With the increasing emphasis on the green energy industry in the world, the LED market has received much attention. More and more manufacturers are actively investing in the LED market, which has led to a rapid increase in semiconductor lighting technology. The rapid development of the LED industry and its wide application have surpassed the imagination. Its value chain has also extended from the manufacturing industry to the service industry, which has had a tremendous impact on social development. There are concerns about the future of LED in the market, but we have analyzed that the market's concerns are overdone. Below we analyze the supply and demand sides to see the market trend of the LED market in the next two years.
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LED industry is expected to grow rapidly
Supply growth is subject to upstream equipment and raw material supplies. First, the upstream MOCVD equipment has rapidly expanded its production capacity and greatly improved its efficiency. There are currently three companies that can produce MOCVD machines worldwide, Aixtron in Germany, Veeco in the US, and Sanso in Japan, while the first two dominate the global market. However, the strong demand in the MOCVD market and the high returns from monopoly have attracted new market entrants. Second, the shortage of upstream major materials has become an important constraint to the current expansion of LED capacity. The main material for the formation of LED capacity is the upstream main material, sapphire substrate, MO gas and so on. The upstream materials industry of LED has high barriers to entry, controlled by a few foreign companies, and the gross profit margin of the major producers of the substrate is constantly increasing, indicating the tightness of the raw material supply in the market.
After analysis, we believe that LED supply is tight in 2010, will be eased in 2011, and the oversupply situation in the past two years will not be very serious. With the launch of large-scale expansion plans for LED chips and new manufacturers on LED chips, investors are increasingly worried about future LED overcapacity. We have consulted a large number of foreign and Taiwanese institutions. The forecasts of future supply and demand vary widely among institutions, and the views on overcapacity and its impact are not uniform.
From the perspective of all parties, we believe that the next few years will be the golden period for the explosive growth of the LED industry. At present, the downstream demand for LEDs is gradually spreading and showing a sharp growth trend, and various capitals have also increased their investment in upstream supply capacity. Whether or not there will be overcapacity in the future, or not, depends mainly on when the large-scale replacement of the general lighting market will start and replace the backlight market to further expand the demand for LEDs. But no matter what the market changes in the future, the start of the lighting market is only a matter of time, and it won't be long.
We believe that even if the overcapacity is not terrible, we are still optimistic about the leading companies in the LED industry. We believe that according to the law of industrial development, as in the process of any emerging industry development, the future LED industry will inevitably have a process of overcapacity and survival of the fittest. Long-term LED R&D and production, companies with rich industry experience, leading technology, economies of scale, and widespread recognition from downstream customers are the final winners. Leading companies in the industry will have higher gross profit margins and more market opportunities by virtue of leading technology, higher quality and economies of scale. On the other hand, China's LED companies are subsidized by the government, and at the same time, with low labor costs and growing domestic downstream backlight demand, they have become a rising star in global competition.
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