Even if the epidemic forces some companies to withdraw from the LED chip market, China's total LED epitaxial wafer production capacity will still increase by 21% in 2020, reaching 3.5 million wafers (4 inches) in a single month. Among them, the production capacity of Zhaochi's Nanchang plant has been gradually released since the fourth quarter of 2019. As of now, it has reached 500,000 pieces (4 inches) in a single month, making Zhaochi the third largest LED chip manufacturer in China, second only to Sanan Optoelectronics. And HC Semitek and this year's Sanan Optoelectronics Quanzhou plant and Zhaoyuan Fuzhou plant have also increased their production capacity.
In addition, the distribution of new capacity is mainly concentrated in the field of lighting. In the first half of the year, the increase in new capacity caused an oversupply of lighting chips, causing the prices of lighting chips to continue to fall. Among them, the market price of 2-inch chips dropped to RMB 50 per chip. Therefore, the focus of operation of some manufacturers has gradually shifted from medium and low-end LED chips to the high-efficiency, large-size, high-end chip market.
TrendForce believes that in addition to the temporary imbalance of supply and demand, the reasons for price increase of LED chips for mid-to-low-end products are one of the reasons why the early price is too low, which leads to a bottoming and rebound in the later period. In addition, thanks to the recovery of terminal demand. The price of the sapphire substrate, which is the raw material for LED chips, has also risen simultaneously. However, the overall LED chip market is still in a state of oversupply. Considering the recovery of market demand and the completion of the release of new LED chip production capacity, it is estimated that the price of LED chips will temporarily stabilize in the short term, and the profitability of related companies will gradually improve.
