Chinese LED Chip is Taking 54% of the World Production Capacity in 2017

LED chip industry is experiencing a new peak of capacity expansion in 2017. Some analysed LED market trends then pointed out that Chinese package suppliers continuously expand capacity since 2016 raises the demand of LED chip.

According to the statistics, the MOCVDs which are used to produce LED chip will be equipped to 401(based on K465i) in 2017. This would be the peak of chip production capacity since 2011.

“LED chip makers like San’an Optoelectronics, HC SemiTek and Aucksun have obvious capacity expansion plan since 2017.” Said Roger Chu. “After these capacity expansion, China’s MOCVD capacity will reach to 54% of the world.”

Chu added that the capacity expansion is mainly to meet the growing demand from LED package suppliers in the downstream. Besides, Guangdong Province and Pearl River Delta once were gathering places for LED companies, but with the rising cost of labor and land, package suppliers continuously move to second-tier cities. Governments are giving preferential policy to attract these out-moving manufacturers to come back. This remakes the capacity expansion spurt of LED industry as 2010.

Which need to pay attention to is a new wave of subsidy of the local government has been given not only to the upstream of the supply chain, but more to LED package industry and its related business. China wants to generate demand of the upstream by opening market channels of the downstream.

Differentiating from old mode of capacity expansion of SMEs continuously build factories, this tide is mainly the expansion of first-tier LED chip makers and package suppliers.

We believes that with the supporting of governments’ subsidy, continued capacity expansion is squeezing profit margins of big global companies. Chinese LED companies will become larger and larger as the others have scaled down or increase the share of outsourcing.