When the cake is large, giants will be strongly involved in feeding; when the cake becomes small, large companies will adjust their strategies and re-find the market for scale. This is particularly typical in the LED chip market. As the growth rate of the LED lighting market slows down, the low-end lighting chip has overcapacity and fierce price competition, the LED chip giants have begun to accelerate their transformation. In recent years, LED chip manufacturers have actively deployed upstream. "The fire of the core can be ignited." From LED to compound semiconductor, the grand transformation of the international lighting giant's strategic transformation is being staged.
After the industry reshuffle, domestic LED chip manufacturers stepped onto the stage of history
Speaking of the development history of the LED chip industry, there are several important time nodes. In June 2003, the Ministry of Science and Technology of China first proposed the development of semiconductor lighting; in 2006, the “Eleventh Five-Year Plan” promoted the semiconductor lighting project as a major national project; since 2009, governments across China Subsidies, domestic LED chip manufacturers' income and net profit increase, while the number of competitors continues to climb, industry competition intensifies.
In 2011, the National Development and Reform Commission officially released the government announcement and road map for the elimination of incandescent lamps in China, and clearly proposed that in 2016, the sale of incandescent lamps will be completely banned. The years from 2011 to 2016 were the transition period for the elimination of incandescent lamps and the rapid development period of the LED lighting industry. After entering 2016, the production capacity brought by the expansion of the major LED chip factories was released, and the eve of the industry reshuffle came. Due to overcapacity, LED chips have caused fierce price competition, resulting in a decline in revenue and net profit for many chip manufacturers, and many small and medium manufacturers have been forced to withdraw from the market.
Foreign manufacturers have also begun to adjust their strategies. For international manufacturers, they have lost their obvious competitive advantage in the mature LED general-purpose market. It is a wise move to cut off the LED "broken wrist" or to avoid the expansion of losses caused by fierce competition. To this end, Samsung and LG shut down some of their production capacity; Panasonic has closed several lighting factories including China, Indonesia and Japan; Toshiba has also closed many local lighting factories; NEC also announced that it will withdraw due to successive losses In the lighting business, it sold its NEC Lighting to Japan Future Fund (NMC); Cree significantly reduced production on high-power chips, and some product orders were transferred to domestic enterprises for processing.
Benefiting from the industry reshuffle and the help of national policies, the LED chip pattern was initially formed by 2018. In 2018, the top three LED chip manufacturers in China accounted for a total of 71% of the market, of which Sanan Optoelectronics accounted for 31%, and Huacan Optoelectronics accounted for 24%, Aoyang Shunchang 16%. Since then, in the field of low-end LED chips, these LED chip industry leaders have become more stable.
In 2019, under the influence of the Sino-US trade war and the sluggish economic environment, the global LED market demand has weakened, and the LED chip industry has continuously released new capacity in 2018, resulting in serious LED chip overcapacity and high corporate inventories. The price of LED chips showed a big drop.
Therefore, major manufacturers are actively seeking breakthroughs, while deeply cultivating the main business of LED, taking measures of simultaneous endogenous growth and extension, seeking industrial upgrading opportunities, and realizing a new round of enterprise development.
From LED to compound semiconductor "transition and change"
Most LED chip manufacturers have nothing more than to take these two differentiated routes: first, to strengthen the development of products in emerging markets such as Mini/Micro LED, UV LED, VCSEL, and to increase the proportion of high-end products' revenue; second, or to shift their focus In the field of compound semiconductors, deepen the research and application of SiC, GaAs and GaN materials. Among them, the leading LED chip manufacturers Sanan, Huacan and Epistar have entered the field of compound semiconductors.
At present, the global compound semiconductor integrated circuit market is mainly occupied by traditional large European and American manufacturers. The country is in its infancy, and the country has issued a series of policies to strongly support the development of the integrated circuit industry. In the current general environment, large domestic downstream manufacturers actively seek cooperation with domestic semiconductor manufacturers in order to improve the security and stability of their semiconductor supply chains. In the context of policy encouragement, increasing demand for import substitution, and increased demand from downstream industries, domestic manufacturers will further increase market penetration in the future.
As a domestic LED leader, San'an's determination to develop compound semiconductors in recent years can be described as very large. In 2014, Sanan Optoelectronics established a wholly-owned subsidiary of Xiamen Sanan Integration and formally entered the field of compound semiconductors. In 2015, the company began to fully deploy compound semiconductors, and at the same time, it cooperated with Huaxin to invest 2.5 billion yuan to set up a special fund for the development of III-V compound integrated circuits.
After 2018, the investment has increased even more. First, it spent 33.3 billion yuan in Nanan Hi-Tech Industrial Park, Quanzhou, Fujian Province; and then invested 12 billion in the area of the Management Committee of the Gedian Economic and Technological Development Zone in Hubei Province to establish a III-V compound semiconductor project; There are 13.8 billion yuan in semiconductor R&D and industrialization projects (phase I), focusing on the three major business segments of gallium nitride, gallium arsenide, and special packaging. Among them, the 3.3 billion yuan project, the equipment purchased by the project in 2019 has successively arrived at the factory. Some of the equipment has been installed and has entered the commissioning phase. After the commissioning is completed, the production capacity will be gradually released. And on June 16, this year, Sanan announced a 16 billion yuan investment in silicon carbide and other compound semiconductor markets.
Sanan announced the commercial version of the 6-inch silicon carbide wafer manufacturing process. On December 19 last year, it announced the completion of all process qualification tests and added it to the OEM service portfolio. The silicon carbide wafers currently produced by the company are the most mature wide bandgap (WBG) semiconductors used in circuit design in power electronics, and can provide device structures for 650V, 1200V and higher rated Schottky barrier diodes (SBD) In the near future, silicon carbide MOS field effect transistor processes (SiC MOSFETs) for 900V, 1200V and higher rated Schottky barrier diodes will be introduced.
