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LED Manufacturing Bubbles in China Bursts like the Solar Panel and Wind Turbine Bubbles

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The LED chip industry flourished in China as the government provided capital subsidy to small companies to buy MOCVD tools which help in making these chips. With oversupply, prices have crashed to below costs leading to bankruptcies. China is now seeing the 3rd Green Industry Bubble Bursting with LED chip manufacturers in China going bankrupt in drovers. With massive oversupply and crashing prices, LED chip makers especially the smaller ones are seeing huge losses and shutting down operations.

China’s policy of promoting green industries through massive subsidies led to a big capacity build-out by thousands of companies. Using the government’s support of providing cheap land, capital and even equipment, these companies built capacity without worrying about demand. Now as reality sinks in, all but the biggest state companies are finding survival impossible. It is a story that has already played out first in the wind turbine industry where hundreds of players entered where there was a space for a only a few. The result has been devastating with hundreds bankrupt and massive job losses. Even the largest ones like Sinovel has defaulted on payments to suppliers and are seeing shrinking margins.

In Solar Panels the results have been equally tragic when thousands of small solar panel companies opened supported by provincial governments. These companies have a snowball’s chance in hell but they are still continuing exacerbating the global industry downturn. Now the biggest ones like LDK and Suntech are facing insolvency due to the government’s lopsided policies of supporting green industry. This has also led to a backlash from foregoing governments with the US imposing duties on Chinese imports of solar panels and wind towers. The government like the solar and wind industries now wants the small LED chip makers to go out while retaining the big ones. Foshan, Silan and others face survival questions while the bigger ones like Sanaan and Elec-Tech keeping adding capacity. Note it is only government support that is leading to this crazy situation that companies are adding equipment even as 50% of the industry equipment lies idle. The industrial overcapacity in China is being acutely felt in the Green Manufacturing Industry where the government policies have been the most supportive.


A light-emitting diode (LED) is a special type of semiconductor device that emits visible light when an electric current passes through it. It has two sides – one with an abundance of electrons called “n-type semiconductor” & the other with bunch of holes that need to be filled by electrons known as “p-type semiconductor “. With the help of these p-n junctions, these semiconductors can control the direction of the flow of electricity. The LED works on the principle that when electrons lose energy, they move from a higher orbit to a lower orbit. The energy lost is in the form of light photons. The color of the light emitted depends upon the frequency of the light photon released. The higher the frequency, the greater is the energy release. Gallium nitride is the light emitting ingredient in LEDs. It is used in the sapphire-based blue and green LEDs. Its practical application is in traffic signals & in lasers in high-definition DVD players. The Indian market of LED products like LED TVs & lightings is also growing.


H. J. Round of Marconi Labs discovered Electroluminescence as a phenomenon in 1907. Later in 1955, Rubin Braunstein of the Radio Corporation of America reported on infrared emission from gallium arsenide (GaAs) and other semiconductor. Nick Holonyak can be called the “father of the light-emitting diode”. He developed the first practical visible-spectrum (red) LED in 1962, while working at General Electric Company.


    • Uniform Lighting – the light is spread evenly over the lens which make them brighter than normal luminous lights.
    • Energy Efficient – In contrast to the normal lights where a higher percentage of energy is lost as heat, LED light gives off negligible amount of heat so a higher amount of electricity is converted into light. This phenomenon of release of light is known as “electroluminescence”.
    • Longer Life – These lights have greater durability & hence are more reliable. They can function for decades, if properly installed.
    • Small Size
    • No Filtration Required – Unlike Incandescent lamps producing only white light which needs to be filtered for applications such as traffic lights, the light generated by LEDs, need not to be filtered. Thus there is no additional loss of energy.


      • LCD panel backlighting white LEDs are used in flat-panel computer displays.
      • Remote Controls of televisions, DVD players, and other domestic appliances – Infrared LEDs are used here.
      • Automotive Lighting – LEDs are used particularly in brake lights, turning signals & indicators.
      • Traffic Signals – Groups of LEDs are packaged into arrays & arranged to form a traffic light.
      • Aviation Lighting


LEDs are created on a substrate of sapphire & hence are expensive. However, a technique is developed to create LEDs on low-cost, metal-coated silicon wafers. The sapphire-based technology, however, is currently too expensive for widespread domestic-lighting use, costing at least 20 times more than conventional incandescent and compact fluorescent light bulbs. China with its low production cost & labor cost has made the manufacturing of LEDs very cheap & affordable. There are LED bulbs on the market which can replace the regular CFLs,the cost has fallen rapidly to around $20. With major Chinese makers getting into the manufacture of the sapphire substrates and wafers, it is expected that the general lighting market will be completely taken over by LEDs.




Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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