SMD LED package: ignored cake

SMD LED package: ignored cake
——SMD LED packaging capacity will not be excessive, but will benefit from overcapacity in the upper and middle reaches

Abstract: In the mid-stream of the LED investment boom, the package is often forgotten, and the policy level does not support the focus. The traditional LED package has indeed entered the era of low-cost competition. The author through the analysis of SMD LED distribution, supply, demand, technology, the SMD LED cake is not only huge, but also benefit from the surplus of the upper and middle reaches. Under the enlightenment of Taiwanese business expansion model, the author draws conclusions that three manufacturers deserve attention.

Keywords: SMD LED, global distribution, investment scale, key equipment, technical barriers, industry surplus
SMD LED package industry: forgotten cake
-have no excess capacity, will benefit from over loads of upstream and midstream

First, SMD LEDs are developing rapidly, but they are relatively small in the packaging industry.
SMD LED is a new type of surface mount semiconductor light-emitting device, which has the advantages of small size, large scattering angle, good uniformity of illumination, high reliability, and various colors including white light. Therefore, it is widely used in various electronic products. SMD LED products have much room for brightness enhancement and cost reduction on the upstream chip side than other LED products, and have greater market demand in downstream applications, especially in large-size LED backlights and LED lighting.

From a global perspective, China's Taiwan packaging production ranks first in the world (more than 60% of the world). The main enterprises are Yiguang, Guangbao, Guanglei, Qihong, Hongqi, etc. The industry has clear division of labor in the middle and lower reaches, and industrial chain supply and marketing. Stable, especially after the packaging manufacturing is transferred to the mainland, the production cost is more competitive. It is expected that in the next 5-10 years, the Pearl River Delta, the Yangtze River Delta and Fujian will become the world's LED packaging centers.

From the perspective of the mainland market, the domestic SMD LED market was almost completely occupied by suppliers in the United States, Japan, South Korea and Taiwan a few years ago. Although foreign manufacturers still occupy most of the market share, since the SMD LED products of Foshan Guoxing Optoelectronics Technology Co., Ltd. have been put into production in 2000, Chinese local suppliers have grown rapidly. Now, there are 20 to 30 suppliers in the industry, most of which are concentrated in Shenzhen, Dongguan, Guangzhou and Foshan in Guangdong. A few companies are located in Jiangsu, Zhejiang and Fujian. Leading companies in the industry include Foshan Guoxing Optoelectronics, Guangdong Hongli Optoelectronics, Shenzhen Ruifeng Optoelectronics, Jiangsu Wenrun Optoelectronics and Jiaguang Electronics.

In terms of production capacity, the gap between Taiwanese and mainland enterprises is large.

Table 1: Comparison of production capacity of major SMD LED companies in Taiwan and mainland China from 2009 to 2010

company location	company name	2009 production capacity (KK / month )	2010 production capacity forecast
Taiwan	Billion light	1000	2000
	Dongbei	400	600-800
	Yu Hong	300	350-400
	Hong Qi	550	650
	advanced	350	450
mainland	National star	200	250
	Kyushu	115	150
	Ruifeng	57	85

Source: National Semiconductor Lighting Industry Alliance CSA

However, LED packaging continues to flourish, but SMD LED's market share is only a small part of China's LED packaging industry, with sales in 2007 only 10% to 15%. In the past five years, when the output and sales of the entire LED industry increased by 30% and 20% respectively, the growth of SMD LED industry is still very slow compared to the whole industry. In 2008, SMD LED revenue increased by only 5% to 10 %.

