MOCVD subsidy policy implemented by Yangzhou Municipal government to end in July 2011

TAIWAN & CHINA: Since MOCVD subsidy policy was primarily implemented by the Yangzhou Municipal Government, several other local Chinese governments followed suit and a rush of investing LED Epi wafer plants occurred in China.

However, when will the rush of MOCVD fiscal subsidy policy fade away? LEDinside was honored to have an opportunity to visit the Director of Yangzhou Merchants Bureau, Sun, Xiao-Jun. Sun indicated that it is impossible to offer this fiscal subsidy indefinitely, and subsidy policy of Yangzhou will end in July 2011. Furthermore, most local governments in China are considering whether they will follow suit.

Yangzhou Economic Development Zone was established in 1992 and has been aggressively developing the green energy industry, which focused primarily in solar energy, smart grid, and SSL industries in recent years.Source: LEDinside.

Further, it successfully attracted leading firms in every industry, including GCL and Suntech Power Holding (STP) which are key players in the solar power industry. Also, as for the smart grid area, the Smart Grid Demonstration Park is run in this development zone.

In addition, the Ministry of Science and Technology (MOST) regarded Yangzhou as one of the development bases for SSL industry in 2007. Currently, various LED enterprises have invested in Yangzhou, including FOREPI, Neo-Neon, Edison Opto, Unity Opto, Wooree, SFT Lighting, amongst others.

Furthermore, it has become a complete supply chain from sapphire substrate, Epi wafer, packaging, to monitor backlight and lighting application.Source: LEDinside.

In addition, Yangzhou Municipal Government initially provided the subsidy of RMB 10 million per set of MOCVD equipment. In particular, the difference between Yangzhou Municipal Government and other local governments is the subsidy is granted in cash, while other local governments offer a tax reduction as the subsidy.

For example, 50 percent of subsidy is offered after MOCVD equipment installation, 30 percent of subsidy is given during the trial period, and a final 20 percent of subsidy is provided at the testing phase of mass production.

Therefore, the subsidy successfully attracted many LED Epi wafer manufacturers to invest in Yangzhou, including FOREPI, Rainbow Optoelectronics Material, Neo-Neon, Long-Yao Opto.Source: LEDinside.

However, under the circumstances that various local governments followed suit to attract business investment, excess equipment investment intensified the concern of oversupply in the LED industry.

Not only has the Chinese Central government been aware of this phenomenon, the financial resource of local governments will deplete gradually. Therefore, Yangzhou has announced that MOCVD fiscal subsidy policy will end in July in 2011, indicating that in order to receive equipment subsidy, manufacturers are required to complete the installation of MOCVD equipment before July 2011. Moreover, other local governments are considering following the same policy.

Perspectives from LEDinside:
Generally speaking, the process of MOCVD equipment installation in China in 2010 was slower than expected. Apart from the delay of plants establishment, the oversupply in the latter half of this year also made most LED manufacturers adopt a wait-and-see attitude.

Therefore, to stimulate investment among LED enterprises, several local governments had to specify an end-date in their fiscal subsidies. Therefore, LEDinside expects LED enterprises to install MOCVD equipment before the subsidy deadline, which may lead to another wave of aggressive MOCVD equipment purchase in the first half of 2011.