LED investment upstream to see "red and yellow" downstream selection "leading"

At present, domestic listed companies have joined the LED investment boom. As the profits from epitaxial wafers and chips account for nearly 70% of the entire industry chain, the purchase of MOCVD equipment into the upstream epitaxial wafer and chip field has become the main direction of LED investment.

Among the domestic listed companies, Sanan Optoelectronics has ordered 107 units, Dehao Runda has ordered 130 units, and Ganzhao Optoelectronics has ordered 23 units. Silan Micro has ordered 6 units, and only four of the listed companies have ordered 266 units. In 2009, there were only 150 MOCVD machines installed nationwide.

At present, the investment preference of MOCVD for LED production equipment in the Chinese market is consistent with that of the world, mainly blue-green LED, and among the above four listed companies, only all of Zhaoguang Photovoltaic purchases are MOCVD of red and yellow LEDs.

We judge that as the global blue-green LED production capacity is doubled, blue-green LED chips have the potential to cut prices significantly. As the equipment investment of red and yellow LEDs remains basically stable in the future, the possibility of red and yellow LED chips being significantly reduced is less than that of blue-green LED chips. Therefore, we recommend investors to pay attention to the main products of the company, red and yellow LEDs.

From the perspective of downstream packaging application companies, we believe that companies with economies of scale and technology and raw materials for packaged applications are preferred.

Price is a major obstacle to the large-scale promotion of LEDs, especially for general home lighting. However, with the advancement of technology and the expansion of production capacity, LED is expected to fall to the generally accepted price, which provides conditions for the large-scale promotion and application of LED.

In this context, the demand for LED downstream applications will burst out, and listed companies will benefit from related packaging applications, including Guoxing Optoelectronics, Zhejiang Sunshine, Fangda Group, Dazu Laser, and Foshan Lighting.

Although there are nearly 2,000 packaging companies in China, the scale of enterprises is generally small. We believe that with the large-scale promotion of LED applications, enterprises in the packaging field are expected to appear strong and strong, and packaging companies with economies of scale and patent technology continue to grow. Investors are advised to pay attention to Guoxing Optoelectronics, a leading LED packaging company in China. The company is one of the top three LED packaging companies in China and the largest SMD LED packaging company.

In addition, the listed companies that supply raw materials for packaging applications also have considerable competitive advantages. These companies include LED connector manufacturers Derun Electronics and LED high-heat-conducting copper-clad board manufacturing company Shengyi Technology. The products produced by these two companies are all imported substitutes. There are almost no related companies in China. In the future, as the scale of LED applications continues to expand, the benefits will be higher than those of general packaging applications.


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