© yury asotov Analysis | January 31, 2014

Production value of mainland Chinese companies reached USD 992M

Global market research firm TrendForce's Green Energy Division LEDinside said that, in 2013 the LED chips total revenues of mainland Chinese companies (which mainly based on mainland investment, similarly hereinafter) reached 992 M USD, with a year-on-year growth of 17%, and is expected to reach 1182 M USD in 2014.
According to LEDinside analyst Allen Yu, in 2013, being influenced by the rapidly enhanced penetration of LED commercial lighting, chip capacity utilization has largely improved, however due to continuous decline in chip price, the growth rate of production value was less than that of production volume.

The Demand of Lighting-use LED Chips is Strong, with the Proportion of Chinese Domestic Production Reached 80%

In the first half of 2013, the LED commercial lighting market demand was strong. Traditional lighting manufacturers accelerated the LED lighting business, and midstream packaging manufacturers have turned to downstream integration in succession. During this period, mid power LED chips appeared shortage at one time.

The lighting-use chip-based manufacturers' capacity utilization improved rapidly. Elec-Tech's LED chip revenue in 2012 only reached 35.5M USD, which is expected to reach 56.5M USD in 2013, with a growth over 50%. EpiTop's revenue will achieve double growth in 2013. For Sanan Optoelectronics, Tongfang Optoelectronics and HuaLei Optoelectronics, capacity utilization all remained at a high level.

The display-use chip-based manufacturers have increased lighting-use chip business in succession. HC SemiTek gradually increased LED lighting-use chip business, which is expected to reach 50% by the end of 2013. Silan Azure's new production machines were mainly used to produce lighting-use chips as well.

In the case of the rise of Chinese chip companies, Taiwan manufacturers’ and international manufacturers' Chinese chip market shares were gradually shrinking. According to LEDinside, in 2013 the Chinese chip makers’ share in the Chinese LED chip markets reached 80%.

In the field of display-use chips, the market was still showing a rapid price decline in 2013, therefore, although companies have greatly increased their revenues, the profit can not follow up the trend. Display-use chips prices decline is one of reasons that chip manufacturers increased lighting-use chip business.

Market Further to be Concentrated, with Industry Integration still in Process

In 2013, China LED chip industry has been further concentrated, the market share of top five manufacturers increased from 61.9% in 2012 to 64.4%. With the continuous industry development, concentration will get ceaseless promotion, and industry reshuffle and integration are inevitable.

Allen Yu said that judging from the current situation of the chip industry, although the chip price decline slowed down, corporate profitability is still difficult to be improved, small and medium sized chip makers lacking of funds and technology will become the next batch of candidates to go into liquidation or to be acquired.

Lighting still to be the Growth Point in 2014, with 4-inch Wafer Technique gradually being Applied

Looking forwards to 2014, in the case of slowdown in growth of backlight and display areas, LED lighting is still the main area that chip manufacturers will compete for. LEDinside expects that global LED lighting market value in 2014 will reach 17.8 billion USD, the total shipment of LED lighting products will be 1.32 billion sets, with a growth of 68% over 2013.

For technology, 4-inch wafer production applied by Chinese companies is quickly increased. Besides ETi which adopts it for 100%, the adoption rate in San’an Optoelectronics, HC SemiTek and Nationstar will reach more than 30%; in addition, flip chip will also be popular, and is expected to be widely used in high-power lighting and flashlight fields with its own advantages.
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