China's LED industry chain integration accelerated in 2013

In August 2009, the Yangzhou municipal government first introduced the MOCVD subsidy policy, and other local governments quickly followed up, resulting in the installation of MOCVD machines in mainland China increased from more than 100 in 2008 to more than 800 in September 2012. As a result, the operating rate of the MOCVD machine in 2012 was only about 50%. Observing the new number trend of MOCVD machines, we can see that the demand for MOCVD equipment has peaked in mid-2011, and the growth rate has slowed down. As the MOCVD machine is the most important and core equipment in the entire LED upstream, the excess supply directly leads to the 2012 sapphire substrate price hovering around 6-7 US dollars (2”).

Not only in the MOCVD machine part, including the upstream sapphire crystal growth equipment, midstream chip manufacturing, and packaging, there are various degrees of excess capacity. According to the author's understanding, some companies have invested a lot of money to purchase the Sapphire crystal growth machine. Not installed and put into production has disappeared. At present, there are about 20 sapphire manufacturing companies in China, about 50 chip manufacturing companies, and as many as 2,000 downstream companies such as packaging and modules. The market is expected to reduce the number of LED industry chain companies by half within the next few years. This situation is directly reflected in the listed company's revenue and net profit, LEDinside statistics 2012 LED companies 3Q financial report found that most of the LED business revenue decreased significantly, which Shilan Micro, Nanda Optoelectronics, Ganzhao photoelectric net profit fell 88.94% year-on-year , 52.42% and 45.91%. In contrast, 3Q net profit of Ruifeng Optoelectronics and Jufei Optoelectronics increased by 125% and 12.84% year-on-year due to the increased demand for backlighting of large-size TVs and tablets.

The consolidation of the industry's small-scale choppers has led to an overall slump in the LED industry. At the same time, the competitions and integrations behind the manufacturers have continued. Industry should be the largest industry leader Sanan Optoelectronics and BDO Runda. Taichang Haoyuan Optoelectronics and China LED Epistar giant Xiamen Sanan Optoelectronics formally signed the "Share Purchase Agreement" at Taipei Grand Hyatt on November 13th. Sanan will acquire a 19.9% ​​stake, which surpasses Japanese manufacturer Mitsui 15%. Sanan became the largest legal person shareholder of Qianyuan. One stone provokes a thousand layers of waves. The author believes that the cooperation between Sanan and Yuyuan has opened the prelude to the vertical integration and horizontal integration of mainland LED manufacturers. NVC and DHL Runda's equity agreement may make LED analysts guess the beginning, but did not guess the outcome. While the industry guessed who Wu Changjiang will win, it broke out with the involvement of BDO Runda. 2012.12.26 BDO Runda announced that it intends to obtain a total of 20.05% of NVC Lighting's total share capital of 1.34 billion through its wholly-owned subsidiary, becoming the largest shareholder, and Wu Changjiang will pass the scheduled increase to become BDO Runda. The two largest shareholders hold 9.31% shares in BDO Runda. At this point, the mainland's two most influential LED companies have taken a crucial step in the vertical integration of the industry chain. The author believes that these two events are a milestone in the history of China's LED industry, completely changing the ecological landscape of China's LED industry.

In fact, integration of LED companies outside mainland China has already begun. For example, Philips acquired lumileds in August 2005 and began manufacturing LED products from traditional lighting products. In 2010, LED lighting applications companies Luceplan and Optimum Lighting were purchased. The layout of LED commercial, outdoor, architectural and indoor lighting solutions. When analyzing the current major global LED lighting companies, it can be found that except Cree is a pure LED product manufacturing enterprise, the international first-line LED lighting product manufacturers such as GE, Philips, Osram, Panasonic, Toshiba, etc. are all transferred from the original traditional lighting manufacturers. LED lighting production up. However, most of the manufacturers with large LED lighting products in China are purely LED lighting product manufacturers. From the development of these years, it is not always easy. Emerging LED lighting product manufacturers are faced with many obstacles such as fierce market competition, incomplete product quality, lack of industry standards, lack of core technologies, and high prices. The case of Sanan Optoelectronics and BDO Runda also reflected the current difficulties faced by domestic LED companies.

The European and American manufacturers are targeting China and they are eyeing on August 8, 2012. Osram laid the foundation for a new factory in Wuxi, China. It is expected to be completed and put into operation in 2012. Its main business is LED chip package. OSRAM entered Foshan Lighting as early as 2005, but did not provide too much LED technology support to Foshan Lighting as originally hoped for. The purpose was to use Foshan Lighting's channels to develop itself. There is also Cree's factory in Zhongxin Hi-tech Development Zone in Huizhou, which is the first chip production base outside of North America. On December 15, 2011, Philips built a Philips LED professional lighting project in Chengdu Hi-tech Zone, hoping to grab a share of China's huge lighting market. According to market survey data, the share of the Asian general lighting market has now accounted for about 35% of the global total and is expected to increase to 45% by 2012. The Chinese lighting market alone has now exceeded 8 billion euros and is expected to at least double by 2020.

