investment in November 2009, Cree decided to build LED chip production base in Huizhou, Guangdong. Konka, Skyworth and other home appliance companies that have demand for LED backlights have also invested in building LED packaging plants.

Many factors in the formation of LED investment

1. The Chinese central government and local governments at all levels have adopted various means to promote the development of the LED industry.

1. The central government lays the foundation for the development of the industry mainly through industrial development direction guidance, demand subsidies, research and development support, and standard setting.

In June 2003, the Ministry of Science and Technology joined forces with various departments, industries and local governments to establish the National Semiconductor Lighting Engineering Coordination Leading Group 2006 National Medium- and Long-Term Science and Technology Development Plan (2006-2020) and Information Industry. The "Eleventh Five-Year Plan" and the "Electronic Information Industry Adjustment and Revitalization Plan" in April 2009 all regard the LED industry as the focus of development. Various departments have given special subsidies to the technology research and development related to the LED industry. December 2008, Ministry of Science and Technology The “Ten Cities and Ten Thousand Cities” program was launched, and ten cities were selected. Each city promoted more than 10,000 LED-based lighting. The Ministry of Science and Technology subsidized 30%-50% of the investment in LED lighting compared to traditional lighting. October 2009, The National Development and Reform Commission and other six ministries and commissions issued the "Opinions on the Development of Semiconductor Lighting Energy-Saving Industry" to make arrangements for the development of China's LED industry. It is clearly proposed that by 2015, the localization of chips will reach more than 70% of LEDs related to semiconductor lighting terminology and device detection methods. Industry standards also officially implemented in 2010

2. Local governments attract investment through policies such as demand subsidies and investment, research and development subsidies, and promote local industrial transformation and upgrading.

In the Sanan Optoelectronics Anhui Wuhu LED project, the first phase of the total investment of 6 billion yuan, the Wuhu Municipal Government will give a total of about 900 million subsidies to the purchase of 100 production equipment. Moreover, the Wuhu City Housing and Urban-Rural Development Committee will also purchase high-power LED street lights from the company, totaling 600 million yuan, and purchase 200 million yuan each year in 2010, 2011 and 2012.

Second, the current industry characteristics of the LED industry itself are also an important reason for the investment boom in the industry.

1. In general, the industry is still in a period of short supply, and companies can now obtain higher profits, so expanding investment is also a natural choice.

Sanan Optoelectronics' Tianjin project's expected profit margin after tax is as high as 20%.

2. Chinese companies are mainly engaged in the processing and manufacturing of LEDs. Relatively speaking, the capital and technology thresholds for entering the industry are not high.

It is estimated that the minimum investment in LEDs is only 100 million yuan.

3. At present, the industry is generally in the early stage of development, and has not formed a leading enterprise with dominant position. The enterprise has the impulse to compete for the leading position in the industry.

Leading enterprise Sanan Optoelectronics' sales revenue in 2009 was only 470 million yuan, and other companies are likely to gain industry leading position by accelerating investment.

4. The Chinese government has always had the policy preferences of supporting large-scale leading enterprises. These enterprises are more likely to obtain various preferential policies and subsidies from the government, thus objectively enabling enterprises to rapidly expand their scale.

5. High prices are an important obstacle to the expansion of current industry demand. Expanding the scale may reduce costs and stimulate demand.

Third, due to the optimistic development prospects of the LED industry, the Chinese capital market provides sufficient financial support for enterprises to increase investment.

Since 2009, the LED industry has been well received by the capital market, and the stock prices of major listed companies have risen sharply.

Stock price growth 1: Dehao Runda, 2.81-20.29 yuan; Shilan micro 3.35-14.85 yuan; Sanan photoelectric 9.55-89 yuan (estimated value); while the Shanghai Composite Index rose from 1820 points to 3109 points.

2. After the company successively launched the LED investment project financing plan, the capital market gave active support and the financing was smooth.

In March this year, it planned to raise 2.98 billion yuan, but the capital market is relatively optimistic, and the stock price has risen successively.
In 2009, Dehao Runda, which just entered the LED industry through share swap, had a revenue of 170 million yuan in 2009 and successfully raised 1.56 billion yuan for the construction of Wuhu LED production base.

Conclusions and recommendations

1. Accelerated investment will help promote the rapid development of China's LED industry, but there are also many risk factors.

1. In order to attract investment, some local governments give large financial support to enterprises. If the profits of enterprises are not good, it is likely to cause problems in local government balance sheets.

2. Relatively concentrated investment expansion has the possibility of low-level redundant construction, which will lower product prices.

The capacity of the polysilicon industry has expanded rapidly from 1,000 tons in 2007 to 100,000 tons in 2010, and product prices have also fallen sharply.

Second, China's LED investment boom has also brought market opportunities to other companies.

1. Accelerated investment, driving demand for upstream LED production materials and equipment

At present, the MOCVD equipment used in the production of LED epitaxial wafers is mainly dominated by the two oligopolys of AIXTRON of Germany and VEECO of the United States, with a total market share of over 92%.

2. Due to technical limitations, Chinese companies may need to strengthen cooperation with foreign companies.

Companies in the US, Japan, and Europe have 85%-90% of original invention patents in the upstream area of ​​the LED industry chain. In January 2009, Dehao Runda and South Korea's Epivalley and Max Alpha established a joint venture in China, when the Korean side will send out Professional team to ensure that the factory meets the same technical level as Korean companies

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