Questions about the barriers to entry and new market entrants from China have been dogging the LED industry. A few industry experts have been taking a look at China and what it means to the industry. Strategies Unlimited analyst Tom Hausken recently wrote a piece for LEDs Magazine about the Chinese LED manufacturing industry. China has been throwing a lot of capital at its nascent LED industry and the world is watching. Tom’s article put some of the talk about the Chinese LED industry into perspective.
According to Hausken, research on the Chinese LED industry by Strategies Unlimited partner GG-LED shows that the Chinese effort goes far beyond MOCVD equipment. The report further calls into question whether the Chinese can match world-class competitors. “The report points out that the real shortage in expertise is not only designing LEDs and operating epitaxy reactors in general research, but particularly in planning and leading enterprises that can match world-class competitors,” wrote Hausken.
According to the report, Chinese investment is overly concentrated in LED epitaxy and chip production due to an outdated perception that the distribution of profit margins in the supply chain were concentrated at the epitaxy and chip layer.
Only time will tell if the Chinese LED industry can get up to speed and become competitive on the world stage. Hausken commented, “There is over-investment in LED manufacturing in China, but what will be the impact? At the very least, it makes the market less certain. A glut will accelerate the trend toward cheaper LEDs and LED lighting, which has been a goal of national policy makers. It may hurt chip makers and vendors of fab equipment along the way,if only by spoiling an otherwise rational market.”
Look for Part 2, Barriers to Entry 2 in a future post.
For Further Reading: LEDs Magazine