70% of the downstream LEDs in China are difficult to enjoy the overseas blowout market

On May 18, Shenzhen was hot. However, in the LED International Sourcing and Trading Center in Huaqiang North, the bustling flow of people is still unabated.

The LED procurement center, which was put into operation in January this year, is the first large-scale professional LED trading market in China. The first phase of the project is 4,500 square meters, bringing together more than 60 LED display and lighting companies in the country.

"The market is more popular than we expected. In just two months, the first phase of the venue has been fully filled." A person in charge of the trading center told this reporter that the second phase of the 4,000 square meter site is currently under construction and is scheduled to be put into operation in the second half of the year: “After the completion of the two phases of the project, the total transaction volume is expected to exceed 2 billion.”

The popularity of the transaction is exactly the epitome of the LED market boom since the end of last year.

According to survey data from the High-tech LED Research Center, in the first quarter of 2010, the output value of LED applications in China was 19.9 billion yuan, a year-on-year increase of 42%. “The foreign trade LED trading is showing multiple growth.” Zhang Xiaofei, CEO of Gaogong LED Research Center, told the reporter.

The industrial heat wave of LED has also attracted the support of relevant government departments. Following the release of the Shenzhen LED Industry Development Plan by the Shenzhen Municipal Government in 2009, the Guangdong Provincial Government held a standing meeting recently. LED lighting, together with new electronic information and electric vehicles, has become one of the three new industries supported by Guangdong Province.

In short supply

Shenzhen Guangming New District, the third floor of Wanrun Technology Co., Ltd. A new workshop was slightly empty – it is waiting to install new LED production equipment.

"The equipment that was originally planned to arrive in March has not yet arrived." Looking at the production line reserved for new equipment, Li Zhijiang, the chairman of Wanrun Technology, was helpless: "There are many orders, but the production capacity is limited."

According to a survey by the reporter, although the sales of Wanrun Technology increased 40% year-on-year in the first quarter of this year, its LED bulb products still face a capacity gap of 500 million.

Wanrun Technology’s experience of “having money can’t make money” is a silhouette of the current LED industry boom. Taking the global lighting industry as an example, LED lighting is increasingly becoming the mainstream of the industry.

It is reported that at the Frankfurt International Lighting Fair in April this year, the traditional lighting three Osram, Philips and GE are all booths to promote LED lighting products.

“Philips 1200 square meters booth has a clear LED light source.” A Chinese manufacturer at the conference told reporters that at the last exhibition, Philips applied LED lighting technology only to a few handheld lighting devices such as flashlights.

One of the reasons why the changes in the international market are quickly transmitted to China is that more than 70% of China's LED application lighting market relies on exports.

"This year we sold three times in the first quarter of this year." Feng Jun, chairman of Shenzhen Eite Lighting Co., Ltd., which focuses on the commercial LED lighting market, told reporters that 75% of the market is overseas, with sales of about 120 million yuan last year. "It is expected that sales will exceed at least 200 million this year."

In contrast, although the domestic LED commercial market is just getting started, the municipal engineering LED street lamp market is promising.

"From the policy level, the country has strong support for the energy-saving and environmentally-friendly LED industry, and the market has great potential." Zhang Yusheng, executive vice president of Huaying Group, told reporters that the company has signed contracts with several provincial and municipal governments for LED street lighting renovation. The total amount exceeds 300 million yuan.

Technology and market double stimulation

"2010 should be the first year of LED industrialization." - This is the common view of our reporters visiting a number of LED packaging and application companies.

Feng Jun, chairman of Shenzhen Eite Lighting Co., Ltd., analyzed the reporter. Taking the LED lighting industry as an example, the LED industrialization is based on two points: one is that the light flow can reach 100 lumens per watt; the other is the color rendering index (RA value). ) can reach 75.

“Based on the maturity of these two indicators, LED lighting technology can be mass-produced in many fields such as industry, office and home.” Feng Jun told reporters that since the second half of last year, the above two indicators have gradually matured. The LED industry laid the foundation for this year's outbreak.

An industry reality related to this is that more than 70% of the world's LED application products are manufactured and manufactured in China. "The maturity of upstream chip technology has created conditions for Chinese companies to enter the LED downstream application industry." Zhang Xiaofei told reporters that in the Pearl River Delta region, there are no fewer than 700 companies engaged in LED packaging and application, and quite a few of them are from plastics and digital industries. Transfer to "gold rush".

At the same time that mass production technology is mature, the LED market has also attracted another opportunity for an outbreak. Our reporter learned that since the World Climate Conference in Copenhagen last December, European countries have increased their consumption subsidies for energy-saving and environmentally friendly products to varying degrees.

“The EU subsidies are the highest, of which the Italian subsidy rate is as high as 55%. That is to say, with the sales receipts, the government directly subsidizes consumers according to 55% of the selling price.” A long-time vendor focusing on the European LED lighting market told reporters.

"An important reason for the company's sales in the first quarter is the stimulation of subsidies in the European market." Feng Jun gave the reporter an example. Yi Te, a lamp cup product sold to the European market, "was sold by thousands of units last year. Shipments exceed 100,000 units per month."

Upstream bottleneck

Similar to the structure of China's global IT industry chain in the past, in the LED global industry chain, Chinese companies are still in the middle and lower reaches of the industry.

It is reported that in the composition of the entire LED industry chain, LED epitaxial wafers and chips account for about 70% of the industry's profits, LED packaging accounts for about 10% to 20%, LED applications account for about 10% to 20%. More than 70% of China's LED industry is concentrated in the middle and lower reaches of the industry, which is the thinnest part of the profit.

"LED upstream core technology and patents are not in China." Zhou Shengming, deputy director of the National IC Design Shenzhen Industrialization Base, told reporters that the current domestic LED epitaxial materials and chips are mainly low-end and medium-sized, more than 80% of power LED chips and devices rely on import.

Since a considerable portion of Chinese LED application companies have not paid royalties, this exposes their products to infringement risks in overseas markets. (See this newspaper's April 30 report "Patent Doors Jam the Chinese LED Industry Shenzhen Enterprises to Attack"

More than that, the overseas LED upstream industry chain is increasingly prominent in the price control of the Chinese LED industry in the middle and lower reaches.

According to our reporter, with the global warming of the LED industry, upstream chip suppliers such as OSRAM, Cree and Samsung have expanded their production capacity and increased their purchases of MOCVD equipment (a kind of LED chip core manufacturing equipment).

But the reality is that the two MOCVD equipment factories in Germany, Aixtron and Veeco, have monopolized more than 90% of the global market share of MOCVD equipment.

“The MOCVD equipment has experienced serious capacity shortages. At present, the equipment ordering queue must be at least half a year.” Zhang Xiaofei believes that the tight supply and demand situation will be difficult to alleviate in the short term: “It is not ruled out that Aixtron and Veeco are deliberately causing such a shortage of supply. The purpose is to In order to monopolize the price."

In fact, the transmission effect of the upstream price monopoly on the Chinese LED market has already appeared. Our reporter learned that starting from the first quarter of this year, high-power epitaxial wafers and sapphire substrate materials all showed price increases, with an increase of more than 30%.

"As the price of upstream chips rises, our profits are also facing squeeze." Feng Jun believes that a constraint factor in the LED market at the beginning of expansion is the high price, so this round of cost increases will further increase market pressure.

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