The two highest entry barriers of the LED industry – in-house production capacity of LED chips and vertical integration – are critical factors in determining whether a company can successfully secure its leading position in the LED industry, said Ben Fan, chairman of Neo-Neon.

From a lighting fixture manufacturer to a vertically-integrated LED manufacturer, Neo-Neon (1868-HK; 911868-TW) saw the tremendous opportunity in LED lighting. Not only did it expand the upstream LED chip production capacity, the company also plans to strengthen its competitiveness by accelerating its vertical integration of the industry chain.

Emphasizing that the core competence lies in the upstream chip manufacturing, rather than the downstream package applications, Neo-Neon will continue to expand the upstream (In)GaN capacity and increase self-sufficiency ratio. Neo-Neon Chairman Ben Fan indicated at the investor conference held on December 18, 2009, that the company currently has five (In)GaN MOCVD machines in Heshan City, Guangdong Province, with a monthly production of 450 million units.

Moreover, the company plans to expand the upstream (In)GaN production capacity and has been actively urging the cooperation of equipment manufacturers. It is estimated that there will be another five MOCVD machines in Yangzhou before May 2010, and 10 more from May to the end of 2010; totaling 20 MOCVD machines by the end of 2010, increasing its self-sufficiency ratio substantially. The goal of Neo-Neon is to increase the number of MOCVD (In)GaN machines by 30 sets.

Apart from emphasizing the importance of in-house production capacity, Neo-Neon is also placing considerable emphasis on the upstream and downstream vertical integration of the industry chain. At present, the LED upstream chip makers, midstream packaging and downstream module production, which manufactures plastic injection, are all produced in-house in order to manage key material sources. In particular, as the decorative lights and stage lights are highly customized products, Neo-Neon will design, open modeling, and ensure consistency in the production process. This not only greatly enhances the design flexibility and delivery speed, but also offers cost advantage.

Ben Fan pointed out that Neo-Neon is not an OEM; Neo-Neon will continue to cultivate and promote "Neo-Neon" as a global brand.