LED industry has a long industrial chain, each link of the technical characteristics and capital characteristics are very different, from the upstream to the middle reaches of the lower reaches of the industry to gradually reduce the threshold. The upstream epitaxial material and chip, with the "double high" characteristics of typical high technology, high cost, high technology content, relatively capital intensive; midstream packaging in the technical content and capital investment to slightly lower, and application of downstream products of technical content and capital at minimal cost.

Investment LED upstream link is risky, the main reason is the rapid development of technology. In general, for the lighting market, the upstream LED technology is still in the primary stage of development, and technology improvement is a process of continuous and relatively fast, modified or disruptive change is upstream enterprises must face the issue. So the upstream of LED not only has the "double high" characteristics, but also has higher risk. From the capital property point of view, the upper reaches of the LED is more suitable for risk investment.

Chip quality mainly depends on the quality of the epitaxial materials, high quality epitaxial materials in the market it is difficult to obtain. The vast majority of upstream manufacturers mainly through the purchase of MOCVD equipment, epitaxial growth, chip manufacturing, so most chip makers are the extension of production capacity, which leads to the upstream epitaxial and chip industry has a high degree of concentration; the current global master core technologies with independent intellectual property rights and the production capacity of enterprise is one of the few, so led the upstream industry showing winning technology characteristics.

In recent years, China's domestic chip companies in the government's support and guidance to develop rapidly. In 2008, China's chip output reached 1 billion 900 million yuan, the chip localization rate of 49%, has become the world's third largest GaN chip production base. At present, the main domestic chip manufacturers have Xiamen Sanan, Tongfang, Jiangxi Lianchuang, Shanghai lanbao, Dalian Road beauty, Hangzhou Silan azure, Shanghai ray, Shenzhen Century Jingyuan, Wuhan Di source and its products luminous efficiency has exceeded the traditional bulbs or halogen lamps, but with the world's advanced level still has certain gap and most of the enterprise doesn't have enough independent R & D capability and related intellectual property.

But this phenomenon is gradually improved. In recent years, domestic enterprises have increased their efforts in technology innovation and level, part of the enterprise has own core technology route, such as through independent research and development for core technology of crystal can photoelectric, through mergers and acquisitions to obtain the core technology of Dalian Lu Ming. Therefore, in the upstream led, with creative new technology, its own core technology, capacity, product with the right price, to enter the high-end areas at the same time, the integrated LED industry chain enterprises strong, worthy of investor attention.