LED Matthew effect: large and small enterprises show polarization

As TV prices fall, a large number of Chinese companies that produce LED chips for Samsung and Sharp are facing difficulties. Analysts pointed out that this oversupply problem will lead half of the companies to go bankrupt, and only larger companies with government support can continue to survive. Small companies may go bankrupt, and the decline in TV and computer sales may further affect the price of LED chips, which will cut prices by 20%. For small LED chip companies in China, integration or bankruptcy will be the choice. However, analysts pointed out that Sanan Optoelectronics, with a market value of 2. 8 billion US dollars, and Guangdong Dehao Runda will be one of the few companies that can continue to survive, because these companies have received subsidies or rewards from the Chinese government. Nomura Securities analyst Anni. Li (AnneLee)Said: this is China's strategy. They hope that big companies will survive the restructuring of the industry. For most LED chip companies in China, government support is gradually withdrawing. These support include tax breaks, free land use, and more than $1. 6 billion for the purchase of LED chip production equipment. These measures have supported the development of this industry in China in the past three years. Shenzhen Proview, which has a trademark dispute with Apple, is also affected by the decline in LED chip prices and increasingly fierce market competition. Other affected companies include Hangzhou Shilan microelectronics and Foshan Guoxing Optoelectronics. Shilan microelectronics and Guoxing optoelectronics have both fallen by more than 30 in the past year. Industry observers pointed out that many LED chip companies have a factory operating rate of only 50. From 2009 to 2010, about half of the 700 or so production lines purchased through government subsidies were currently idle. According to analysts, over the past year, overcapacity has caused hundreds of small LED manufacturers in China to close down. Bao Enzhong, deputy secretary general of Shenzhen LED Industry Association, said: China's financial policy does not give sufficient support to small and medium-sized enterprises. We will see more businesses close down. Large enterprises received high subsidies. Due to government support, the market share of Chinese manufacturers in packaged LED components reached in 2011, up from in 2010. Sanan Optoelectronics said that in 2011, the company's net profit doubled year-on-year to 9. 5%. 3. 6 billion yuan, the company received about 1. 9 billion yuan of government subsidies in 2011. Dehao Runda's net profit in 2011 also increased significantly to 3. 5%. 92. 3 billion yuan. Analysts pointed out that these large LED enterprises hold nearly 2 billion yuan in cash in total, so they can continue to expand their production capacity while the market growth slows down, so as to gain a larger share in government-supported LED projects. UBS said in a report that Dehao Runda has added 50 metal organic chemical vapor deposition (MOVCD)Equipment, and this year will add 100. Sanan Optoelectronics also plans to increase the number of such equipment. China's Ministry of Science and Technology said earlier that it plans to expand the scale of China's LED industry to 500 billion yuan by 2015. Analysts pointed out that in 2011, the scale of China's industry was 31 billion yuan, and industry integration has become a top priority. The collapse of weaker companies will be conducive to the development of large-scale LED companies with government support, so that these companies can gain certain advantages in international competition. Other major LED companies in Asia include Taiwan's wafer optoelectronics and South Korea's LGInnotek. The trend next year is still difficult to be optimistic. The cyclical decline in market demand for LED chips and the obvious overcapacity have affected the prices of LED chips and the profit margins of related enterprises. Although the market demand for LED chips increased seasonally earlier this year, the market fundamentals are still weak. According to UBS's report, the revenue growth rate of LED companies in Taiwan fell to 3 month on month in April, lower than the 12. 5% in March. These companies have a market share of about 19. 5% in the packaged LED chip market. HSBC analyst Jerry Cai (JerryTsai) Said: With the improvement of backlight technology, the number of LEDs used in televisions and displays will decrease, and we will see the real demand problem. If the price of products falls by another 20 this year, the industry will face greater difficulties next year.