China government concerned about overheating in LED investments
Siu Han, Taipei; Willie Teng, DIGITIMES [Thursday 16 September 2010]
digitimes.com
Current orders for MOCVD equipment, which is used in LED chip production, from China have reached 1,400-1,600 sets, according to sources from the LED sector, and officials from China's Ministry of Industry and Information Technology (MIIT) have expressed concerns about possible overheating in LED-related investments.
Epitaxy and LED chip production constitutes about 70% of profits generated by the LED supply chain, and LED chip packaging accounts for about 30%, said the sources. Since China's LED industry is primarily in the chip packaging segment, the government has been active in supporting a move upstream to more profitable areas, offering generous subsidies to companies developing epitaxy and LED chip making capabilities. Currently, the government subsidizes 8-10 million yuan (US$1.19-1.49 million) of each MOCVD machine installation, and has attracted numerous LED chip makers from home, Taiwan and the US to set up facilities in the country.
China-based players have aggressive plans to expand upstream. Sanan Optoelectronics in January 2010 invested 12 billion yuan to construct an LED production base and is expected to procure around 100 MOCVD sets. Tsinghua Tongfang has plans to invest three billion yuan over the next three years in LED optoelectronics with an emphasis on LED chip production and to become China's largest and a world top-three supplier. Silan Microelectronics will raise 600 million yuan for expanding capacity in the manufacturing of high-brightness LED chips.
Taiwan-based LED companies, however, pointed out that LED chip production is a technology- and experience-intensive process. Heavy investments in capacity ramp do not necessarily translate to quality products that meet industry standards. Furthermore, with rapid capacity expansion, prices from low-end to mid-range products could fall substantially, which is another huge challenge.
Officials from MIIT revealed that the government is indeed concerned that aggressive investments could overheat the LED industry, and is currently designing its twelfth five-year plan for LED industry development. It is scheduled to announce up to ten new standards and policies in 2010. |
