Cut-throat competition in China is killing off the makers of LED chips.
Already a half of them have gone to the wall and those which remain are the large, state-backed companies.
Talking to Reuters, Nomura analyst Anne Lee said that sluggish global sales of TVs and computers may further cut LED chip prices by 20 percent this year, and consolidation or closure are the only options for China's smaller LED manufactorys.Sanan Optoelectronics, which is China's top LED chipmaker with a market value of $2.8 billion, and Elec-Tech International will be one of the few survivors because it receive subsidies and incentives from the government.
This is because it is China's strategy to have its biggest companies to survive in this restructuring.
However, for the majority of LED firms, the government is slowly rolling back incentives, including tax breaks, free land and more than $1.6 billion in cash to buy LED chip-making equipment.
These have propped up the industry for more than three years.
Proview, which is more famous for its war with Apple over the iPad trademark in China, is grappling with slumping LED prices and fierce competition that have dragged down earnings for other LED companies. Others hit include Hangzhou Silan Microelectronics and Foshan Nationstar Optoelectronics.
Many LED companies are operating their factories at half capacity in China.
Overcapacity has shut hundreds of small Chinese makers of LED lighting, according to analysts.