Chinese LED chips factories suffers more in the year 2019

U.S. administration had imposed the tariffs on US$200 billion of Chinese goods, raising up to 25 percent from 10 percent on Friday, May 10, 2019. The Chinese LED chip factories have reached a record high inventory level due to increased capacity and decreasing market demand, as well as the trade disputes starting 2018. It is estimated that the sluggish LED industry might encounter even greater challenges.



The LED chip industry has suffered from low price competition owning to over supply as Chinese LED chip manufacturers continued their capacity expansion in the previous years. In the first quarter of 2019, the value of Sanan’s inventory came to CNY 2.96 billion (US$ 437.56 million), up by 10.37 percent compared to the end of 2018. For HCSemitek, the inventory value was CNY 1.55 billion (US$229.13 million) by the end of 1Q19, which has almost doubled compared with the same period in 2018.

In July 2018, the tariff imposed on Chinese imported products to the U.S. came to effect; later by September, more Chinese goods including more than 30 categories of LED lights was imposed with 10 percent tariffs. The 10 percent tariffs would have been raised to 25 percent by the beginning of 2019 but a truce was announced in December 2018.

The tariffs-imposed products took around 70% of Chinese LED lights products exports. In order to avoid the extra duty, most of the buyers from the U.S. have made extra orders by the end of 2018. Therefore, they will still need some time to resell the products that were bought in advance. Now the 25 percent tariffs begin, the oversupply in the LED chips industry will become worse. As the tariffs are very high, related companies face serious hits. Some of them would consider shift their production out of mainland China.