Comprehensive analysis of the development status of China's LED industry chain

The LED industry chain includes epitaxial growth and chip fabrication, packaging and applications. According to the needs of the LED component structure, the upstream LED chip manufacturer first performs metal evaporation, then etches and heats the reticle on the epitaxial wafer to fabricate the metal electrodes at both ends of the LED, and then thins the substrate, polishes it, and cuts it into a small LED chip. The mid-stream LED package refers to the process of encapsulating the LED chip and the bracket with epoxy resin or silicone; the downstream application refers to the packaged LED device for producing various application products, such as light bars and downlights. , spotlights, car lights, backlights, displays, etc.
There is still excess capacity pressure in the upstream, and the upstream of the LED industry, which is optimistic about the first-mover advantage, is mainly epitaxial production and chip manufacturing. The upstream link has high technical content in the LED industry chain, and the equipment investment quota is large, and the profit rate is relatively high in the overall industrial chain. The number of enterprises with large-scale production capacity is relatively small, mainly distributed in the United States, Japan, the European Union, Taiwan and other countries or regions, some of which simultaneously develop LED epitaxial wafers and chips, some of which only have chip production capacity, and The supply of films is provided by upstream enterprises; since 2009, China's local governments have launched a MOCVD subsidy policy to attract investment, which has set off a wave of investment climax in China. China's MOCVD machine procurement data has increased rapidly, occupying a major position in the world. However, with the subsidy policy successively stopped, this investment boom has a tendency to retreat. According to the latest data from IMSResearch, the global MOCVD machine shipments in 2011 were 654 units, which has declined compared to the 10-year shipments. Due to the continued oversupply of LEDs, credit crunch, equipment readiness and the expiration of China's subsidy policy, IMS forecasts that MOCVD machine shipments in 2012 will further drop to 342 units, a decrease of 48.
In addition, China's MOCVD machine purchases continue to increase: in 2011, China digested global MOCVD shipments of 76, Q42011 peaked at 92.
According to the statistics of high-tech LEDs, by the end of 11th, the number of MOCVD machines in China has exceeded 800. Since the MOCVD debugging period is usually long and the demand for 11 years is not good, we expect more than half of the MOCVD equipments to be idle. These production capacity will be released in 12-13 years, bringing certain supply and demand pressure to the LED chip industry.
Upstream investment still occupies the main direction of China's LED investment. According to the statistics of the Institute of Advanced Industrial Engineering, in 2011, China's LED industry contracted planned investment amounted to 194.5 billion yuan, down 10.7 percent year-on-year. The total number of projects above designated size (projects with an investment of more than 100 million yuan) totaled 132, 10 years later. An increase of 58; in particular, the upstream epitaxial core investment amount is as high as 89 billion yuan. However, we believe that many upstream projects will be forced to withdraw or shelve in the future, and the actual overcapacity may not be as serious as it seems. From the perspective of domestic and international shipments, many MOCVD machines are still in the stage of commissioning and climbing. The product quality is low and the competitiveness is low. It can only be used for very low-end LED products. Industry impact is limited.
From a longer-term perspective, LED demand will be deterministic explosive growth, and MOCVD machines will no longer be able to repeat previous high investment and high growth, LED chip supply and demand situation is expected to improve in the future. We judge that the excess of LED chips in the future is likely to be partial over-supplied, that is, the low-light-efficiency and high-cost chips are over-supplied, and the high-efficiency, low-cost products may even be in short supply. In the next 3-5 years, the domestic low-end LED chip market competition will continue to intensify, and the supply of high-quality LED chips will be in a state of shortage, and further consolidation of the industry will be inevitable.
We believe that in the context of overall overcapacity and falling prices, technological strength and economies of scale will determine long-term competitiveness.
Among them, the technical strength determines the product quality, and the scale effect determines the product cost. In this sense, Sanan Optoelectronics and Dehao Runda undoubtedly have obvious economies of scale and cost advantages. Among them, the most profitable, the earliest production capacity release, the best chip development company for customers is undoubtedly the leading Sanan Optoelectronics. According to our research on downstream customers, the acceptance of Sanan chip products by domestic packaging companies has generally increased, and the company's capacity utilization rate has rebounded significantly, which deserves special attention.
Midstream packaging benefits directly, focusing on customer development and capacity expansion. The LED packaging process equipment and manufacturing processes are highly standardized. The investment scale of manufacturers is generally small and the technical requirements are low. Therefore, there are many manufacturers in the packaging field. The general order visibility of packaging enterprises is low, only about 1-3 months, and the product delivery is generally about 3 months. Therefore, the performance of the company is directly affected by the industry boom, and it is also obvious. In 2011, LED overcapacity first occurred in the packaging field, and the gross profit margin of related companies all showed a significant decline.
Compared with the epitaxy and chip industry, the LED packaging industry in mainland China is the most competitive and the largest, and the technical level is also close to the international advanced level. At present, foreign LED companies have set up factories in China. The LED packaging industry in China has formed a certain industrial scale and has become an important middle and low-end LED packaging production base in the world. We believe that the barriers in the packaging field are mainly reflected in the accumulation of experience in packaging applications, and companies with good market reputation and manufacturing experience can be recognized by downstream customers. Recently, the industry has rebounded, packaging companies have benefited directly, and capacity utilization has generally increased. As we have analyzed before, the LED lighting industry will begin a large-scale outbreak in 12 years. We believe that for manufacturers with lighting packaging experience, it is the best time to rapidly expand production capacity, not only to enjoy the high gross profit margin in the early stage of new product popularization, but also to establish scale barriers and customer barriers. From our research in the industry chain, many packaging factories that joined the company last year and this year are still in a poor state of survival in the current boom, and the upstream and downstream supply chains are more inclined to choose packaging companies with scale and brand advantages; The agglomeration effect brought about by industry-adjusted integration is rapidly fermenting.
We are optimistic about Hongli Optoelectronics, which has accumulated a lot in the field of white light. The company has a positive attitude of expanding production, and this year's production capacity will increase by more than three times. At the same time, we are also optimistic about the business model leading Qinshang Optoelectronics, the company has good government resources, is expected to take the lead in benefiting from the industry's possible future promotion policies.
The downstream pattern is chaotic, and the traditional energy-saving lamp manufacturers that are optimistic about traditional brands and channel advantages mainly include display, backlight, car lighting and general lighting. As the LED industry chain gradually decreases from upstream to downstream, the number of SMEs downstream of LEDs is numerous and the pattern is chaotic. According to statistics, there are more than 3,000 semiconductor lighting manufacturers in China, 70 of which are concentrated in the downstream of the industry. The homogenization of enterprises is serious, lacking core technology, and relying on price wars for low-level competition.
Looking ahead, we believe lighting is the most promising area for LED downstream applications. In order to occupy a place in LED lighting, the most advantageous ones are traditional lighting manufacturers that have occupied the brand and channel high point in the field of energy-saving lamps. We believe that Sunlight Lighting has a long-term layout in the field of LEDs, and it is expected to stand out in the future competition.

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