Second, SMD LED technology barrier is higher
The packaging technology of the traditional Lamp LED has been developed more maturely, the barriers to entry in the industry are lower, and the products have entered the stage of low-price competition. The key industrial production technology of SMD LED is still only mastered by a few large enterprises. For the miniaturization or power requirements, the packaging technology is fundamentally different from Lamp LED. The barriers to entry in the industry are high, mainly reflected in the following aspects. :

Product manufacturing technology
A. Compared to traditional Lamp LEDs, the Chip LEDs in SMD LEDs are very small, such as the ultra-thin Chip LEDs for mobile phones, which are only 0.3mm thick. Chip LED package needs to solve a series of problems caused by miniaturized structure, including: control of circuit board thickness, control of equipment and mold precision, control of gold wire arc during gold wire bonding process, dicing size control, plastic sealing process PCB deformation problems, bonding of epoxy resin to PCB, etc.
B. Compared with the traditional Lamp LED, the high-power LED package in SMD needs to solve a series of problems caused by large heat dissipation and high light distribution requirements, including: high light extraction efficiency, good heat dissipation effect, and suitable for mass production. Technology, new heat sink design technology brought by thermoelectric separation, precision optical design and precision mold technology corresponding to different light output characteristics, new solid crystal technology, test binning technology in mass production, new multi-layer encapsulation structure design technology, etc.
C. At present, Chip LED white light technology is relatively mature, and the key production technology of high-power white LED needs to be further improved. The main production processes and technical difficulties are as follows:

A. Apply YAG (yttrium aluminum garnet) phosphor to the blue LED chip, use the blue light emitted by the chip to excite the phosphor to emit yellow-green light, and yellow-green light and blue light to synthesize white light. The process requires relatively low preparation, high efficiency and high practicability. However, because the viscosity of the carrier gel is a dynamic parameter, the phosphor will be precipitated due to the specific gravity greater than the carrier gel, and the precision of the dispenser is limited, the control of the uniformity of the coating amount of the phosphor is more difficult. b. (Red, Green, Blue) Three primary colors Multiple chips or multiple devices are illuminating and mixing into white, or white light is generated by using a blue chip and a yellow-green two-chip complementary color. This type of production can obtain white LEDs with high color rendering index and wide color gamut. However, due to the difference between optical parameters (such as wavelength and light intensity) and electrical parameters (such as forward voltage), the light attenuation is inconsistent. Controlling white light parameters is the key to this technical route.
c. Apply RGB phosphor to the UV chip, and use the violet light to excite the phosphor to produce three primary colors to form white light. Since the main problem at present is that the ultraviolet light chip and the RGB phosphor are less efficient, the epoxy resin is easily decomposed and degraded under ultraviolet light irradiation.
2. Process flow management and learning curve
SMD LED packages are ultra-fine, mass-produced. Miniaturized packaging requires high manufacturing precision. In the case of mass production, improper handling of a production detail can lead to a large number of products failing, causing significant losses to the enterprise. Therefore, SMD LED packaging not only puts higher requirements on packaging equipment and packaging technology, but also requires strong process management and strict control of each production detail.

At present, the true theory of the LED industry surplus, the author in the "LED industry will be surplus after 3Q 2011, 2014.6-2016 general lighting market will open, it is recommended to pay attention to 4 types of enterprises", has analyzed the LED midstream in The 3Q surplus in 2011 will gradually emerge.

Third, the SMD LED package will not be surplus, but will benefit from the decline in chip prices in the future.
Based on the above analysis, due to:

1. Domestic SMD LED packaging products mainly come from Taiwan and mainland China 2. SMD LED technology barriers are relatively high. It is expected that there will not be many new competitors transformed by foreigners during the reporting period.
Then, we mainly focus on:
1. Expansion of capacity of mainland SMD LEDs 2. Expansion of SMD LEDs based on Taiwanese companies and establishment of factories in mainland China
Major manufacturers of SMD LEDs in mainland China: Expansion projects often include not only SMD LEDs, but also LED terminal applications, including non-LED products such as fluorescent lamps.

