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The continued sharp decline in chip prices has led to a decline in corporate profitability, and most chip companies are already on the verge of losing money. The cruel market situation has led some chip companies to be forced to opt out. In addition, projects that have not yet been put into production are making slow progress and do not rule out the possibility of stagnation at any time.
According to the latest report released by the High-tech LED Industry Research Institute (GLII), the output value of LED chips in China in 2012 (including Taiwan-funded and foreign-invested production bases in mainland China, the same below) was 7.2 billion yuan, which was significantly reduced by last year’s chip prices. The impact, in the case of a year-on-year increase in output of nearly 80%, the output value only achieved 20% growth.
Among them, mainland local LED chip companies achieved an output value of 5.1 billion yuan, a year-on-year increase of only 6%. A number of mainland domestic chip companies' revenues fell year-on-year.
The decline in the output value of most chip companies is mainly affected by the rapid decline in product prices.
According to GLII data, in 2012, the price of LED chips in mainland China continued to decline sharply in 2011. The average price dropped by 32% year-on-year, and some products fell by as much as 50%.
By the end of 2012, the number of MOCVD in the mainland had reached 917 units, and the utilization rate of MOCVD capacity was only about 30% last year. It is estimated that the overall capacity utilization rate this year is still difficult to exceed 60%.
The fierce market competition and ultra-low capacity utilization also forced the investment projects of LED chip companies to slow down. Even the completed fundraising projects failed to achieve reasonable returns as expected, which dragged down the listed companies. Overall profitability.
More delays in fundraising projects
On April 12, 2013, Silan Micro (SH.600460) released the “Assessment Report on the Use of Previously Raised Fundsâ€. According to the report, in 2010, the company raised funds of 575 million yuan through private placement, and its investment in the high-brightness LED chip production line expansion project implemented by the company's wholly-owned subsidiary Shilan Mingxin. As of December 31, 2012, the high-brightness LED chip production line expansion project implemented by Silan Mingxin has invested a total of 478 million yuan, and 95.51% of the committed investment has been completed.
According to the original issuance plan, the fundraising project should be completed in November 2012. However, due to the equipment delivery cycle and the extension of the commissioning cycle, the construction period of the fundraising project was extended from the original 12 months to 27 months.
“As of the end of 2012, the company has added 15 MOCVD equipments to its investment projects. Except for one MOCVD equipment, it is still under commission due to special process, and the rest are put into production, which basically meets the design capacity.†Shilanwei Director, Silan Mingxin Manager Jiang Zhongyong told the "High-tech LED" reporter that the current production capacity of Silan Mingxin is 1400kk/month, and the display chip accounts for 80%. This year, the company will continue to expand production. By the end of the year, the production capacity will reach 2000kk/month, and the proportion of lighting chips will rise to 30%-40%.
According to industry insiders, Silan Mingxin's display chips have a very high market share in the past, but their share has been declining in the past two years due to capacity and price issues. After the expansion of the investment project, how to recapture the original chip market and customers will be the main problem that the company will face, and the display market has achieved steady growth in recent years. In the future, the market has limited capacity, how to improve the white light faster. The proportion of chips will also be an important test.
The same situation also occurred in Sanan Optoelectronics (SH.600703). In 2010, Sanan Optoelectronics raised a net amount of 2.98 billion yuan through private placement, and the funds were invested in the LED Industrialization (Phase I) project of Anhui Sanan Optoelectronics Co., Ltd. It was gradually put into production in 2011.
As of December 31, 2012, among the 103 MOCVD equipments of Anhui Sanan Optoelectronics Co., Ltd., 92 units have been installed, commissioned and started to be put into operation. The project has not yet completed the construction; the equipment that has been put into production has not yet fully reached Production.
According to industry insiders, chip companies launched a large number of new projects and expanded production projects in 2010, resulting in insufficient supply of MOCVD imported equipment, which also led to the extension of some project construction cycles. Since 2011, the chip production capacity has been excessively surplus, and the gross profit has declined rapidly. The enterprises represented by Sanan have fought price wars and sold inventory at low prices. This has also caused many chip companies to deliberately slow down the construction progress of the project and wait for the market to improve.
The income is much lower than expected
In 2010, Dehao Runda (SZ.002005) invested RMB 502 million in non-public offerings to invest in the LED chip project of Wuhu Dehao Runda Optoelectronics Technology Co., Ltd., and has invested a total of 503 million yuan. In 2012, the proceeds from the fundraising project were -176,400 yuan.
