[Source: Gaogong LED's "LED Research Review" magazine April issue reporter / Liu Qiaomei]
From profiteering to meager profits to losses, LED upstream companies are experiencing the pains necessary for industrial development. When the price of chips stops falling, it becomes the most concerned issue for enterprises at the moment.
Nowadays, the LED epitaxial chip market is like the Spring and Autumn Period and the Warring States Period, where the high-tech LED Industry Research Institute (GLII) released a report. In 2012, there were 74 epitaxial chip companies in China, including Taiwanese and foreign investment. The output value of LED chips in the mainland's production base is about 7.2 billion yuan.
In 2006, Diyuan Optoelectronics was born in a market environment where domestic high-power chips still depend on imports. In the past eight years, LED epitaxial chips have experienced periods of insufficiency, frenzied investment, overcapacity, and price decline. In the past eight years, Diyuan Optoelectronics has been pragmatic and low-key, focused and focused, not rushing forward, sticking to the lighting market, sailing against the water, and not breaking the territory. In the pattern of the epitaxial chip warring the country, it won a place.
In the midst of a crisis of crisis, if companies want to survive, they must strengthen their own R&D capabilities. This is the foundation of life, and a keen insight into the market is good at marketing.
Dong Zhijiang, general manager of Wuhan Diyuan Optoelectronics Technology Co., Ltd. bluntly said: "The leader in technology research and development and the master of cost control will be the final winner."
Not blindly expanding
High-tech LED: Since the first high-power chip production line was put into production in 2007, what has changed in the production capacity and products of Diyuan Optoelectronics? Is there a plan to expand production this year?
Dong Zhijiang: At present, Diyuan Optoelectronics Chip has an annual production capacity of 10,000 kk. In the first quarter of this year, the market gradually recovered, and downstream demand continued to expand. However, chip prices continued to be sluggish and market competition remained very cruel.
This year, we will focus on the promotion of medium-power white light lighting chips, and achieve business goals by highlighting distinctive product features and rich product lines.
High-tech LED: The labels that Diyuan Optoelectronics had previously printed were “focus on high-power chipsâ€. Now it is playing the slogan of “medium power chipâ€. Is this a transformation of Diyuan Optoelectronics? Why do you want to make such a change?
Dong Zhijiang: This is not a transformation, but a richness and extension of our product line. Whether it is high power or medium power, our focus is always on LED lighting chips.
High-tech LED: What is the monthly capacity of the power chip in Diyuan Optoelectronics? What is the ratio of total capacity?
Dong Zhijiang: At present, Diyuan Optoelectronics' medium-power chips account for about 50% of the total capacity.
High-tech LED: How can the production and sales of Diyuan Optoelectronics reach a balance in the context of overcapacity in the industry?
Dong Zhijiang: Since the establishment of the company, there has never been a blind expansion, and it has always been full of production.
High-tech LED: From the financial reports of the listed companies that have been announced so far, the fierce competition and the sharp drop in chip prices are the main reasons for the decline in both revenue and net profit. What is the revenue status of Diyuan Optoelectronics in 2012, what do you think about this year's market performance?
Dong Zhijiang: The status quo of the industry you mentioned is indeed a grim situation faced by the entire LED industry. This is the result of blind subsidies from some local governments to attract investment and blind expansion of enterprises since 2011.
In 2011, we analyzed and predicted this consequence. Now, unfortunately, it seems that this is the fate of China's manufacturing industry. Everyone wants to enter the industry that looks like a beautiful scenery. The local government is especially happy.
Diyuan Optoelectronics' revenue in 2012 is close to 200 million yuan. The industry situation this year is still not optimistic, but it should be better than last year.
Who is the winner?
High-tech LED: Obviously, the increase in profit will not be an unavoidable phenomenon for epitaxial chip companies in the short term. How to solve this bottleneck?
Dong Zhijiang: The increase indicates that the scale of this industry is still expanding, which is a positive phenomenon.