Table 2: Expansion of major SMD LED manufacturers in mainland China in 2010

Mainland SMD manufacturers	Tender time	project total investment	Construction capacity	2011 , 2012 new production line capacity forecast
Guoxing Optoelectronics	September-October 2010	19489.07 million	Introduce foreign advanced equipment such as ASM, GARTER, DISC, etc., and optimize the production process to expand the production scale and increase new varieties of thinner and smaller Chip LED and PLCC LED. The project has added 2.4 billion Chip LEDs and 480 million PLCC LEDs per year.	The construction period of the project is 2 years. In 2011, there was no capacity generated by the new production line. In 2012, 480 million new ones were added.
Guangzhou Hongli Photoelectric	September 2010	33266.35 million yuan	The total investment of the project is 332,266,500 yuan, and the capacity of surface mount LEDs is 5.52 billion pieces.	The completion time is unknown. There is no capacity generated by the new production line in 2011. In 2012, about 1 billion new ones were added.
Sichuan Jiuzhou Optoelectronics Technology	June 2010	4.5 million yuan	The annual output of MR-16 spotlight series is 3 million, the number of T5 and T8 lamps is 766,000, the number of street lamps is 133,000, and the production capacity of high-power LED is 25 million.	The completion time is unknown, and it is optimistic that there will be no production capacity caused by new production lines in 2011. In 2012, about 5 million new ones will be added.
Shenzhen Ruifeng Optoelectronics	——	——	In January 2010, he obtained an industrial investment of 80 million yuan from a color TV giant in Shenzhen.	It is expected that the production capacity of new production lines will not be produced in 2010 and 2011.
Jiangsu Wenrun Photoelectric	Year 2008	The initial investment of 65 million yuan	2009 estimated income of 65 million yuan, the specific product portfolio is unknown	NA
Xiamen Hualian Electronics	——	——	——	It is expected that the production capacity of new production lines will not be produced in 2010 and 2011.
Shenzhen Guoye Starlight	——	——	——	It is expected that the production capacity of new production lines will not be produced in 2010 and 2011.

Source: China Optical Optoelectronics Association

The new expansion projects of major SMD LED manufacturers in mainland China are mainly tendered after June 2010, plus construction time, installation time, and trial production time, which will take nearly 1-2 years. No new production line will be formed in 2011. Capacity; new capacity in 2012 is estimated to be 1/6-1/3 of the designed capacity. Even with a similar expansion plan in 2009, capacity was released in 2011 and 2012, and the proportion of new capacity to the original production line capacity is not large.

In 2011 and 2012, there is another new capacity in the technical transformation of SMD LED company and the utilization of idle capacity of the original production line. In view of the current SMD LED capacity utilization rate of about 90%, the increase in idle capacity can be released by up to 10%; The resulting new capacity will take a while from the successful development to the smooth application. It is not expected that a large amount will be released.

Moreover, from the policy level, only 11% of the LED investment in 2009 has invested in the packaging industry, and fewer SMD LEDs have been invested. In the “Opinions on the Development of Semiconductor Lighting Energy-Saving Industry” issued by the 2010 Development and Reform Commission, the packaging is not in the key support areas. within. This may not be a good thing for the development of the industry, but it is not a big advantage for the industry leader, and can avoid the overcapacity of the industry caused by the large investment in MOCVD.

Then, let's pay attention to the expansion of non-continental enterprises represented by Taiwanese companies. Taiwan's Yiguang, Shunhong and foreign industry leaders have begun to set up factories in the mainland. It is expected that in the next 5-10 years, the Pearl River Delta, the Yangtze River Delta and Fujian will become the world's LED packaging centers. While improving the technical level of China's semiconductor lighting industry and the international competitiveness of the industry, they have also intensified competition in the domestic market. Below, it is the main non-continental enterprise that expanded in mainland China in 2010.