Due to the slow release of production capacity and the decline in the price of LED chips, the average selling price of Silan Mingxin LED chips in 2012 decreased by 48.04% compared with the forecasted selling price of fundraising projects, resulting in a total of 116 million investment projects in 2012. Yuan's sales revenue, but the income after income tax still lost a loss of 140.885 million yuan.
Sanan Optoelectronics also said in the announcement that market competition has intensified, coupled with the global financial crisis and the impact of low domestic economic climate, the company's product prices and costs have declined, resulting in a decline in gross profit margin, which also affected the industrialization of Wuhu Optoelectronics ( The benefits of the first phase of the project.
"With the existing technology and production level, the price is already close to the bottom. Most domestic enterprises that produce white light lighting chips are in a state of loss operation." Wu Yongsheng, general manager of Jiangsu Xinguanglian LED Business Unit, said that the project is now completed and put into production. Part of it was launched in 2010-2011. Now the price of the chip has dropped by more than half compared with the current price, and the revenue will definitely be much lower than the planned revenue of the project at that time.
According to the person in charge of the chip company, in 2009 and 2010, the chip is still in short supply. As long as it is produced, there will be people who want it, and the gross profit is also considerable. Therefore, many companies have cut into the chip industry. At the peak, half of the world's MOCVD machines were sold to China.
As a result, the production capacity of epitaxial chips has expanded dramatically, and the downstream application market has not yet opened, resulting in rapid growth of chip enterprise inventory and serious business losses.
Industry integration into a trend
The progress of the fundraising project is not smooth and the benefits are undoubtedly hurting the company. However, the capital market is not limited to this. It may become a new trend through capital docking and integration between enterprises.
According to GLII statistics, in 2012, the number of LED upstream chip production enterprises was 36, and the number of enterprises with an output value of less than 100 million yuan was 23, accounting for 64%. The total output value of the top five chip companies in 2012 accounted for 55% of the total output value of the industry, an increase of 4.2 percentage points over 2011. Among them, the average output value of enterprises with an output value of more than 100 million yuan was 315 million yuan, an increase of 27% over 2011.
GLII believes that the polarization trend of LED upstream chip industry has gradually emerged, and the industry has entered the survival of the fittest in advance.
Since 2012, LED epitaxial chip companies have begun to integrate the pace of mergers and acquisitions. In August 2012, Jingyuan Optoelectronics acquired Guangguang Optoelectronics to open the curtain of chip integration.
In November 2012, Sanan Optoelectronics announced that it plans to use self-raised funds of no more than 2.352 billion Taiwan dollars (about 506 million yuan) to subscribe for about 19.9% ​​of the shares of Yanyuan Optoelectronics.
Entering 2013, the pace of chip enterprise integration is accelerating.
In April, Ganzhao Optoelectronics (SZ.300102) intends to hold Dongguan Zhoulei and Maanshan Yuanrong Optoelectronics to complete the acquisition of Jiangxi Ruineng.
According to industry insiders, the current overcapacity of LED epitaxial chips, the company's new construction projects or expansion is obviously out of date, and the cost is also high. At this time, the expansion of scale through mergers has become the best choice, saving time and effort, and low cost. And it works quickly.
"The LED lighting industry will usher in a critical period this year, especially in the field of indoor lighting." Dr. Zhang Xiaofei, CEO of Gaogong LED, believes that with the advancement of technology, the performance of LED lighting products continues to increase, prices continue to decline, lighting The overall cost is already close to traditional lighting.
The advent of the downstream application explosion period has also accelerated the pace of upstream LED chip giants and mergers and acquisitions. At this time, whoever has the scale, who can achieve lower costs, indicates the expansion of its market share.
Dr. Zhang Xiaofei said that in the next two to three years, only a few or a dozen MOCVD machine chip companies will be difficult. Unless the products are positioned in the market segment, these small enterprises will soon be eliminated by the market.
In fact, the spontaneous reorganization of enterprises is getting more and more support from the policy level. At the beginning of the year, the ministries and commissions jointly issued the “Guiding Opinions on Accelerating the Merger and Reorganization of Key Industry Enterprisesâ€, and the LED industry also includes them. 
[Source: LED Engineering's "LED Research Review" magazine May issue of reporter / Zhao Hui] Since 2012, mainland China LED application market demand is less than expected, coupled with overseas markets affected by the financial crisis in Europe and slow growth in upstream epitaxial silicon capacity expansion over The LED chip price war is getting worse.