LED market behind the madness: still technology and investment worries

Yesterday, LED chip manufacturer Sanan Optoelectronics (600703.SH) announced that a wholly owned subsidiary of Anhui Sanan optoelectronics Co., Ltd. (hereinafter referred to as "Anhui Sanan") has received the Wuhu economic and Technological Development Zone Finance Bureau 125 million yuan of financial subsidies, the subsidies will be used mainly for the LED project.

The previous day, Sanan optoelectronics 2010 second provisional shareholders' meeting also approved the issuance program, drawn to the issuance of non-public offering of shares 20 million to 53 million shares, issue price of not less than 55.77 yuan / share, plans to raise 2 billion 980 million yuan of funds for Anhui three LED industrialization projects.

This means that the total investment of 12 billion yuan of Wuhu Sanan optoelectronics LED production base has been launched, this news once again boost investor LED industry investment enthusiasm. Yesterday, an optoelectronic closing 46.37 yuan, up 8.57%.

But this increase in Sanan optoelectronics 14 months, just pediatrics. Because, yesterday's closing price of 46.37 yuan compared to last January's low of $5.86, an increase of nearly 7 times.

Technical patent worries

In fact, this is only the tip of the domestic LED industry crazy tip.

"Now the world is advocating energy-saving emission reduction and low-carbon, more energy-efficient LED industry just to comply with this trend, the future of all related products are likely to use LED. ISuppli China semiconductor industry analyst Gu Wenjun pointed out that the LED industry in addition to a good market prospects, the domestic local governments have introduced a series of policies to support the LED industry.

In October last year, the national development and Reform Commission and other 6 departments jointly issued the "opinions" the development of semiconductor lighting industry, by 2015, the output value of the semiconductor lighting industry with an average annual growth rate of around 30%; product market share increased year by year, functional lighting can reach about 20%, the liquid crystal backlight reaches more than 50%, landscape and other decorative products market share more than 70% target etc..

Based on the huge market prospects, have invested in LED industry. Relevant data show that as of August last year, the country has 31 cities to enter the LED chip industry, to join the LED chip industry enterprises up to more than and 30. But the worry is that the LED chip technology mainly lies in CREE (CREE), PHILPS, OSRAM, and a few enterprises Nichia hands.

In CREE, for example, from the chip, substrate materials, epitaxial chip, and even packaging are doing, covering more than half of the industrial chain, with 825 U.S. patents and more than 1800 international patents. Therefore, many domestic enterprises have to face the situation of LED patent applications exhausted, and to bypass one after another patent trap.

Perhaps de Ho Runda (002005.SZ) and South Korea Epivalley cooperation, more clearly reflects the embarrassing situation.

In February this year, Max Alpha, Epivalley and Elec-Tech signed the agreement, the three parties jointly invested $15 million in China set up a joint venture company LED chip. As a partner, Epivalley not only to undertake a unique LED patent license, but also on the plant settings, equipment procurement, personnel recruitment and other aspects of support. In addition, built in the new factory, Epivalley must also provide support for product development, improvement of production efficiency, stable quality, fault analysis and so on, to ensure that the new company LED production operations to achieve the same level of Epivalley and South Korean factories in terms of quality, production efficiency etc..

The content of the cooperation agreement was written so detailed, mainly because de Ho Runda technically completely dependent on Epivalley. "Although Elec-Tech said in the announcement, Epivalley LED is the world's leading chip manufacturing enterprises, grasp the core technology of LED chip manufacturing, has more than 200 patents, but most of these patents is patent application registered in South korea. China Securities Research Report also shows that Epivalley registered in the United States and other overseas patents only 11.

In the joint venture agreement also specifically pointed out that the new company to produce products in China, in addition to the region outside Japan, the distribution of products. This shows that there is a patent risk in japan. Both the LED chip or an optoelectronic Elec-Tech project will face LED chip products can successfully put into operation and problem of shortage of professionals.

Crazy investment impulse

In November last year, CREE investment in Huizhou, its chip products will be available until this year in July. By the end of February, the launch of Foshan Nanhai XURUI photoelectricity LED epitaxial chip project, but also to be put into operation in October this year.

The executives said cautiously in the 2009 annual report, Wuhu, Yangzhou will be part of the project production capacity into the production stage this year. Sanan optoelectronics also said in the 2009 annual report, Tianjin Sanan optoelectronics and strive to put into operation in succession in April. "There should be no problem. "Sanan optoelectronics Secretary Boozer declined to" First Financial Daily "telephone interview.

Although the risk is very large, but did not affect the LED industry crazy forward. Because the LED chip market gap is too large!

This year, the global demand for LED chips will reach 200 billion, an increase of 100% compared to 2009, the huge demand for at least 3000 MOCVD (LED chip production equipment) operating at full power. But high LED data show that by the end of 2009 the world has been put into operation only 1200 MOCVD devices, is expected to add 350 units this year, MOCVD, the gap is still huge. Among them, China will add 130 units, the total amount of China's MOCVD equipment reached 280 units.

Investor enthusiasm is also crazy.

In February 1st, the total investment of 6 billion yuan in Wuhu LED industry base was officially launched.