Expansion and chip price decline, is it necessary for the market or blind competition?

Under the dual-wheel drive of LED and MEMS, in 2018, Huacan Optoelectronics "has a hundred feet, further."

Yu Xinhua, chairman of Huacan Optoelectronics, introduced that in the first quarter of 2018, sales were 710 million, an increase of about 40% year-on-year. The overall net profit was 143 million, the net profit of LED chips exceeded 100 million, and the net profit of sapphire business was more than 30 million. The net profit after deducting non-recurring gains and losses was 70 million, a year-on-year increase of 57%.

As a technology-led chip company, after more than a decade of development, Huacan chips gradually occupy LED market segments. Today, Huacan's LED chips have covered the whole country and become the second largest chip supplier in China and the largest domestic display chip supplier. In 2015, it acquired Yunnan Lanjing and integrated LED upstream industry resources. In 2018, it acquired Meixin Semiconductor, and formed the dual main industry development of LED chips and MEMS sensors in the future.

Among them, Blue Crystal's factory has an advantage in crystal growth, and is now improving in the direction of material utilization. The new accelerometers have already entered international big-name cars, such as GM, Ford, Mazda, etc., mainly through the Autoliv company to enter the above-mentioned car manufacturers; this year to expand the domestic car market, there will be millions of orders of sales in China. Meixin Semiconductor has several hundred million sales, and has its own strong advantages in stability and precision.

According to Wang Jiangbo, vice president of Huacan Optoelectronics, Huacan Optoelectronics will start a vertical integration merger from the second quarter of 2018. Together with the company's original sapphire business, the entire business can be compared with Sanan Optoelectronics.

Indeed, Sanan Optoelectronics has always been Hua Can Optoelectronics' largest competitor in China. After Sanan Optoelectronics announced an investment of 33.3 billion yuan for the expansion of semiconductor projects at the end of last year, Huacan Optoelectronics also announced an investment of 10.8 billion yuan for expansion in February this year. It can be seen that the production capacity of Sanan and Huacan has progressed from “trotting” to “big stepping”.

In fact, in the entire LED chip industry, not only Sanan and Huacan are expanding. Including the largest supply of red and yellow light, Ganzhao Optoelectronics, "Xinke Zhuangyuan" Jucan Optoelectronics and flip chip technology leader Dehao Runda are expanding in large scale, and newcomers such as Zhaochi shares are also The chip field is frequently active. The expansion of these chip makers once triggered a market panic about the imbalance between supply and demand in the chip market and vicious competition.

Concerning the chip market, Huacan Optoelectronics said that many manufacturers had to expand production last year, but not much capacity was actually expanded. For example, many people think that 100 MOCVD machines of Zhaochi will be expanded this year, but it may not be able to form capacity until after the second quarter of 2019. At the same time, we can compare this period of 2010-2011. In 2010, there were a lot of new capacity to enter, but there are not many of them actually used. Some of the equipment purchased by manufacturers in 2011 has not come in handy yet.

"LED chips are highly technically intensive industries with certain technical thresholds," said Wang Jiangbo. Therefore, for the chip industry, the release of expanded capacity is not a one-step process and needs to be released in stages.

In addition, from an industry perspective, there is more than 10% growth every year, as well as in 2018. From the mid-stream packaging and downstream application vendors' first quarter results growth, the first quarter of 2018, the mid-stream package manufacturers' operating income is basically 20%-30% growth rate, and the downstream display application manufacturers' revenue growth rate is even as high. 60%. Therefore, it is certain that the demand for chips in the entire LED industry continues to grow.

At the same time, we have to face up to the fact that the expansion of chip manufacturers has driven the price decline of market chip products. According to sources, the price of LED chips has started to decline since the fourth quarter of 2017 due to the increase in production capacity of Chinese manufacturers. As the two largest LED epitaxial wafer and chip manufacturers in China, Sanan Optoelectronics and Huacan Optoelectronics cut their LED chip prices by 20% in the fourth quarter of 2017; at the same time, LED prices continued to fall in the first quarter of 2018. .

In this regard, Huacan Optoelectronics believes that the current chip as an industrial product, there will certainly be a decline, slightly decreased in the first quarter, but the magnitude is not large, probably fell by 2-3 percentage points, the price of the second quarter to the second half of 2018 The trend must be a steady decline.

The price of LED chips has ended a two-year stable and small upward trend. The price reduction of the chip for LED packaging manufacturers has also eased the cost pressure caused by the price cuts for two consecutive years.

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