A new round of shockwave: the "butterfly effect" caused by overheated investment

[High-tech LED network news] text / reporter Liu Qiaomei A butterfly in the tropical rain forest of the Amazon River in South America, occasionally swaying its wings, can cause a tornado in Texas in a few weeks. The famous butterfly effect proposed by meteorologist Lorenz in 1963 has been fully reflected in the development stage of China's LED industry.

Now, an unavoidable reality in the domestic LED industry is that the lighting terminal application market does not reach the scale effect, which leads to the difficulty in recovering the enterprise accounts from the bottom up in the industry chain, and the increase in bad debts eventually leads to the situation in which funds are stuck. At the same time, the upstream of the industrial chain has continuously released capacity expectations, resulting in fierce market price competition for products of middle and lower reaches.

Investing in hot brakes, newcomers slow down
On September 18, Gaogong LED reporter received confirmation from Zhangjiagang Development and Reform Commission: The GCL-Zhangjiagang LED project has been officially suspended. At the same time, the company's internal core technical team has also been dissolved.

In February of this year, Zhu Xinshan, the chairman of GCL Group, announced that the GCL-ion LED industrial base with a total planned investment of 2.5 billion US dollars was signed into the Zhangjiagang Economic Development Zone, and the MOCVD equipment planned purchase volume reached 500 units. This is the largest LED investment case in history, which has caused an uproar in the industry. It has been praised by many media as a landmark event in the domestic LED investment boom.

However, less than half a year later, the project suffered a change that was put on hold indefinitely, and even the rumor will be revoked, causing the industry to be in turmoil.

"This is just a case of LED investment thermal brakes." Zhang Xiaofei, dean of the High-tech Industrial Research Institute, pointed out that since the first half of this year, most domestic LED companies have suspended the procurement of MOCVD equipment, and some originally planned to purchase 50 MOCVD equipment. The manufacturers have basically lowered their purchases by 50%. At this point, we have seen a significant increase in the shipments of the two MOCVD equipment manufacturers from VEECO and AIXTRON this year.

Sure enough, on September 15, AIXTRON issued a press release, downgraded its earnings forecast: 2011 revenue will be between $6.0-6.5 billion, lower than the company's previous estimate of $8.0-9.0 billion. In addition, AIXTRON lowered the previously announced backlog of orders by €100 million.

AIXTRON pointed out that the above-mentioned latest financial forecast and backlog data mainly reflect the increase in conversion risk and the factors that delay the orders and product shipment schedules to 2012 for many customers (especially in Asia).

Although AIXTRON is still very optimistic about the medium and long-term business opportunities in the LED market, the recent economic recovery through contact with Asian customers has caused doubts about the short-term market outlook, which has also led to conservative investment activities. In addition, due to the rapid decline in the price of LED terminal products, the gross profit margin was compressed, and several customers also delayed the order and product shipment schedule to 2012.

According to the previously announced plan, GCL's 100 MOCVD orders in 2011 were 50% each by VEECO and AXITRON. However, Gaogong LED reporter learned from VEECO and AIXTRON two equipment manufacturers that GCL Optoelectronics only made a verbal order for MOCVD equipment, and even the deposit was not paid, let alone the real purchase.

Veeco said that GCL Optoelectronics' orders were not included in the quarterly order forecast, so it was not affected by the adjustment of GCL. But for Veeco's third-quarter business prospects, Veeco CEO John R. Peeler said, “The domestic market is still in high demand for MOCVD. MOCVD orders will definitely fluctuate with each quarter, depending on the customer. In the short term, orders may be affected by several factors such as the recent sluggish LED industry end market demand and global macroeconomic concerns. Orders are expected to be less than the second quarter in the third quarter.

In addition to new players like GCL, LED veterans including Sanan Optoelectronics have also shown signs of slowing down in different degrees.

Sanan Optoelectronics announced on February 28 this year that the company's 2010 non-public offering of shares raised funds for the construction of Anhui Sanan Optoelectronics Co., Ltd. Wuhu Optoelectronics Industrialization (Phase I) project has ordered a total of 107 MOCVD equipment. 48 MOCVD machines are being commissioned, and 15 MOCVD equipments were officially put into production on February 26.

Since then, Sanan Optoelectronics reported in the semi-annual report in 2011 that “the company's 2010 fundraising project Anhui Sanan Co., Ltd. LED project is rapidly advancing, all MOCVD equipment ordered has arrived at the company, and 30 sets of MOCVD equipment have entered normal batches. In the production status, the remaining equipment is being installed and tested.

As of September 28, the reporter found that Sanan Optoelectronics did not announce more information about the commissioning of MOCVD equipment. The first phase of 107 MOCVD will be put into production until now, and it is still a big question mark.

The “stop construction” incident of the GCL-Zhangjiagang LED project was also interpreted by the industry as a decline signal for the domestic LED industry investment boom.

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