Any fully competitive industry is from immature to mature, entering more and more companies, and the profit margin will be high to low. We can't expect the profit margin of LED lighting chips to remain at a high level as in previous years.
In the case of low market prices, we are more likely to reduce costs and increase profit margins through “training internal strengthâ€.
High-tech LED: Last year, the average price of white LED low-power chips fell by 31%, the average price of high-power chips fell by 33%, and the average price of medium-power chips dropped the most, with a drop of 40%. How do you view the price trend of high-power chips and medium-power chips in 2013? When will the supply and demand of the chip reach a balance?
Dong Zhijiang: Last year, the price of chips dropped sharply. On the one hand, the chip production capacity was released quickly, causing an imbalance between supply and demand. On the other hand, domestically produced high-power chip technology increased and chip imports decreased.
According to a report released by the High-tech LED Industry Research Institute (GLII), the domestic MOCVD capacity utilization rate was only about 30% last year, and the operating rate was only about 50%. Now that the LED lighting market is about to start, a large amount of production capacity and market demand have not been released. The market structure will be polarized, and the large-scale enterprises will continue to seize market share, and the new companies should cooperate to tide over the difficulties.
High-tech LED: Diyuan Optoelectronics has entered its eighth year. In the past eight years, LED chips have undergone a lot of changes, from insatiable demand to crazy investment, from overcapacity to falling prices. From the need to worry about sales problems to the irrational competition of prices, in different market environments, how does Diyuan Optoelectronics respond to such industry changes?
Dong Zhijiang: From the beginning of the establishment of Diyuan Optoelectronics, we have always adhered to the rules of the industry, do not blow or gamble, do not rush, and do industry in a down-to-earth manner.
In the end, LED chips belong to the semiconductor high-tech industry, which requires high-intensity technology, capital investment and continuous capacity expansion. The requirements for technology leadership and capital investment are real.
In recent years, Diyuan Optoelectronics has established a solid R&D platform and cultivated a highly efficient R&D team by undertaking various state-level industrial R&D projects and strong alliances with well-known university research institutions.
Since the rise of LEDs in China in 2000, the industry has experienced several ups and downs. Although LED chip practitioners have strong support from local governments, it is not uncommon for those who have difficulties in operating.
Looking at it today, it seems not easy to raise money, dig a few technicians, and list money. We have consistently called for strong alliances between upstream and downstream industries to improve the luminous efficiency of LED lamps and reduce the total cost of LED lamps.
At the same time, we also hope to actively promote the complementary advantages of peers and win-win cooperation. We have already done this, and we have received very good results, and we will continue to do so in the future.
LED is a big and promising industry, and each of us and every company should find a suitable place in it.
High-tech LED: What changes will occur in the LED epitaxial chip market in China in the next three years? What impact will this change have on the midstream and downstream industries?
Dong Zhijiang: After the adjustment of the epitaxial chip industry in the next three years, the leader in technology research and development and the master of cost control will become the final winners.
Because the technology and funding threshold for geometric multipliers allows newcomers to have no chance to form a market pattern that is as stable as all semiconductor industries or their counterparts in Taiwan.
In addition to mergers, the pattern of changes in the pattern may lead to professional subdivision, that is, the epitaxial chip factory has evolved into a professional epitaxial plant and chip factory. At the same time, the chip factory's business model will also evolve into two types, namely, the epitaxial chip factory based on the supply market and the supporting factory based on the internal demand of the service group.
Such changes will be the embodiment of market-optimized supporting resources, which will greatly reduce the negative impact of unfair competition on the development of the industry caused by the misplaced resources of local governments and the promotion of seedlings. Whether it is for the middle and lower reaches, or the entire LED industry into the lighting era is positive.
In the end, consumers' acceptance of LED lamps is getting higher and higher, and the lighting revolution has become a reality. The dreams of many practitioners who have been proposed by the founder of LED, Nakamura Shuji, 20 years ago are tirelessly pursued.
