May 9, 2013…China’s LED chip makers have seen a large decrease in government subsidies this year, according to an article by Peoples Daily. Numerous companies have relied on the subsidies to offer lower prices. The market is currently facing overcapacity.
Companies such as Sanan Optoelectronics which produces LED die and can offer it at very low prices will be hardest hit. Other companies such as Elec-Tech which produces LED production equipment will also suffer from the reduced funding.
Peoples Daily cited 21cbh.cn, which said that Sanan Optoelectronics received government subsidies totaling 328 million yuan ($53.3 million) in 2012, 805 million yuan in 2011 and 2.53 million yuan in 2010. These subsidy amounts reportedly accounted for 40.5 percent, 85 percent and 60.4 percent of its net profits respectively during these years.
According to People’s Daily, Elec-Tech would likely have suffered losses in 2010 and 2012 if it weren’t for subsidies.
One result of the reduced subsidies is that the pace of LED price drops is expected to slow down. Taiwan-based LED chip makers noted that prices for LEDs have fallen about 35 percent in the last two years, according to Digitimes.
Sanan, a leader in China’s LED industry, has reportedly chosen to be less aggressive in its price cuts, likely because of the reduced subsidies.
Digitimes noted that with prices stabilizing, TV backlighting demand returning and the lighting market growing, Taiwan-based firms are likely to see strong performance in the second and third quarter of 2013.