[China] China LED chipmakers delay expansion


With strong incentives provided by local governments, many China-based LED chipmakers aimed to increase the number of MOCVD equipment in 2010. However, inventory has been piling up as demand has been weak in 2011. Market rumors have indicated that many firms have been delaying their plans of adding more MOCVD equipment.


Industry sources indicated newly added MOCVD equipment in 2011 will reach 711 units, with 380 units in China alone.


Ever since the city government of Yangzhou, China announced a plan to stop providing subsidies to MOCVD procurements starting in second half of 2011, many China- and Taiwan-based LED chipmakers worry similar policies will also occur in other regions. Many LED firms procured the equipment in large amounts in first half of 2011 to obtain subsidies.


Industry sources pointed out China's government has been tightening money supply to control inflation, causing the local governments to lack funds to provide subsidies. Coupled with weak demand, many LED chipmakers have decreased capacity utilization rate to 50%.


China's consumer price index (CPI) continues to reach new highs. In May, the CPI reached 5.5% causing the central bank to use aggressive measures to control inflation. Interest rate was increased to 6.56% earlier in July, the third increase of the year. The amount of total loans in May showed a 25% decrease on month and 13.7% decrease on year indicating the difficulties for firms to obtain capital.


Source: Digitimes