February 28, 2012 — The formal announcement of China’s light emitting diode (LED) subsidy program, likely in the first half of March, may drive tool utilization expansions for LED chip makers, reports Barclays Capital.
Based on Barclays’ latest checks with Chinese government officials, they expect the LED subsidy program will be focused on downstream luminaires, with the central government providing subsidies for LED luminaires and lighting products that have been centrally qualified and listed in the government-driven LED product catalog. Additionally, certain municipal governments may match the subsidies of the central government, lowering the product cost further.
Preference will be given to domestic LED component and luminaire manufacturers, though foreign suppliers will benefit from the program as well. As for the likely impact to LED lighting adoption in China, the likely demand ramp will first be seen in the commercial and industrial segments, before spreading to the consumer segment down the line.
What does this mean for metal-organic chemical vapor deposition (MOCVD) tool expenditures? The anticipated growth in LED demand this year will be insufficient to drive the need for new capacity, given very depressed industry utilization levels. China’s LED maker consolidation is likely to take at least 1-2 years, posing a continued headwind to MOCVD demand. MOCVD replacement tools therefore are not going to meaningfully contribute to demand in 2012, prompting Barclays to lower its tool-buying forecast from 400 to 315. The analysts also lowered 2013 estimates from 440 to 350 tools.