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M&A holds China's ailing LED industry together

Posted: 22 May 2013 ?? ?Print Version ?Bookmark and Share

Keywords:LED chip? MOCVDs? epitaxial wafer? oversupply?

Mergers and Acquisitions (M&A) are helping drive Taiwan's and China's LED chip sector. TrendForce's research division LEDinside reported that from August 2012, there has been five M&A in Taiwan and China. Examples of these are Epistar's acquisition of 49 per cent of Huga's equity and Sanan Opto's buying 120 million of FOREPI's common stock.

Since 2010, Chinese LED chip makers have aggressively in chips and caused severe oversupply in the market. Chip price has continued to decline and most industries have been struggling to survive in the industry. Even with the economic recovery, upstream LED chip manufacturers still failed to extricate themselves from the oversupply situation. LEDinside believes that the only solution to this problem is through mergers and acquisitions.

MOCVD's utilization rate drops
In 2009, the Yangzhou government first announced a subsidy policy for MOCVDs. Subsidies are issued to expansion projects with a one-time purchase five or more brand new MOCVDs for LED epi-wafer production. The governments of Jiangmen, Wuhu, Hangzhou, and Wuhan have also successively announced similar policies.

According to LEDinside's statistics, as of the end of 2012, there were over 900 MOCVDs in China, but the utilization rate was less than 50 per cent. The subsidy for MOCVDs has caused a sudden increase of new LED epitaxial wafer projects in China. According to statistics, 65 LED epitaxial wafer projects were established during 2009-2012, but due to the market downturn, over 30 per cent of the projects have been held up or even terminated.

MOCVD installation

Figure 1: New MOCVD installation volume in China from 2009-2012 (Unit: Sets)
Source: LEDinside

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