Table 3: Major Hong Kong and Taiwan enterprises that expanded in mainland China in 2010

Origin	Manufacturer name	Specific forms
Taiwan	Jingyuan Optoelectronics, Guangbao Optoelectronics	The LED epitaxial wafer and die produced by Jingdian will be packaged by Lite-On and shipped to the mainland LED TV factory.
Hong Kong	Hemingli Group	Zhenmingli Group has a complete production chain including chip manufacturing, LED packaging, LED applications and controllers. Heshan Lide Electronics Industry Co., Ltd. will focus on SMD series in 2010, focusing on 3528 SMD LEDs, providing high quality LED package products for other downstream LED lighting applications.
Taiwan	Hon Hai	Setting up factories in two places in mainland China is still to meet their own packaging needs. Belongs to the initial involvement of the LED industry, no resource control involved in the chip

Source: China Optical Optoelectronics Association

The Taiwanese manufacturers that set up factories in the mainland before 2010 are as follows. At present, there is no information on the substantial expansion of mainland branches:

Table 4: Situation of Taiwanese manufacturers set up in the mainland

Taiwanese manufacturer	Mainland investment company	Set up time	Shareholding ratio	Main
Billion light	Guangzhou Hengguang Electronics	1991.01	100%	LED manufacturing
	Yiguang Electronics (Suzhou)	2001.02	100%	LED manufacturing
Lite	Lite-On Electronics	1995	100%	Display/lamp/SMD LED Manufacturing

Source: National Semiconductor Lighting Industry Alliance CSA

In terms of production capacity, the expansion of non-continental enterprises will not pose a substantial threat to mainland manufacturers. However, there are two expansion modes that are worthy of attention:

1. The external industry chain integration model, such as the production chip of Jingyuan Optoelectronics - Guangbao Optoelectronics Packaging - the mode of application of the mainland TV factory, not only the SMD LED manufacturer Lite-On, but also the high point of the film And the mainland TV factory is at the bottom of the industry chain, earning meager profits. Moreover, the industry integration model helps to establish channels, and it is difficult for latecomers to enter.
2. The internal industry chain integration model, such as Hong Kong Zhen Mingli, a group that runs through the middle, lower and middle reaches of the industrial chain, not only establishes channels, but also maximizes the profits of the entire industry chain. Through the introduction of the automatic machine in 2009, Lide Electronics Industrial Co., Ltd. has been able to achieve an annual output of 5.4 billion LEDs. The company plans to continue to expand its production capacity in 2010, bringing the lamp capacity to 6 billion and the SMD series capacity to 1 billion. Among them, 3528 SMD LEDs account for 77% of the total SMD, which will lower the cost of the overall package.

For SMD LED companies, it will benefit from the decline in LED chip prices. In the "LED industry will be surplus after 3Q 2011, the general lighting market will open in 2011.6-2016, it is recommended to focus on 4 types of enterprises", the author analyzed the MOCVD crazy investment The surplus of the upper and middle reaches, due to the international situation is not optimistic, it is expected that the price of chips will decline faster. The SMD LED package is relatively limited, and the SMD LED product has a large brightness increase and cost reduction space on the upstream chip side than the Lamp LED product. It is expected that this neglected cake will bring huge profits to the industry leader.

The decline in chip prices will increase the gross profit margin of SMD LEDs. How much improvement? Based on the data of domestic SMD LED leader Guoxing Optoelectronics, it is concluded that:

Table 5: The impact of the price change of Guoxing Optoelectronic LED chip on the gross profit of LED package products

LED chip average unit price decline	In 2007 LED package products gross profit increase	In 2008 LED package products gross profit increase
1%	1.09%	0.92%
5%	5.47%	4.58%
10%	10.95%	9.15%
18.28%	20.01%	16.73%

Source: Guoxing Optoelectronics Prospectus

It can be seen that in the case that the LED chip expansion speed far exceeds the SMD LED package expansion speed and the SMD LED package expansion speed is relatively slower than the LED terminal product market growth rate, the sharp collapse of the chip price will increase the gross profit margin of the SMD LED product. Considering the different sensitivities of different companies, the price of LED chips has dropped by 1%, and the gross profit of SMD LED products is expected to increase by 0.8%-1.1%.

