A Reuters survey predicts that 50% of LED CHIP makers in China will face crisis due to falling global demand and subsidies. Analysts said that the sluggish prices caused by oversupply and economic recession have fallen below the level of production, which means that most small LED chip companies have to stop production. With the reduction of the Chinese government’s new fiscal subsidies, these companies may have no way out, but only choose to integrate or declare bankruptcy.
In the past few years, the Chinese government has supported the development of LED chip companies with policy measures such as tax reductions and free land use rights, and has also provided US$1.6 billion in funds to purchase MOCDV equipment.
Thanks to the government's support, the global market share of LED packaging components has increased from 2% in 2010 to 6% in 2011, a three-fold increase.
However, with the decline in the production capacity of many LED chip makers to 50%, the previous boom will be sluggish. About half of the 700 companies that received policy financial support have already closed down. Today, the Chinese government wants to reduce financial subsidies for small businesses. On the contrary, it will increase investment in large companies such as BDO Runda and Sanan Optoelectronics. The market value of these two LED chip manufacturers is worth US$2.8 billion.
Nomura Securities analyst Anne Lee said: "This is China's strategy. After the reorganization, they hope that the big companies will be able to maintain them." Bao Enzhong, deputy secretary-general of Shenzhen LED Industry Federation, believes: "China's fiscal policy is not enough to support small and medium enterprises." In the future, more companies will be eliminated."
