“Recently several major LED chip companies on the mainland have begun dumping their goods.” In early November of last year, LED chip maker Xiang Neng Hua Lei, chairman of the Board of Directors, said that although the LED chip manufacturers are selling defective products, but the LED chip market The price has exerted great pressure. "Many LED chip manufacturers have recently lowered the price of LED chips by about 10% to cope with market shocks."

Cruel is that the mainland LED chip manufacturers' original product gross margin is not high, once again cut prices undoubtedly make the business worse.

"According to the current decline in the price of LED chips, mainland LED chip manufacturers are basically operating at a loss, and the profit point is completely subsidized by the government," said Li Bingjie, chairman of Taiwan's Epistar.

Liu Chi, director of Inspur Huaguang Market, pointed out that under the background of excess capacity in the LED industry, price war has become one of the main means to stimulate demand. "In order to attract customers, many LED chip companies can only think of ways to reduce prices in disguise, and market competition is somewhat disorderly."

Disguised price cuts "The crisis of overcapacity in LED upstream lasting for a year has not been eased and LED chip price war will continue." Shen Guang, vice president of Averyn Optoelectronics, said that as a result of overcapacity, domestic companies' upstream equipment MOCVD (LED epitaxial wafers) Production equipment) equipment operating rate is only about 50%.

"On the one hand, it is because of bad market conditions. On the other hand, it is difficult for companies to produce products that meet market demands," Shen Guang said.

According to statistics, as of September 30 last year, the number of domestic MOCVD equipment was 896, the average operating rate was 58.4%, and the capacity utilization rate was only 30.1%.

Ye Guoguang said that even if the output capacity of the LED chips is currently open, only 70% to 80% of the products can be sold, and 20% to 30% of them will be converted into inventory in the warehouse.

"Products that do not go out will generally be thrown at the end of the year," said Ye Guoguang.

In fact, the wave of rejection of goods is also a panic manifestation of the LED chip industry, because of fears and the domestic LED chip boss Sanan photoelectric rejection of the goods, when the price may be even more insecure. Sanan Optoelectronics Financial Report shows that as of September 30 last year, Sanan Optoelectronics had an inventory of 900 million yuan.

According to industry sources, Sanan Optoelectronics will clean up its inventory once every quarter, and the sales price will be much lower than the normal price. "It's generally a three-fold price in the market."

“A part of Taiwan’s LED chip companies also began dumping their goods.” Ye Guoguang revealed that Taiwan Taigu, Taiwan’s New Century Optoelectronics and Taiwan’s Longda will also ship inferior low-quality LED backlight products to mainland low-end lighting manufacturers.

“The price reduction is the main theme of this year's LED chip industry, and the way of price reduction is also varied.” Liu Qi, director of Inspur Huaguang Market, said that for example, the normal market price of an LED chip is 5 yuan per 1,000 chips, which is packaged into a project without warranty. After the product, the price of each one thousand dropped to 3.5 yuan immediately.

The fierce price war led to a rapid decline in the gross profit margin of LED chip companies' products.

LED chip companies Sanan Optoelectronics, Qianzhao Optoelectronics, Silan Micro, Huacan Optoelectronics' product gross margins have all declined without exception.

The gross margins of Sanan Optoelectronics, Qianzhao Optoelectronics, and Silan Micro's products in the first three quarters of 2012 were 26.93%, 42.22%, and 22.36%, respectively, down 33.41%, 32.77%, and 27.68% respectively from the previous three quarters of last year. Huacan Photoelectric's gross margin for the first three quarters of 2012 was 33.06%, which was 8% lower than the first half of the year.

"This year, the price of LED display chips has dropped by at least 50%," said Wang Depeng, sales director of Huacan Optoelectronics. Shen Guang pointed out that the price of low-power LED lighting chips has dropped by 30% this year.

"The price war is getting more and more powerful. Now most packaging companies get goods from chip companies. First of all, they don't ask about product performance, but the price is not low enough. The price has gradually become the main factor in determining the purchase." Ye Guoguang said that packaging manufacturers The prices are getting lower and lower, and most of the LED chips are running at a loss.

Shen Guang said that at present, the price of LED chips has actually not been reduced, and manufacturers can only work hard on the application of new materials and equipment yields in order to further reduce production costs.

It is reported that the yield rate of MOhCVD equipment from mainland companies is between 70% and 80%, which still has room for improvement compared with the 80%-90% yield rate for Taiwanese companies.

Under the shadow of the price war, the performance of LED listed companies was bleak.

"Now the price war has caused great pressure on chip companies. Like our current main business is the display chip, and prices have fallen so much, Huacan must ensure that the sales volume doubles to maintain the same income as last year," said Wang Depeng.

Of the six listed LED chip companies in the mainland, only the Sanan Optoelectronics Group achieved a year-on-year increase in revenue and net profit. The revenue and net profit of Qianzhao Optoelectronics, BDO Runda, Silan Micro and Huacan Optoelectronics all showed declines in different degrees.

Industry Accelerated Integration “How long will the price war last? It is still unknown. However, if the price of competitors' LED chips goes downward, the business of Epistar will follow.” Li Bingjie said that such price reductions, manufacturers’ production capacity The bigger you go, the more you lose. The chip situation continues to decline, and the company is not affected. Epistar is no exception.

"Now is the integration period of the chip industry. In this wave, everyone has to suffer for at least three years," said Li Bingjie.

Industry insiders pointed out that the fierce price war has led to the cost-effectiveness of Taiwan's LED chips without much advantage. The disorder of competition also accelerates the integration between LED manufacturers.

Li Bingjie said that the current demand for MOCVD in the global LED chip market capacity is around 1600 units, but the number of existing MOCVD equipment in the world is around 2800 units. Once all MOCVD equipment production capacity is fully released, the entire LED industry will face washing. brand.

Perhaps based on this, Epistar has acquired Hirose Electronics in August. The reason for the success of the merger and acquisition is that Guangsheng Optoelectronics was under the impact of Sanan Optoelectronics and suffered serious losses.

The first LED land-based case has also surfaced recently. On November 12, Sanan Optoelectronics announced that Xiamen Sanan Optoelectronics Co., Ltd., a subsidiary of the company, will acquire 19.9% ​​of Taiwan Minguang Optoelectronics for 506 million yuan, becoming the largest shareholder of Haoyuan. It is reported that Yuyuan Optoelectronics' revenue in Taiwan is second only to Jingdian and has more than 100 MOCVD equipment.

"This is just the beginning, LED industry consolidation and reshuffle will continue." An industry veteran said.

As of the end of the third quarter of 2012, the number of MOCVD companies in the mainland was 44. Among them, the number of companies with more than 50 companies accounted for 11%, between 30-49 units accounted for 7%, between 20-29 units accounted for 7%, and between 10-19 units accounted for 34%. Between 1-9 stations accounted for 41%.

At present, most LED chip manufacturers in China are small-scale enterprises, and it is expected that more than 50% of LED chip manufacturers will be forced to withdraw or be integrated in the next two years.