Fourth, it is recommended to pay attention to three types of enterprises
1. Industry integrators, preferably external industry chain integrators
From the inspiration of Taiwanese companies, industry integrators help maximize the overall benefits of the industry chain. China's LED packaging industry is currently divided into segments, each is a war, small factories are mostly, and the grades are not high. The high-end chips required by larger packaging manufacturers all rely on overseas imports. Although the mainland LED packaging industry has reached the stage of scale and heavy brand management, resource integration is king, but due to the limitations of regional politicians' performance economy, the integration of external industry chain is not easy. At present, the form of vertical integration within the enterprise is more common in mainland enterprises, such as Sanan Optoelectronics involved in packaging, street lamp production, Silan micro-involved package, display screen and so on.

2, industry leader
SMD LED competition is still relatively fierce compared to the upper and middle reaches, and the industry leaders have advantages in the following:

u On the fund side, SMD LED packaging not only needs to purchase expensive advanced production equipment imported from abroad, but also requires funds to continue to invest in research and development. At present, an SMD LED packaging production line is being built. The investment in production equipment and test equipment needs millions of dollars. Different types of products also need different plastic molds, tape machines and test machines to match them, and the price of each of these machines is up. Million yuan
u On the technical side, subsequent technical updates and product upgrades also require continuous large-scale R&D investment and personnel reserves.
u Cost, large-scale mass production will greatly reduce the cost of the company's SMD products
u On the customer's resources, LED is a key component of signal indication and backlight of electronic equipment. It is not a terminal consumer product. Its direct customers are mostly professional application product manufacturers, so it is difficult to establish in a short period of time through regular marketing means such as advertising. Market brands, manufacturers' recognition of LED quality can only be based on long-term cooperation. At the same time, in order to maintain their trade secrets, application manufacturers usually do not change easily once they have selected raw material manufacturers.
The mainland's current major SMD LED listed companies are as follows:

Table 6: List of SMD LED listed companies in mainland China

Numbering	Continental SMD LED manufacturer	Type of listing
1	Guoxing Optoelectronics	Listing
2	Guangzhou Hongli Photoelectric	Unlisted
3	Sichuan Jiuzhou Optoelectronics Technology	Unlisted
4	Shenzhen Ruifeng Optoelectronics	Unlisted
5	Jiangsu Wenrun Photoelectric	Unlisted
6	Xiamen Hualian Electronics	Listed company Lianchuang Optoelectronics Holding subsidiary
7	Shenzhen Guoye Starlight	Listed company Dazu Laser Holding subsidiary

Source: National Semiconductor Lighting Industry Alliance CSA

In view of the fact that Dazu Laser's "LED equipment and products" accounted for only 13.38% of the operating revenue (2010 mid-year report), the SMD LED business was partially listed; and the technical advantages of the joint venture business are not obvious, and the SMD LED business is not listed at the same time. Therefore, it is recommended to pay attention to Guoxing Optoelectronics. For specific analysis, please see "National Star Optoelectronics: SMD LED leader grows steadily, and its performance will increase significantly in 2012."

3. Small enterprises with advantages in market segments
The industry leader is in a state of momentum, and small companies are not without living space. Compared with large companies, small companies also have their own advantages. They respond quickly and can provide professional customized services to customers. For mobile phone products, the life cycle of new models is up to half a year, the cycle of new product development is very short, and the design changes are also many. It is difficult for foreign manufacturers to meet the customization needs of some customers.

LED display modules, LED backlights and other non-standard products specially designed for specific customers emphasize individualized design and service, requiring new mold opening cycle, fast product delivery, fast and convenient technical service, if the company can not follow the progress of customer requirements Completion of product design and development will result in the risk of losing customers, and small businesses that can continue to follow in these segments are worthy of attention.