Another challenging year awaits Taiwanese manufacturers as major Chinese LED chip manufacturer San’an Opto acquires a total of 100 MOCVD reactors in September and December and have said that the company will continue to headhunt Taiwanese experts, according to a report of China Times.

The firm, well known for its price competitiveness, announced its receipt of subsidies from Xiamen and Tianjin authorities totaling RMB 242 million (US $38.9 million) for MOCVDs installation.

Having received MOCVDs subsidies from local authorities, Chinese LED manufacturers were able to launch low price LEDs. Even though Chinese authorities tightened the release of subsidy, San’an Opto and HC Semitek reportedly received their subsidies according to earlier agreement. San’an Opto released statements on December 15 and 22 stating the company received RMB 230 million and RMB 12 million subsidies from Xiamen Torch Hi-tech Industrial Development Zone Committee and Tianjin Binhai Hi-tech Industrial Development Zone Committee respectively.

When Xiamen San’an Opto was founded, San’an Opto Group planned 200 MOCVDs investment plan which totaled RMB 10 billion to make the company the group’s major production center. The company has acquired 50 MOCVDs each from AIXTRON and Veeco on September and December respectively, and has gained wide attention.

The 100 new MOCVDs production capacity is equivalent to 200 MOCVDs based on 2-inch 54 PCS, said Epistar ChairmanB.J. Lee. These new facilities are expected to enter production next year and the market supply will grow greatly.

Although San’an Opto will add 200 MOCVDs in the near future, downstream LED package manufacturers’ demand for LED chips remained normal. Moreover, not many manufacturers plan to acquire new equipment even as LED bulb market growth soared. There are potentially LED chip oversupply issues as San’an Opto’s actively expands production capacity might.

Chinese manufacturers have invested around RMB 10 billion in LED equipment in the past 6-7 years where 70% is coming from subsidy, according to industry insider. Subsidy is a deciding factor for Chinese manufacturer to stay competitive. Hence, once subsidies are canceled, only three to five companies will remain after the  current 20 LED chip manufacturers restructure, while second tier manufacturers might undergo  cut throat market competition, said an insider.