Figure 1 Revenue of major sapphire manufacturers in Taiwan from 2011 to 2012 Shenzhen Guan Chen Electronics Co., Ltd. is a High-tech enterprise that integrates R&D, design, manufacture of computer peripheral products.The products include Thunderbolt Docking Station,USB Docking Station,USB Hubs,USB Adapter, Thunderbolt Cable , SSD Enclosure , HDD Enclosure . Our company adheres to the principle and motto of Being sincere, Responsible, Practical to meet the needs of markets and customers with high quality technology and management. We commit ourselves to new product development and also stress the exploring of international markets. Thunderbolt 4 Docking Station,Thunderbolt 4 Multiport Docking Station,Thunderbolt 4 Dock Usb Docking Station,Thunderbolt 4 Docking Station For Macbook Shenzhen GuanChen Electronics Co., Ltd. , https://www.gcneotech.com
The High-Tech LED Industry Research Institute (GLII) estimates that the LED sapphire market in Taiwan in 2012 is about 1.6 billion yuan, down 27% year-on-year.
In the case of tough profits, the pace of vertical integration of vendors is accelerating. The future PSS (patterned sapphire substrate) will become the key to the profitability of sapphire manufacturers in Taiwan, but it is still difficult to reverse the industry's decline in the short term.
9 companies' revenue decreased by 25% year-on-year
In 2012, among the 12 LED sapphire manufacturers in Taiwan, the sales volume was Xinjing Diamond, Jingmei Application and Zhaoyuan Technology. Among them, the total revenue of 9 LED sapphire listed companies was about 1.52 billion yuan, down 25% year-on-year.
In terms of specific corporate performance, in 2012, eight listed companies experienced a setback in revenue. Among them, Xinjing drill revenue was about 328 million yuan, down 34% year-on-year. Jingmei's application revenue was approximately 316 million yuan, down 24% year-on-year. The biggest decline was in Hejing Optoelectronics. In 2012, revenue was about 30 million yuan, down 63% year-on-year.
Ruijie Technology has benefited from the continued increase in PSS orders. In 2012, revenue increased to 178 million yuan, a year-on-year increase of 159%. In terms of profitability, in 2012, four LED sapphire listed companies achieved profitability, but most of them were small profits. Among them, only Ruijie Technology, which is mainly engaged in PSS, achieved substantial profit in 2012, and it also achieved profitability for two consecutive years.
In terms of losses, Hejing Optoelectronics is in a state of loss for two consecutive years.
GLII believes that the main reason for the decline in the scale of the LED sapphire market in Taiwan in 2012 is that the price of the product has dropped sharply compared with that of 2011, resulting in the embarrassing situation of many LED sapphire manufacturers in the “incremental increaseâ€.
Strengthen the layout of the Chinese mainland market
In recent years, the LED industry in mainland China has developed rapidly, and the demand for sapphire is also growing rapidly. Due to the gradual increase in dependence on the Chinese mainland market, it is imperative for Taiwanese sapphire manufacturers to increase their efforts to layout the mainland under strict control of production costs.
In 2012, Xinjing Diamond selected Jiangsu Zhangjiagang as the first production base in mainland China. In the first phase, it plans to invest about 30 million US dollars to expand the capacity of sapphire polished sheets, and the long crystal part will move some of the crystal growth furnaces of the Taiwan headquarters to the mainland. 
In the third quarter of 2012, Jingmei was put into production at the sapphire substrate plant in Yancheng, Jiangsu. Calculated on a 2-inch sapphire substrate, the existing monthly production capacity has reached 200,000 pieces. In the future, equipment will be gradually expanded with the growth of customers' demand, and the products will be mainly sapphire polished sheets.
Zhaoyuan has invested in Shandong Yuanhong to get involved in the former segment of Changjing. In 2012, Shandong Yuanhong raised 10 million US dollars to replenish working capital, purchase machinery and equipment and expand the plant. Together with the previous investment of 13 million US dollars, Zhaoyuan's total investment in Shandong Yuanhong reached 23 million US dollars. In terms of production capacity, the current production capacity is about 120,000 pieces with a 2-inch sapphire polished sheet.
Compared with the LED chip manufacturers in Taiwan, the pace of the above-mentioned sapphire manufacturers in the mainland market is relatively slow. Considering that the production capacity of local sapphire manufacturers in mainland China will enter the release period in 2013, the competition faced by sapphire manufacturers in Taiwan will become more intense.
Table 1 Capacity of sapphire substrate manufacturers in Taiwan, China in 2012 (calculated in 2 inches, 10,000 pieces) 
Vertical integration has become a trend
GLII believes that after a wave of investment expansion in 2011, sapphire is no longer a market dominated by a few manufacturers. In the future, as market competition intensifies, the price increase of 2-inch sapphire substrates is not large, and large-size sapphire substrates and PSS will also find a balance between supply and demand in the process of gradually decreasing prices. Faced with such market price trends, sapphire manufacturers will face greater pressure to seek profit.
Whether the cost can be minimized will be an urgent problem to be solved in front of sapphire manufacturers in Taiwan. GLII believes that sapphire manufacturers need to make efforts in the following three aspects: first, to increase the self-made rate of sapphire crystal rods; second, to increase the proportion of large-size sapphire production capacity; third, the product structure has shifted to PSS with higher gross profit margin.
On January 1, 2013, Sino-US Blue Crystal and Zhaoyuan Technology, a subsidiary of Zhongmeijing, formally merged with Zhaoyuan Technology as a surviving company. This is another strong alliance between sapphire manufacturers in Taiwan after the announcement of the merger of Zhaojing Technology and Xinjing Diamond Technology in 2011.
Integrating the long crystal, slice and PSS one-stop industrial chain model will become an important way for sapphire manufacturers in Taiwan to control and reduce costs.
After the merger of Zhaoyuan and Sino-US Blue Crystal, the scale of production capacity will leap to the first place in Taiwan. The first echelon consisting of Jingmei, Zhaoyuan and Xinjing Diamond has been formed, and the sapphire industry in Taiwan has entered the era of the Evergrande.
PSS is difficult to support the future
At present, the shipment of 2-inch polished sapphire substrates still accounts for a major share, but the gross profit margin is only about 10%, so it basically does not contribute to the profitability of manufacturers.
Since last year, sapphire substrate manufacturers have increased the capacity of PSS to increase overall revenue and profitability, and actively expand the PSS market share.
At present, sapphire substrate manufacturers such as Sino-US Blue Crystal, Zhaoyuan, Xinjing Diamond, Jingmei, Hejing Optoelectronics are significantly increasing the capacity of 2 inch and 4 inch PSS.
However, due to the continued expansion of new sapphire manufacturers in China and Taiwan in 2012, it is likely that oversupply will result in a surge in bargaining chips for downstream extension manufacturers, which will drive a rapid decline in PSS prices.
Affected by this, in the next two years, Taiwan's sapphire substrate manufacturers will face the dilemma of revenue and profit decline.
GLII believes that due to the rapid rise of sapphire manufacturers in mainland China and the decline in PSS prices, the size of the sapphire market in Taiwan in China is expected to decline by more than 10% year-on-year in 2013. 
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GLII: 2012 Taiwan sapphire market size of about 1.6 billion yuan
[Source: Gaogong LED's "LED Research Review" magazine February issue GLII/覃å®æ˜‚] In 2012, the price of LED sapphire remained at a low level, and the revenue and profit of LED sapphire manufacturers in Taiwan were retrogressive.