The layout of the compound semiconductor project will not only contribute to Sanan Optoelectronics' annual revenue, but also further expand the company's volume. The company's financial report pointed out that for the whole year of 2019, Sanan Integrated achieved annual sales revenue of 241 million yuan, a year-on-year increase of 40.67%. In Q1 2020, revenue will reach 166 million yuan.
Sanan integration's recognition and industry trends have emerged, and various product lines have made significant progress. In 2019, the cumulative shipments of gallium arsenide exceeded 90; the major customers of gallium nitride products have achieved mass production, and the production capacity is gradually climbing; the cumulative number of power electronics customers exceeds 60, and 27 products have entered mass production; optical communications In addition to maintaining and expanding the market share of existing low- and medium-speed PD/MPD products, high-end products with high added value, such as 10G APD/25G PD, as well as the transmitter 10G/25G VCSEL and 10G DFB, have been realized at important customers in the industry After verification, it enters the stage of substantial batch trial production; the filter product has excellent development performance, the production line is continuously expanded and stocked, and it is expected to be sold in 2020.
As the second-largest LED chip manufacturer in China, Huacan Optoelectronics is also vigorously researching and developing the third-generation semiconductors in other fields while using its scientific research advantages. In January 2018, Huacan Optoelectronic Semiconductor New Materials and Devices Research Institute was officially established. On November 21, 2019, Huacan Optoelectronics Zhejiang Provincial Postdoctoral Work Station Awarding Ceremony was held in Huacan Optoelectronics Research Building. This move means that Huacan Optoelectronics has added another technology and talent reserve in the third generation semiconductor field New steps.
Also in November 2019, Huacan announced the successful approval of the third-generation key laboratory of semiconductor materials and devices in Zhejiang Province, making it the first provincial key laboratory in Yiwu. This marks the affirmation of the company's technical reserves and scientific research strength in the field of third-generation semiconductor materials and devices by the Science and Technology Department of Zhejiang Province, and marks that Huacan Optoelectronics will reach a new level in the construction of technological innovation.
In January of this year, Huacan Optoelectronics appointed Zhou Jianhui as the company's president. Chairman Yu Xinhua said: "After extensive and comprehensive evaluation, we chose Mr. Zhou Jianhui as the company's president, on the one hand because he is leading a large international optoelectronic company He has achieved industry-recognized achievements. On the other hand, he has brought a wealth of strategic and management experience to Huacan Optoelectronics' current business development and third-generation semiconductor layout. We look forward to and believe that Dr. Zhou will definitely lead Huacan Optoelectronics in LED industry transformation and the next round of growth will continue to maintain a leading position."
Aoyang Shunchang is also hard to beat the profit decline caused by the sharp drop in LED chip prices. In 2019, the company achieved a total operating income of 3.481 billion yuan, a year-on-year decrease of 18.2%; it realized a net profit attributable to the owners of the parent company of 117 million, a year-on-year decrease of 47.86%, and the decrease was greater than last year. Affected by the epidemic situation and the Sino-US trade war, the profit of Aoyang Shunchang in the first quarter of 2020 decreased by 99.242 million year-on-year to 74.80%.
Therefore, on the basis of maintaining the overall competitive advantage of the metal logistics and distribution business, Aoyang Shunchang will do a good job in the structural upgrade and adjustment of the LED chip business. In addition, this year it will focus on the development of the new energy automotive industry, in the electronic control, battery, The comprehensive layout of the three major areas of lightweight manufacturing, through the layout of "IGBT + ternary lithium battery + auto parts", opened 100 billion market space. At the same time, Aoyang Shunchang is also actively promoting the preparation of integrated circuit projects.
In 2018, Taiwan's photovoltaic manufacturer Epistar announced that by splitting the original "OEM" division into a subsidiary "Jingcheng Semiconductor", Jingcheng Semiconductor's main purpose is to implement professional division of labor and effective application of resources, focusing on VCSEL and Semiconductor foundry services such as GaN on Si power electronic components.
In December 2019, Epistar and compound semiconductor manufacturing foundry Huanyu-KY jointly invested in Changzhou Xinjingyu Optoelectronics to develop 6-inch compound semiconductor radio frequency wafer foundry and optoelectronic wafer foundry business. The strong cooperation also shows the determination of Epistar to vigorously develop compound semiconductors.
At the same time, Taiwan Wafer Optoelectronics also invested in GCS high-end compound semiconductor manufacturing projects with US GCS, Wu Yuefeng Capital and Jiangsu Zhuo Shengwei. The project is mainly used to build compound semiconductor and micro-electromechanical system production lines for semiconductor manufacturing in high-end RF front-end applications and optoelectronic applications.
Qianzhao Optoelectronics announced in November 2018 that it plans to invest 1.597 billion yuan to build VCSEL, high-end LED chip and other semiconductor R&D and production projects, which will be undertaken by Xiamen Qianzhao Semiconductor Technology Co., Ltd., a wholly-owned subsidiary of the company. In 2019, Qianzhao Optoelectronics will actively expand opportunities in the semiconductor industry such as laser chips, VCSEL chips, and optical communication chips in the field of high-end compound semiconductors through investment, incubation, and internal research and development. It is understood that at this stage, dry photoelectrics mainly include full-color LED epitaxial wafers and chips and three-junction gallium arsenide solar cell epitaxial wafers and chips.
In the new era, the transformation and adjustment of domestic LED lighting chip giants is in line with the changing situation, which does not mean that they have completely lost their advantages in technology, patents and brands, but in increasingly fierce competition, each LED manufacturers are constantly improving technology and avoiding homogenous competition in order to regain their leading position in the new stage of the lighting industry.