From profiteering to meager profits to losses, LED upstream companies are experiencing the pains necessary for industrial development. When the price of chips stops falling, it becomes the most concerned issue for enterprises at the moment.
Nowadays, the LED epitaxial chip market is like the Spring and Autumn Period and the Warring States Period, where the high-tech LED Industry Research Institute (GLII) released a report. In 2012, there were 74 epitaxial chip companies in China, including Taiwanese and foreign investment. The output value of LED chips in the mainland's production base is about 7.2 billion yuan.
In 2006, Diyuan Optoelectronics was born in a market environment where domestic high-power chips still depend on imports. In the past eight years, LED epitaxial chips have experienced periods of insufficiency, frenzied investment, overcapacity, and price decline. In the past eight years, Diyuan Optoelectronics has been pragmatic and low-key, focused and focused, not rushing forward, sticking to the lighting market, sailing against the water, and not breaking the territory. In the pattern of the epitaxial chip warring the country, it won a place.
In the midst of a crisis of crisis, if companies want to survive, they must strengthen their own R&D capabilities. This is the foundation of life, and a keen insight into the market is good at marketing.
Dong Zhijiang, general manager of Wuhan Diyuan Optoelectronics Technology Co., Ltd. bluntly said: "The leader in technology research and development and the master of cost control will be the final winner."
Not blindly expanding
High-tech LED: Since the first high-power chip production line was put into production in 2007, what has changed in the production capacity and products of Diyuan Optoelectronics? Is there a plan to expand production this year?
Dong Zhijiang: At present, Diyuan Optoelectronics Chip has an annual production capacity of 10,000 kk. In the first quarter of this year, the market gradually recovered, and downstream demand continued to expand. However, chip prices continued to be sluggish and market competition remained very cruel.
This year, we will focus on the promotion of medium-power white light lighting chips, and achieve business goals by highlighting distinctive product features and rich product lines.
High-tech LED: The labels that Diyuan Optoelectronics had previously printed were “focus on high-power chipsâ€. Now it is playing the slogan of “medium power chipâ€. Is this a transformation of Diyuan Optoelectronics? Why do you want to make such a change?
Dong Zhijiang: This is not a transformation, but a richness and extension of our product line. Whether it is high power or medium power, our focus is always on LED lighting chips.
High-tech LED: What is the monthly capacity of the power chip in Diyuan Optoelectronics? What is the ratio of total capacity?
Dong Zhijiang: At present, Diyuan Optoelectronics' medium-power chips account for about 50% of the total capacity.
High-tech LED: How can the production and sales of Diyuan Optoelectronics reach a balance in the context of overcapacity in the industry?
Dong Zhijiang: Since the establishment of the company, there has never been a blind expansion, and it has always been full of production.
High-tech LED: From the financial reports of the listed companies that have been announced so far, the fierce competition and the sharp drop in chip prices are the main reasons for the decline in both revenue and net profit. What is the revenue status of Diyuan Optoelectronics in 2012, what do you think about this year's market performance?
Dong Zhijiang: The status quo of the industry you mentioned is indeed a grim situation faced by the entire LED industry. This is the result of blind subsidies from some local governments to attract investment and blind expansion of enterprises since 2011.
In 2011, we analyzed and predicted this consequence. Now, unfortunately, it seems that this is the fate of China's manufacturing industry. Everyone wants to enter the industry that looks like a beautiful scenery. The local government is especially happy.
Diyuan Optoelectronics' revenue in 2012 is close to 200 million yuan. The industry situation this year is still not optimistic, but it should be better than last year.
Who is the winner?
High-tech LED: Obviously, the increase in profit will not be an unavoidable phenomenon for epitaxial chip companies in the short term. How to solve this bottleneck?
Dong Zhijiang: The increase indicates that the scale of this industry is still expanding, which is a positive phenomenon.
