The Chinese government LED equipment subsidy policies lead to a global increase of more than 1,000 MOCVD equipment in 2011, which is the root to the industry’s oversupply situation, according to a Chinese-language Commercial Times report. Manufacturers have yet to fully install and utilize all the units purchased. However, a new subsidy policy brings good news to manufactures. Since China’s  painful lesson from LED and solar energy subsidies, latest LED subsidies will be shifting from upstream manufacturers to the consumer end, said Robert Yeh, chairman of Everlight. Commercial users will receive 30 percent subsidy, while general users 50 percent. This marks the start of a fair business competition.

With the last round of subsidy, a MOCVD unit priced at US $1.5 million (NT $45.4 million) could receive a government subsidy of RMB 10 million (US $1.67  million), making the units practically free, according to calculations by a LED manufactur. MOCVD units make up the majority of costs for chip manufacturers, which creates unfair competition.

Although a wave of new demands for LEDs has already swept the globe, chip manufacturers are not expanding production. Using the largest global equipment manufacturer Veeco as an example, the company shipped about 80 MOCVD equipments last year. It is estimated that shipments this year will be similar, showing chip manufacturers are controlling the pace of expansions. . Aside from Epistar maintaining a steady production expansion pace, domestic LED chip manufacturers such as Forepi and Genesis Photonics Inc. also have no plans of heavily investing in purchasing new units, and are increasing production efficiency instead.