Wang Haolei, Chairman of Dehao Runda, told the Securities Times in Wuhu that central departments and cities prioritizing LED as a key industry should help stimulate market demand. Otherwise, domestic production capacity may shift overseas, leading to anti-dumping issues similar to those seen in the photovoltaic sector. He emphasized that the industry is currently facing overcapacity, with many companies struggling to find enough demand to absorb their output.
Dehao Runda has three major bases in Dalian, Yangzhou, and Wuhu. Initially, the company planned to invest 12 billion yuan and acquire 200 MOCVD machines—key equipment for LED chip production. However, due to rapid industry expansion, the investment plan has been significantly revised downward. Wang noted that when Dehao Runda entered the LED market in 2009, profit margins were high, but now, despite being one of the largest players, the entire industry faces overcapacity.
The LED industry saw a major transformation in 2009 when Samsung introduced LEDs into TV backlights, significantly boosting demand. This led to a surge in MOCVD orders, with half of the global supply sold to China in 2011. However, market growth failed to match expectations, resulting in oversupply. Currently, more than 1,700 LED packaging companies in China account for 80% of global production, intensifying competition.
At Dehao Runda’s Wuhu base, the operating rate of LED chips is only around 50%, reflecting efforts to avoid overproduction. Wang pointed out that Sanan Optoelectronics, which started production in just six months, has already driven down chip prices by 20%. If Dehao Runda were to ramp up fully, similar price drops could occur. Therefore, slowing down MOCVD deployment is seen as a way to reduce losses and wait for market recovery.
Wang believes the industry will rebound around 2014. “After 24 months, the LED chip market could be much stronger,†he said. However, he also warned that the next year will still be tough. Sanan Optoelectronics, based in Xiamen, recently launched a large-scale LED project in Wuhu, which is now operating at full capacity. Its chairman, Jin Hongzhu, described 2013 as a "winter" for the industry, expecting many small firms to fail and the upstream chip sector to consolidate.
While the upstream chip industry may face challenges, the downstream application sector is even more competitive. For example, Haobo Optoelectronics, a major Shenzhen-based LED firm, recently faced wage arrears and struggled to secure lighting projects. Industry insiders note that 95% of the domestic LED lighting market is government-driven, making it highly dependent on policy support.
Both Sanan Optoelectronics and Dehao Runda have secured significant LED streetlight projects in Wuhu, splitting the local orders. However, despite these contracts, production lines remain underutilized due to cautious approaches to cash flow. Wang admitted that government orders are slow, and the real estate sector’s slowdown has further impacted local finances, reducing land sales revenue and delaying subsidies.
Despite the current challenges, both companies remain optimistic about the long-term potential of the LED industry. Wang believes the market will eventually grow tenfold once commercial lighting takes off, driven by falling costs, longer lifespans, and energy savings. Sanan Optoelectronics is also expanding globally, recently becoming a top shareholder in a leading Taiwanese LED company.
In the coming years, the industry is expected to undergo a major reshuffle, with many smaller firms likely to exit. However, leaders like Wang and Jin see this as an opportunity to strengthen their positions, invest in R&D, and prepare for the next wave of growth. Whether the LED industry will follow the same path as photovoltaics remains uncertain, but both companies are determined to survive the winter and lead the way into the future.
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