These large European and American manufacturers have already completed the layout of all product lines in China, and they also have Japanese systems that have both cost and technical advantages. Korean manufacturers are also trying to enter the Chinese mainland market through self-built or joint ventures. The industry generally expects that with the establishment of industry standards such as chip light efficiency, heat dissipation technology, and light engines, the outbreak of outdoor lighting, commercial lighting, and home lighting will take place in the next few years. The author believes that before the situation of overcapacity in the upstream/middle-stream area has not improved, companies with both upper-middle-stream advantages and downstream channel integration capabilities may survive in the brutal price-capability wars in the future.

The consolidation of China's LED industry chain is accelerating, and the survival of the market is cruel. The competition in the industry will inevitably lead to the collapse of enterprises and the emergence of new companies. What Schumpeter called “creative destruction” has made an industry Maintaining innovation and vitality, the LED industry is no exception. In 2012, LEDINSIDE has successively reported that several LED lighting manufacturers with revenues exceeding RMB 100 million each year have successively closed down, such as Haobo Optoelectronics, Jiahao Optoelectronics, and Big Eyes, which have led to a pessimistic impression for the LED industry in 2012. Winter has come and spring will not be far; but it will not happen immediately. In addition to the integration of Sanan and BDO Runda, Ruifeng Optoelectronics Chairman Gong Weibin and Lianchuang Optoelectronics President Jiang Guozhong stated that they are considering acquiring LED packaging and application companies with an annual output value of over RMB 100 million. According to the National Semiconductor Lighting Engineering R&D and Industry Alliance, the industry concentration of China's epitaxial chip segment has exceeded 50%, but the industrial concentration of packaging industry is only 16.8%, especially the concentration of LED lighting applications that a large number of companies have entered. 5.7%, intense competition in the industry, is expected to become a key area for industry consolidation in 2013.

The waves are turbulent and the underwater currents are turbulent. Although LED mid-range packaging and chip companies have excess capacity, profits have fallen. However, the bright future of LED applications still attracts many LED companies to expand their territory. The author believes that the key to LED industry integration is to have an end market, which is the channel, only through the channel to occupy a certain market share in order to ensure that companies, especially the upstream chip and packaging companies survive in the cruel market. Through mergers and acquisitions or mergers, it is easier to dominate the market than new channels. In order to expand product sales and increase gross margins, LED upstream companies are constantly trying to establish or acquire downstream application companies. In addition to BDO Runda, on September 25, 2012, Hongli Optoelectronics announced that it plans to increase the capital of 35 million yuan to Leddie Lighting. The registered capital of Lydia was changed from 15 million yuan to 50 million yuan, becoming a wholly-owned subsidiary of Hongli Optoelectronics. In early November 2012, Laitiya Lighting officially relocated from Shenzhen to the Hi-tech Industrial Base in Huadu Town Airport, Huadu District, Guangzhou, hoping to expand its share of the lighting application market in Guangzhou.

In January 2012, NVC Lighting and Ruifeng Optoelectronics planned to set up a joint venture company to engage in the research and development of LED packaging technology for high-power lighting and the manufacturing and sales of packaged products. The planned production of LED devices is mainly provided to NVC Lighting. However, in August, RuiFeng announced that due to changes in NVC Lighting, Ruifeng Optoelectronics had previously suspended joint ventures with NVC Lighting. The two sides promised in January that the funds invested in the joint venture will not be put into operation as scheduled. . It can be seen that when the upstream LED companies actively integrate downstream businesses, the downstream companies are also eager to expand the upstream sector.

When analyzing the integration of the LED industry, the media did not really attach importance to the importance of Taiwanese LED companies playing a role. With the surplus of LED packaging market and the upgrading of the mainland LED industry, it will inevitably lead some mainland companies to turn to Taiwanese companies' areas of expertise. It is estimated that in 2013, Sanan Optoelectronics' LED chip production capacity will surpass that of Taiwan's leading chip maker. Beginning this year, Taiwanese companies have already felt the threat from mainland companies. Before Sanan joined the stock market, Lunda and Wei Limeng, or Guangsheng and Jingdian, have also realized that LED companies in mainland China will inevitably erode Taiwan. The territory of the enterprise and make preparations in advance. At the same time, Taiwan-funded enterprises are also actively setting up joint ventures in the mainland, hoping to capitalize on China’s capital and market capacity to expand their market share and profits. As early as 2010, Jingdian has invested and set up factories in Xiamen to produce blue LEDs in the later stage. In June 2012, Jing Bing Chairman Li Bingjie revealed that in order to welcome the arrival of the next wave of LED lighting, it will expand production in Xiamen, China, and Hsinchu, Taiwan, with an investment of more than NT$5 billion. The goal is to become the top two in the world. One of the LED epitaxial plants, another Jingyuan Optoelectronics shareholders through 2.5 billion private equity case, is expected to introduce strategic partners to expand the LED lighting market. Fuzhen Zhen, the spokesperson of the company, cooperated with China Sanan and has received orders for large-size LED TVs from mainland packaging plants. It is expected that it will show strong growth in the second half of the year. It is expected that the proportion of revenue in mainland China will be from 2013. From 10% to 15%.

The analysis to this point, LEDinside speculated that taking into account the various types of LED commercial, outdoor lighting and other application market scale advantages of the mainland and the Taiwanese companies technology and standard advantages, the next LED industry's integration focus can not rule out may still be Taiwan's LED Lei The merger between the crystal manufacturer or LED lamp manufacturer and the mainland LED company.