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Farewell, disorder competition government subsidies or will turn to assist Chinese enterprises to global competition

- Sep 10, 2016 -

Difference in sensor industry high technology threshold, the LED industry technical threshold is low, so more and more companies to enter this industry, eventually leading to and the photovoltaic industry - serious excess capacity, big price war between enterprises. After a round of shuffling, many businesses closed.


Recently, the "daily economic news" reporter learned that the LED chip from 2012 to 2015, more than three years, the price dropped to one over ten.


As the second largest LED chip production in the domestic enterprises, HuaCan photoelectric (300323, SZ), a sharp fall in the last round of price has experienced the pain. However, the chip prices remain relatively stable state, the competition between the enterprises, tend to be stable.


It is worth mentioning that LED enterprises subsidies of the government level, has LED many companies to enter this industry is not to the purpose of development of LED, but for subsidies, which is one of the cause of industry overcapacity.

HuaCan Liu Rong photoelectric President said, as the industry competition tends to be stable, will eventually form a few companies alone big, government level of subsidy will also tightening, will be for those who are able to participate in the international competition of the enterprise subsidies, while those who cannot get subsidies business, will gradually withdraw from the stage in the next round competition.


Industry competition tends to be stable


As a domestic leading LED chip suppliers, HuaCan photoelectric has become the second largest LED epitaxial wafer domestic production enterprises, is one of the main LED epitaxial wafer manufacturers in the world.


LED industry since 2000, has experienced rapid development, HuaCan photoelectric photoelectric (600703, SH), three Ann LED enterprises are also on the development of the industry such as the east wind, from the original small, developed into today's leds listed companies.


Due to the LED industry technical threshold is low, also make many money into this business, eventually leading to and the photovoltaic industry, formed the situation of excess production capacity.


In order to break through, to start a price war between businesses, disorder competition, the competition reached its peak in 2015. High yield research institute (GGII) data of LED display, there are more than 20% in 2015, about 5000 LED companies exit the market.

Among them, as the LED chip industry, competition also experienced a price war, industry experienced rounds of shuffling. According to reporter understanding, at present the domestic LED chip company in the normal operation of about 15, the 15 from 50 in 2010, after the price war shuffle the rest of the enterprise.


Liu Rong said, LED chip prices fell by 10 times over the past three years, although there is a decrease in the cost, but compared with the price decline is not enough, so the LED business is difficult, "the original 50% to 60% gross margin, almost no profit to the first quarter of this year, the per piece price is in 200 yuan, now there are some profit space."


In Liu Rong point of view, the LED industry competition will continue, but this competition will tend to be stable, because companies price war between has little space. Three Ann in the chip, photoelectric, HuaCan photoelectric and other companies are expanding production, but the volume is not large, have already could lead to overcapacity, but the price of a few years ago is unlikely to lose order.

Industry oligarchs will form


LED industry researcher tyok to the "daily economic news" reporter said, "the LED industry competition at present, already from the previous competition, orderly competition and development to the present price space has dropped to a minimum. Despite price competition could be next, but will not overcharge. Enterprises with capital out price less and less now."


In the global macro economic downturn and the LED backlight and screen under the condition of weak demand, three Ann photoelectric, HuaCan photoelectric, dried according to the photoelectric, Macao ocean shun cheong companies such as chip production capacity expansion, contrarian further exacerbated the LED chip market competition, chip manufacturers price war intensified, industry consolidation will continue.


Combined with the slowdown in the LED lighting demand growth, increasing competition in the industry, as the chip part of the LED lighting industry chain upstream pressure surge.

Research according to the high production high LED research institute (GGII) statistics, in 2015 China's LED industry is expected to total 396.7 billion yuan, up 15.1% from a year earlier, the LED chip production value of 13 billion yuan, only rose 8% year on year, but the LED chip production has jumped 60% year-on-year.


At present domestic LED chip companies and 15, but this is not the final market pattern, the reshuffle will continue to.


Liu Rong to "daily economic news" reporter said, "although said it's not a price cut space already, but this kind of price competition will still continue, the 15 companies after the next round of shuffling, could eventually left five or so, more focused."


Liu Rong further analysis said that "the current row in the first three Ann photoelectric, accounting for more than 30 percentage, the second, we accounted for teens. Three years later will form the duopoly, estimated market share at around 70%, our share may be at about 30%, the first of proportion or at around 40%."

Government subsidies or to be tightened


As the emerging industry, the LED industry high-speed development, government subsidies play an important role in it.


Public information, our country began in 2009 to the LED lighting industry subsidies, subsidies range is very large. In 2013, LED industry ushered in the spring breeze policies, from the state council to the local governments have issued policy promoted the LED industry. Now, government subsidies still has a lot of half the company's performance.


Statistics show that as the LED industry three Ann photoelectric "subsidy", from 2010 to 2010 the subsidy amount exceeds 3 billion yuan. In 2010, three Ann photoelectric has received government subsidies of 700 million yuan, accounting for 60% of the net profit than in 2010; In 2011, 86%; 2012 60%, 2013 45.7%, 2014, the proportion is still around 50%, 28% in 2015.


In addition, bdo, (002005, SZ) is also one of the beneficiaries of government subsidies. From 2009 to 2009 in the first half of the bdo embellish of recorded into the profits and losses of the current government subsidies amount is 8.1003 million yuan respectively, 8.1003 million yuan, 310.2644 million yuan, 224.2239 million yuan, 232.0039 million yuan and 64.4308 million yuan.

Liu Rong expressed, "the government subsidies from two point of view, from the national level, early in the development of the industry, government subsidies to promote better development of the industry. But from the enterprise the individual is painful, since subsidies so much money out, participate in the competition the main body of a lot, bearing is not so much the main body, market competition out will be very cruel. And through the rest of the enterprise competition, the cost and management advantages will be highlighted."


In the industry point of view, after a round of shuffling, government subsidy object change, no longer as before all subsidies, subsidies for those to be able to become the industry's top companies, some small and medium enterprises to get subsidies is unlikely. Subsidies and, the government has began to decline, and surface has been narrowed.


Liu Rong analysis said, "from the point of competition main body, the government also see clear at this stage, the rest of the enterprise will participate in international competition, the government's subsidies will supply companies, this is health subsidies. LED industry competition will still continue, but the situation will be less bitter, will tend to be relatively stable, can reduce the price of the enterprise less. So the price will be stable, LED enterprise performance will be better."


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