Accelerate the integration of cross-strait LED chip industry to accelerate

Consolidation process is accelerating

Since April, there have been two cases of China, LED chip industry integration case, respectively changelight acquisition of Dongguan Zhou Lei and Ma'anshan harmony photoelectric acquisition of Jiangxi Rui can science and technology.

Since last August, the two sides have undergone at least 5 LED chip industry integration case. Source: LEDinside

August 2012, the acquisition of a wide range of shares through the equity transfer of the remaining 49% stake in wide gallium, became a wholly owned holding company.

In November, three optical released "on the wholly owned subsidiary of foreign investment announcement", intends to use the raised funds not more than 2 billion 352 million new Taiwan dollars (about 505 million 680 thousand yuan) for the Taiwan Stock Exchange listed company canyuan photoelectricity in private offering of not more than 120 million shares of common stock. After the completion of the transaction, an optoelectronic canyuan photoelectric technology will hold approximately 19.9% of the shares, becoming the first major shareholder canyuan photoelectric.

In January 2013, the country star power through the "capital of XURUI Au Optronics Co's motion", will increase to 50 million yuan to a subsidiary of XURUI photoelectricity, after the completion of the capital will hold a 60.55% stake in XURUI photoelectricity, become the country star electric subsidiary.

In April, Xiamen Golden Eagle Technology and dry according to signed "agreement" intent on equity in Dongguan Lei Chau Electronics Co. Ltd., the company intends to transfer its own funds the Golden Eagle technology holds 100% stake in Dongguan Lei Chau holding Dongguan Lei chau.

The same month, the successful acquisition of Jiangxi Rui Ma'anshan harmony technology and has completed the transfer procedures.

Two cases occur in a month, indicating that the process of integrating the tide is accelerating.

Boom, upstream integration is the inevitable result

From the beginning of 2010, China's LED chip industry crazy investment directly lead to serious excess capacity of the chip, product prices continue to fall, most companies have been struggling. LED upstream chip industry overcapacity problem can not be eased in the short term, so the industry is the inevitable result of integration.

1 investment overheating, excess capacity

According to LEDinside statistics, as of the end of 2012 the number of Chinese MOCVD equipment has more than 900 units, the number of new MOCVD from 2009-2012 in China more than 800 units.

Figure 1 MOCVD China's annual number of new 2009-2012 over the years

Data source: LEDinside

In 2009, the Yangzhou municipal government introduced the first cash subsidy policy for MOCVD, a one-time purchase of new LED wafer production equipment more than 5 sets of MOCVD (including 5) of the new or expanded investment projects for financial subsidies, followed by Jiangmen, Wuhu, Hangzhou, Wuhan and other local governments have introduced similar policies. Government MOCVD subsidy policy directly led to the domestic new LED epitaxial chip project as if springing up. According to statistics, a total of 2009-2012 years, the establishment of a new LED epitaxial chip project totaling 65, but due to the harsh market environment, more than 3 of the project has been withdrawn or shelved.

Follow the trend of investment led to serious excess capacity of the chip, in 2012 China's MOCVD capacity utilization of less than 5.

2 gross profit margin declined

Figure 2 2010-2012 main business LED chip business gross margin

Data sources: corporate earnings, LEDinside finishing

Note: an optoelectronic 2012 gross margin refers to the gross margin of LED, its LED business mainly includes LED chip and LED application products.

Overcapacity led to the increasingly fierce market competition, and then some chip companies rely on government subsidies to take low-cost occupation of the market strategy, directly lead to a red chip market. As can be seen from Figure 2, 2010-2012 chip business in showed a rapid decline in gross margin. LEDinside survey found that in 2012 the domestic LED display chip prices fell the most serious, some low-end product prices fell by 5. Hangzhou Silan azure photoelectric 2012 to display chip as the main business gross profit margin of only 5.7%.

Listed companies, non-listed company is more serious. According to the survey, in 2012 the majority of domestic chip companies at the edge of loss, some of the funds have not been supported by the enterprise has fallen, China's LED chip industry has changed from the early technical competition into capital competition.

3 technology competition into capital competition

LED industry market growth is not up to expectations, leading to the emergence of a variety of bad market phenomenon. Such as the issue of triangular debt has spread to the upstream chip industry, corporate extension generally extended. The other part of the enterprise because of financial support and government subsidies, do not hesitate to take cheap Paohuo market strategy. Boil, has become a normal LED chip companies, but need a lot of money to support the boil. Industry competition has changed from technical competition to capital competition. And some do not go down the business, and now most people look forward to is to pick up.

Chip industry consolidation opportunities approaching

Although the investment problem of overcapacity led to short-term easing is unlikely, but narrowed from the chip price decline trend, some companies have run out of the upper reaches of the bottom of the capital, but after a few years ago the possibility of obtaining new overdraft financing also has been reduced to a minimum.

On the other hand, the signal of the industry warming also prompted some of the capital is relatively sufficient manufacturers have the courage to gamble again, through the acquisition of equity acquisition of low-cost horizontal mergers to obtain the scale of future competition advantage.

Some people want to get out of trouble, some people dare to offer, and the probability of occurrence of new cases greatly enhance. LEDinside expects the next year, China's LED chip industry consolidation will accelerate the scope of large-scale.