LED investment strategy: Rational Thinking on investment opportunities

LED lighting market may be raging like a storm, Chinese manufacturing a new feast. Rational PE should avoid irrational thinking of investing in solar energy industry in this area, starting from the LED application end manufacturers, take a bottom-up investment path.

Sequoia Capital Investment changelight has been listed, the famous PE company through investment LED industry over the past two years has created a new miracle - is calculated according to the current market value of the investment value of more than 20 times. LED, this emerging lighting technology not only illuminates our lives, but also began to illuminate the PE investment community. Just a few years, the various sectors of China's LED industry is full of industry and non industry investors, only in the LED lighting applications, nearly two years there have been nearly more than 4 thousand enterprises. "Squandering charming eyes, can not Asakusa horseshoe" to describe the industry situation is quite appropriate, a lively participant in the market, one is the unbalanced development of the industrial chain. What are the investment opportunities in this sparkling industry? A few years ago, the photovoltaic industry, wind energy investment retreat, can give this wave of LED market participants leave what enlightenment?

Industry revenue model: upstream downstream decision

Semiconductor lighting has been recognized as one of the most promising technology in twenty-first Century, opened the third lighting revolution of the human society, the enormous economic benefits. In the past ten years, the global LED market size of the average annual growth rate of more than 20%; high brightness LED market to grow more rapidly, with an average annual growth rate of 1995-2005 annual rate of 46%, the market size in 2008 reached $5 billion 100 million, accounting for the proportion of LED market increased from 40% in 2001 to 80% in 2008. The conservative estimate of the market in 2012 the scale is expected to reach $11 billion 400 million.

In this article is full of highlights and the value of the industry chain, the upstream enterprises took more than 70% of the profits, this is a capital intensive, high technology content, high profit return link. While the upper reaches of the core technology of concentrated in Japan Nichia (Nichia) and Corey (Cree), OSRAM (Osram) as the hands of the few overseas giants, belongs to the typical oligopoly Management (schedule). In the field of epitaxial chips and chips, the United States and Japanese companies are also in a monopoly advantage.

The entire LED industry scale, depending on the direction of technology development, the upstream firm's production capacity. At present there are two main factors restricting the development of the LED industry: technology, such as the efficiency of light conversion rate is low, the industry standard has not issued the lumen speed and light; two is relative to the application terminal market is hot, have the core technology of the production capacity of manufacturers. The semiconductor industry "Moore's law" in the LED industry has not yet appeared, in 2010, in the upper reaches of the mainstream manufacturers yield spread, chip prices did not fall but rise, downstream manufacturers are even downtime await urgently necessary condition.

Currently, chip development and grain, the middle reaches of the upper reaches of the package and downstream applications, has had Chinese enterprises involved, but the domestic chip manufacturers in the low-end, low power field, including low power chip field, Sanan optoelectronics changelight enterprises etc.. Limited to technology, production capacity and other reasons, the current domestic manufacturers accounted for less than 10% of the domestic market supply, has not yet entered the ranks of mainstream suppliers.

China LED most of the manufacturers, only in the packaging application end of industry chain, for the remaining less than 40% of the profits, this reality is similar to the solar polysilicon industry a few years ago. At present, Chinese has more than 4000 enterprises in the downstream of LED, they are mainly concentrated in manufacturing, materials processing and design industry, is characterized by the small scale of investment, the industry set up fast and the unit output value is not high, which belongs to the traditional processing industry, but its biggest advantage is close to the market, sensitive reaction, if to seize the market boom, there are may grow out of large enterprises. In particular, the rapid development of LED application market in recent years, LED backlight, display, light source market are growing exponentially. Market demand the development of production, to ensure the LED lighting manufacturers this year will harvest a lot of orders for domestic production quality, FSL, NVC in the rapid transition to this, there are large-scale enterprises in other industries in the market.

The development of Taiwan LED industry, can provide reference for mainland enterprises. In the 90s of last century, the development of the LED industry in Taiwan, the company was in Pyramid, a large number of downstream enterprises, the upstream enterprises are few. However, with the expansion of the market scale, the scale of the enterprises in the middle and lower reaches of the upstream began to cut, the League of nations, EPISTAR photoelectric master high brightness high power chip technology international supplier packaging field appeared, this kind of guanlei Lite scale enterprises, in the field of downstream, and billion light focused on the application of automobile instrument LED enterprises, and gradually formed a complete industrial chain.

Mainland LED industry growth path, should also follow the bottom-up. Lenovo early trade and manufacture mode, it may be worth of domestic LED enterprises, to seize market opportunities, enhance their own strength, the accumulation of basic in technology, market, upstream extension, vertical industry chain can be a chance to wait.

PE investment opportunities: technology and market

Facing fiery market opportunities for LED industry, access to many PE. In January 2010, open investment fund, IDG and other private capital to invest 150 million yuan in Wuhan Huacan; application of KingSun lighting field a total of 3 years.