Any fully competitive industry is from immature to mature, entering more and more companies, and the profit margin will be high to low. We can't expect the profit margin of LED lighting chips to remain at a high level as in previous years.
In the case of low market prices, we are more likely to reduce costs and increase profit margins through “training internal strengthâ€.
High-tech LED: Last year, the average price of white LED low-power chips fell by 31%, the average price of high-power chips fell by 33%, and the average price of medium-power chips dropped the most, with a drop of 40%. How do you view the price trend of high-power chips and medium-power chips in 2013? When will the supply and demand of the chip reach a balance?
Dong Zhijiang: Last year, the price of chips dropped sharply. On the one hand, the chip production capacity was released quickly, causing an imbalance between supply and demand. On the other hand, domestically produced high-power chip technology increased and chip imports decreased.
According to a report released by the High-tech LED Industry Research Institute (GLII), the domestic MOCVD capacity utilization rate was only about 30% last year, and the operating rate was only about 50%. Now that the LED lighting market is about to start, a large amount of production capacity and market demand have not been released. The market structure will be polarized, and the large-scale enterprises will continue to seize market share, and the new companies should cooperate to tide over the difficulties.
High-tech LED: Diyuan Optoelectronics has entered its eighth year. In the past eight years, LED chips have undergone a lot of changes, from insatiable demand to crazy investment, from overcapacity to falling prices. From the need to worry about sales problems to the irrational competition of prices, in different market environments, how does Diyuan Optoelectronics respond to such industry changes?
Dong Zhijiang: From the beginning of the establishment of Diyuan Optoelectronics, we have always adhered to the rules of the industry, do not blow or gamble, do not rush, and do industry in a down-to-earth manner.
In the end, LED chips belong to the semiconductor high-tech industry, which requires high-intensity technology, capital investment and continuous capacity expansion. The requirements for technology leadership and capital investment are real.
In recent years, Diyuan Optoelectronics has established a solid R&D platform and cultivated a highly efficient R&D team by undertaking various state-level industrial R&D projects and strong alliances with well-known university research institutions.
Since the rise of LEDs in China in 2000, the industry has experienced several ups and downs. Although LED chip practitioners have strong support from local governments, it is not uncommon for those who have difficulties in operating.
Looking at it today, it seems not easy to raise money, dig a few technicians, and list money. We have consistently called for strong alliances between upstream and downstream industries to improve the luminous efficiency of LED lamps and reduce the total cost of LED lamps.
At the same time, we also hope to actively promote the complementary advantages of peers and win-win cooperation. We have already done this, and we have received very good results, and we will continue to do so in the future.
LED is a big and promising industry, and each of us and every company should find a suitable place in it.
High-tech LED: What changes will occur in the LED epitaxial chip market in China in the next three years? What impact will this change have on the midstream and downstream industries?
Dong Zhijiang: After the adjustment of the epitaxial chip industry in the next three years, the leader in technology research and development and the master of cost control will become the final winners.
Because the technology and funding threshold for geometric multipliers allows newcomers to have no chance to form a market pattern that is as stable as all semiconductor industries or their counterparts in Taiwan.
In addition to mergers, the pattern of changes in the pattern may lead to professional subdivision, that is, the epitaxial chip factory has evolved into a professional epitaxial plant and chip factory. At the same time, the chip factory's business model will also evolve into two types, namely, the epitaxial chip factory based on the supply market and the supporting factory based on the internal demand of the service group.
Such changes will be the embodiment of market-optimized supporting resources, which will greatly reduce the negative impact of unfair competition on the development of the industry caused by the misplaced resources of local governments and the promotion of seedlings. Whether it is for the middle and lower reaches, or the entire LED industry into the lighting era is positive.
In the end, consumers' acceptance of LED lamps is getting higher and higher, and the lighting revolution has become a reality. The dreams of many practitioners who have been proposed by the founder of LED, Nakamura Shuji, 20 years ago are tirelessly pursued.
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