LEDinside：LED Chip Market Sees Oversupply as China Accounts for 47% of Global MOCVD Capacity

Roger Chu, research director at LEDinside, pointed out that this year’s MOCVD capacity is equivalent to 72.31 million pieces of 2-inch LED wafers, representing a 14% increase in output volume over 2014. Chinese chip manufacturers such as San’an Opto and Changelight in particular are producing with the latest MOCVD systems in their newly built plants in Xiamen. Based on LEDinside’s projection, the monthly wafer capacity during the second half of 2015 will increase by as much as 500,000 pieces, creating a huge impact on the entire chip industry’s supply and demand situation.

 

Due to government support and fundraising in the stock market during recent years, Chinese LED chip manufacturers are able to expand their capacities to the point of creating a supply glut. Therefore, the strength of these enterprises cannot be judged by past records. San’an Opto, the largest Chinese LED chip manufacture, is a prime example. In the past few years, local governments in China have been providing San’an Opto subsidies that have made up 10~14% of the company’s annual revenues. Moreover, San’an Opto’s market value has been rising sharply since 2014, and this in turn has attracted more and bigger investments. In the overall competition, Chinese LED companies have fewer patents and smaller customer base than their global competitors, but they have significant strength as they are backed by a continuing stream of investments. Taiwanese LED companies by contrast have seen their market values falling followed by exodus of their talents and fundraising challenges. Consequently, they resort to layoffs and unpaid furloughs as means to reduce cash outflows.