LED Indsutry in Taiwan and China Swept by Restructuring in 2013

Looking back at the development of the LED industries in Taiwan and China throughout 2013, industry executives generally paint a picture of the Law of the Jungle, with restructuring taking the form of big players encroaching on territories of weaker competitors, similar players banding against primary competitors, and struggling manufacturers choosing to exit.

Market consultant LEDinside feels the elimination amid the industry will continue into 2014, quoting chipmaker Epistar Corp. Chairman B.J. Lee's comment: “LED chip and packaging sectors will continue reshuffling and the industry consolidation pattern will not end until 2015 or 2016.”

The LED industry has been recently divided in opinions on whether the industry will be eventually dominated by vertically consolidated players or horizontally consolidated ones. Lextar Electronics Corp., a typical vertically consolidated maker, further fortified its unmatched position by acquiring LED packager Wellypower Optronic Corp. on February 1, 2013.

In China towards the end of 2013 a spate of insolvency, result of tighter credit, underselling rivalry and uncompetitive products and technologies, forced out prominent LED lighting makers, including Zhongshan Xiongji Lighting Factory and Zhongshan Wealthy Epitaxy Technology Lighting. Both Xiongji and Wealthy Epitaxy were among the handful of China's approximately 10,000 LED lighting makers with annual revenue up to RMB100 million (US$16.6 million).

To control debt defaults, a Guangdong branch of a sizable state-owned bank recently urgently notified all its outlets throughout the province to thoroughly investigate LED makers asking for loans, and to report details of such investigations, status of loans, and risk hedging.

Bankruptcies also struck Taiwan's LED industry in 2013, underscored by the July closure of Chi Mei Lighting Technology Corp. that sent shock rippling throughout Taiwan's LED industry considering the prominent shareholders of the company, Chi Mei Corp. and Innolux Corp. Ubilux Technology Inc., mostly held by computer chipmaker PowerChip Technology Corp. also left the market in August.

Partnership deals increased between Taiwan's and China's LED industries by the end of 2013, including between Formosa Epitaxy Inc. (FOREPI) and chipmaker San'an Optoelectronics Co., Ltd. and that of Epistar and luminare maker Hangzhou Yuzhong Gaohong Lighting Electrical Equipment Co.,Ltd.

San'an of Xiamen acquired nearly a 20% stake in FOREPI, becoming the Taiwan LED chipmaker's largest shareholder. However, the Taiwan government imposed three preconditions for the marriage: no patent and technology transfers, and no talent poaching from FOREPI; as well as no San'an-involved management in FOREPI.

In July, Epistar and Gaohong formed a joint venture in China to make LED lighting fixtures, underlining throughout 2013 the trend of traditional lighting-fixture manufacturers migrating to the LED fixture sector being the major driver of  maturing LED applications in lighting.

LED makers in Taiwan and China extended their consolidations to North America and Europe, with San'an acquiring 100% of LED solution provider Luminus Devices of the United States and its 151 world patents for US$20 million while Everlight Electronic Co., Ltd. of Taiwan, the world's No.1 LED packager by volume, bought German luminarie maker, WOFI.

Traditional lighting-fixture makers migrating to the LED packaging sector also accelerated in 2013. In China, the homegrown NVC Lighting Holding Ltd. and Elec-Tech International (H.K) Co., Ltd. announced in August an LED packaging joint venture. In Taiwan, lamp maker China Electric Mfg. Co., Ltd. acquired GIO Optoelectronics Corp. (KL)