As of now, over a dozen chip companies are vying for space in the market, with large factories releasing their production capabilities while smaller ones find themselves struggling to secure orders. Liu Wenhui, director of Ganzhao Optoelectronics, made this observation during Huatai Securities' 2017 interim strategy meeting.
This year, several major players are ramping up their production efforts. In China's LED industry, over the last few years, there have been significant improvements in every aspect—high-end equipment, chip manufacturing, packaging, technology, products, and scale. These advancements have allowed Chinese firms to rival international giants in terms of competitiveness.
According to plans, Sanan’s monthly production capacity is set to rise from 1.8 million pieces in 2017 to 2.5 million pieces, while Huacan aims to reach 1.5 million pieces per month. Within the next two years, the industry landscape might stabilize, leaving little room for laggards. Dominant manufacturers will likely consolidate production capacity and market share further.
By the end of 2017, the top three mainland chip manufacturers will account for nearly 60% of total capacity. For these companies, expanding production or not becomes a matter of survival. Without scaling up, they risk being marginalized in the industry.
The oligarchy of LED chip manufacturers may be reaching its final stages within the next two years. Afterward, the industry structure is expected to stabilize, making it difficult for underperforming competitors to catch up.
Over the last decade, the global LED market has grown at an annual rate exceeding 20%. With ongoing technological advancements and cost reductions, this rapid growth is set to continue, particularly in the lighting sector.
Data from the Gaogong Research Institute shows that the global LED chip production value reached 44.8 billion yuan in 2016, marking a 7.88% increase. It’s predicted that China’s LED core output value will reach 28.8 billion yuan by 2020, with a growth rate of around 12%.
Since the start of this year, Huacan Optoelectronics, Ganzhao Optoelectronics, and Zhaochi have made significant moves, planning to invest 16 billion yuan collectively to expand their chip capacities.
Ganzhao Optoelectronics plans a 5 billion yuan investment to expand LED epitaxial chips. Today (July 17), Ganzhao announced its intention to further expand LED epitaxial chip production in the new district of Nanchang City, Jiangxi Province. The initial phase involves a 2.5 billion yuan investment to create a blue-green chip production base with a monthly output of 600,000 pieces (2 inches). Based on the need for expanding its blue-green business, Ganzhao plans to establish a wholly-owned subsidiary in Nanchang with 300 million yuan of self-owned capital to support this expansion. The primary applications for these products will be in lighting, displays, and backlighting.
Huacan Optoelectronics’ 6 billion yuan Yiwu plant has been completed and went operational on July 15. President Liu Wei stated that the Yiwu plant's commissioning signifies the successful completion of the first phase of Huacan’s capacity expansion. By year-end, the company’s 4-inch LED chip capacity is expected to reach 425,000 pieces per month, alleviating current shortages and increasing product market share.
The Yiwu plant covers over 280 acres, with a total planned investment of 6 billion yuan. Upon full operation, it will boost 4-inch LED epitaxial chip production by 250,000 pieces per month. The first phase of the project, with an investment of 3 billion yuan covering 140 acres, is expected to produce 150,000 LED chips and 200,000 sapphire substrates monthly by year-end.
Domestic manufacturers like Sanan and Huacan are leading the charge in expansion, with Huacan increasing its capacity from 200,000 pieces/month in 2016 to 425,000 pieces/month in 2017, doubling its capacity. This expansion has significantly boosted sales revenue in 2017.
Huacan Optoelectronics now operates four production bases in Wuhan, Suzhou, Yuxi, and Yiwu. Additionally, the acquisition of upstream sapphire substrate enterprise Lanjing Technology has integrated epitaxial chip and sapphire substrate production capabilities. Yiwu factory will become the company’s largest production base, driving downstream enterprises to invest in Yiwu. Mulinsen, China’s largest packaging company, is investing 5.5 billion yuan in Yiwu.
Zhaochi shares announced a 5 billion yuan investment to enter the LED upstream chip sector. In June, Zhaochi announced plans to set up a project company in Nanchang High-tech Industrial Development Zone, focusing on producing, researching, and selling LED epitaxial wafers and chips. The first phase of the project plans to jointly invest 5 billion yuan (including construction land, plant construction, and renovation costs), with equipment investment not less than 3 billion yuan. The Nanchang High-tech Industrial Development Zone Management Committee will apply for the Nanchang Key Industry Development Fund, with an investment amount of 1.5 billion yuan, not exceeding 50% of the project company’s registered capital.
After the project company begins operations, it is expected to contribute an additional 60-70 billion yuan in production value to the company.
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