Although the LED market's weather vane in March showed signs of industry warming, the chart below shows that the LED chip and package manufacturer confidence index has improved significantly since entering February. By the end of March, the confidence index of the package even recovered to more than 4,000 points.
However, the sampling objects selected by ledx are mainly Taiwanese manufacturers. Because Taiwanese manufacturers have clear division of labor, they can better reflect the changes of upstream and downstream industries.
For mainland LED companies, they are in different stages of competition and development, but they may not be able to feel the spring as reflected in ledx. Downstream companies may be able to feel the signs of market recovery, and orders from the European and American markets have increased. However, due to the need to digest the industry's high water level inventory before the year, the warm-up packaging industry in the market has experienced a slight decline in the inventory level. The upstream chip industry is still cutting prices in the midst of a slaughter, and the operating rate of the production line is still low. . The overall industry supply far exceeds the effective demand. Although the price war has been heated up, due to the strong specificity of LED devices, low price flexibility has limited the market's response to price cuts, and the rapid downward price has not brought the demand for volume growth.
Perspectives on the Causes of Oversupply of the Industry If you trace the source of the current stage of excess industry, the Great Leap Forward chip project since 2009 is the cause. The financial tsunami of 2008 prompted the government to adopt a loose fiscal policy and the fiscal competition among local governments. Local governments in Yangzhou and Wuhu, Tianjin and other cities hope to attract the iconicity through subsidies to high-tech enterprises. LED companies settled in the local area, thus forming a growth pole that can drive the local LED-related industries. The result of the game is that many places have launched chip projects in the same period.
However, after the financial tsunami in 2008, the quantitative easing monetary policy and positive fiscal policy of various countries did not resolve the crisis, but only delayed the problem, which led to a greater crisis two years later. The expected market size of the LED industry has not arrived as scheduled. On the contrary, due to the sharp decline in demand in the European market after the European debt crisis, the growth rate of the LED industry has slowed down considerably. In 2011, most of the MOCVD machines invested in the previous period were completed and commissioned after a period of trial production, and some machines had to be sealed up and reopened. More manufacturers have returned to the machine and have not installed it and sold it directly. The MOCVD machine has changed from a smashed scent to a hot potato and turned into a toxic asset.
How the LED industry is bail-out and self-help the structural surplus of the entire industry has caused the company's living conditions to deteriorate rapidly, and some enterprises have closed down. However, from the case analysis, the problems inherent in these closed enterprises are obviously more important, but the crisis makes the problems more exposed. Because some well-operated companies have continued to grow against the market in the difficult situation of 2011. However, for most of the employed companies, in the industry downturn, in order to survive, they have to consume valuable cash flow and multi-party financing to bail out. If such a state can pass as soon as possible, the surviving enterprises may face a better explosive growth. According to China's current MOCVD installed capacity, if the production capacity is fully released, China will become the world's most concentrated LED industry, with the most complete industrial chain, the largest output, and the highest output value. However, if the duration is too long, and after consuming the cash flow, it will have to bear the high asset-liability ratio to continue to operate, it will inevitably consume the strength of the enterprise, affecting the long-term competitiveness, and even worse, it will have to go bankrupt. More risk of unemployment and repayment, the entire industry suffers losses.
To solve the bell, you need to ring the bell. The government's policy is the most far-reaching external factor for the industry. Because of the structural overcapacity caused by resource mismatch caused by MOCVD subsidies, what is more needed at this time is that the government's purchasing expenditures in the terminal market will bridge the demand gap and curb industrial fluctuations. The indoor and outdoor lighting bidding project jointly initiated by the three ministries and commissions is undoubtedly a good medicine for the industry, but the sales value and the benefited enterprises are very limited. As part of the overall plan to enhance China's LED industry competitiveness, the government's timely introduction of a larger and broader subsidy policy for the LED industry will be the key to helping the LED industry survive the current dark period.
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