LED chip prices half a year who is pushing up the chip price?

This year's LED industry can be described as hot. One of the hottest is the upstream equipment, raw material suppliers, and mid-stream chip makers! Diyuan Optoelectronics Co., Ltd., located in Wuhan, is China's largest high-power chip manufacturer. When the reporter visits, they see that the factory is working overtime. The production of chips, and venture capital institutions are also endlessly in order to participate in shares.

Chip is scarcely missing buyers

In recent months, Senior Engineer Zhang Xiaofei has been busy researching in various places. He knows how hot the LED industry is in China. Zhang Xiaofei said, "From the end of the first quarter of 2010, global LED chips and epitaxial wafers began to increase prices. The current chip gains have been close to 50%, and prices are expected to remain high in the third quarter."

This rise in chip prices is somewhat unconventional. By convention, the price of LED chips has fallen more than once, and the average annual decline has reached 20%; while the second quarter is usually the traditional off-season, the possibility of price increases should have been even smaller. In this unexpectedly rapid price increase, China's major chip giants ushered in a period of high profit growth. Taking Silan Micro as an example, the gross margin of its LED chips was 40% in the fourth quarter of 2009, and its gross profit has been increased to 50% by the second quarter of 2010.

Although the prices of LED chips and epitaxial wafers are rising, the market is still in short supply.

China's largest manufacturer of high-power LED chips Diyuan Optoelectronics has chosen a small price increase. Wu Zhihong, chairman of Diyuan Optoelectronics, said witly, “Although we can use the strong market demand to increase prices significantly, but considering the longer-term future cooperation, we have chosen a small price increase, selected downstream partners.” According to Diyuan photoelectric Dong Zhijiang, general manager of the company, said that 80% of domestic high-power chips are imported, and the other 20% are mainly from Diyuan.

According to report, red and yellow LED chip manufacturers are more comfortable than blue-green LED chip makers. Zhang Xiaofei said, "A few years ago, the red and yellow light LED chip market is far less than the blue-green LED, white LED chip market is booming, and is in a state of continuous shrinkage. Many companies fled the red and yellow LED chip market, into blue and green The light LED chip market did not expect that in 2010, the market demand for red and yellow LED chips will increase, and a few companies that are still sticking to this market will benefit greatly."

Stereo Optical is a company that sticks to this field and has benefited greatly from this round of price increases. A person in charge of the company reluctantly told reporters, “Our production of red and yellow chips is indeed in short supply. At present, production capacity can only meet the needs of the top 70 customers, about 50%. If we consider these 70 customers, the production capacity in 2011 will grow by 80 now. %, the future supply gap will be even bigger."

Who is pushing up chip prices?

Who drives up global chip prices? In the face of huge supply gaps and rising prices, why are LED chips and epitaxial wafer manufacturers not rapidly expanding their production? According to the reporter's understanding, LED chips and epitaxial wafer producers are more than satisfied. Insufficient resources, because the upstream equipment and raw materials are monopolized by giants overseas, and fell into a serious shortage, which tightly hampers the pace of expansion of Chinese companies.

First, MOCVD, which is the main equipment for producing LED chips, is seriously out of stock. Xi'an Zhongwei Optoelectronics Co., Ltd. stated that two sets of MOCVD ordered at the end of 2009 had waited six months to arrive. At present, the global MOCVD equipment market is monopolized by AixtrON of Germany and Veeco of the United States. Together, the two companies will receive orders of 600 to 700 units this year. The market research organization Shuiqing Muhua Research Center pointed out in the report that the two companies are expected to ship 662 MOCVD devices this year, which is the sum of the shipments in the past three years. It is expected that the shipment volume in 2011 will remain at a record high. Given that capacity is far from meeting demand, MOCVD equipment orders have been scheduled for 2012.

What followed the order was profit growth. Aixtron's revenue for the second quarter reached 198 million euros, an increase of 24% year-on-year, with orders received amounting to 175 million euros (up 4% year-on-year); Veeco's revenue for the second quarter reached 253 million US dollars, an increase of 55% year-on-year. Veeco CEO John R. Peeler said that in the second quarter alone, it received orders for 347 million U.S. dollars, setting a record high. Among them, LED-related orders for solar energy amounted to 260 million U.S. dollars. It is estimated that the revenue for 2010 will exceed 1 billion U.S. dollars.

Second, sapphire substrate, organic metal (MO) gas and other materials, which are important raw materials, have declined in price. Since the end of last year, the two-inch sapphire substrate has risen from a minimum of $8/piece to about $30/piece. The current rally has yet to show signs of stagnation. Recently, Rubico, the global leader in sapphire single crystal leading plants in Illinois, decided to continue raising the price of sapphire substrates in the fourth quarter. Rubicon's price hikes can be described as fearless, because manufacturers such as China and South Korea's large-scale expansion of MOCVD equipment has resulted in a sapphire substrate supply gap of up to 10% to 30%. Rubicon's downstream customers can only passively accept price increases. Jiang Zhongyong, the general manager of Hangzhou Shi Lanming, worriedly stated that there may still be a shortage of sapphire substrates in the next two years.

Zhang Xiaofei said, “MOCVD equipment, sapphire substrates, etc. account for a large proportion of the total cost. Among them, sapphire substrates account for about 12% of the total cost. Therefore, these important upstream equipment shortages and rising raw material prices have directly pushed up LED chips and epitaxy. The cost of the film.” Zhang Xiaofei said, “Even if MOCVD and sapphire substrates arrive, it does not mean that they can reach production immediately. Installation, commissioning, and trial production will take at least 3 months to 6 months. Only a handful of companies It can be produced within a month."

This “rising up” situation in the upper reaches of the country is exposing the shortcomings of China’s LED industry. Ren Yuanhui, researcher of the China Lighting Association's Indoor Lighting Professional Committee pointed out that China has not yet formed a complete LED industry chain. Developed countries hold the right to speak on LED chip technology, and 80% of domestic high-end chips rely on imports. In addition, the lack of uniform production standards and test methods for LED lamps also greatly limits the development of China's LED lighting industry.