According to industry sources, as Chinese manufacturers of LED epitaxies and chips continue to invest more capacity, but the market demand remains unchanged, leading to a situation of oversupply in the market of LED chips, which eventually leads to excessive inventory pressure on Taiwan and domestic manufacturers of LED chips.

At the end of the third quarter of 2018, the stock value of Sanan Optoelectronics reached 2.578 billion yuan ($376 million), an increase of 3.6% over the previous quarter and 102.2% over the previous quarter; by the end of September 2018, the stock value of Huacan Optoelectronics reached 1.237 billion yuan, an increase of 33.2% over the previous quarter; and the stock value of Qianzhao Optoelectronics reached 407 million yuan, a year-on-year increase. The increase is as high as 64.1%.

For Taiwanese manufacturer Crystal Optoelectronics, the inventory value at the end of the third quarter of 2018 reached 172 million US dollars, down 1.4% from the previous quarter, but up 11.9% from the same period last year.

Although manufacturers of LED chips have increased inventories in order to slow down the price decline, at the same time, from the beginning of 2018 to the end of September, the price of LED chips has dropped by 15-20%. As Sanan Optoelectronics is expanding its capacity and some additional capacity is expected to come into effect in mid-2019, the oversupply of LED chips may continue to deteriorate in 2019.