China-based tier-two LED chipmakers such as Silan Azure, Epilight Technology, and Tsinghua Tongfang have seen on-year decreases of around 30-50% in their accumulated revenues so far in 2012. Gross margin of the three firms has been below 10%, according to Digitimes Research.

Due to oversupply in the market, Silan Azure has been relatively slow at taking on capacity expansion. In 2012, the firm's total equipment reached 24 units. In the future, the firm plans to have an annual LED chip capacity of around 4.356 billion units at its plant in Chengdu, China.

Tsinghua Tongfang's original plan was to install all 50 units of equipment in its plant in Nantong, China, but it has decided to push the schedule back to after 2012.

With strong support from its corporation, Epilight Technology plans to install 200 units of MOCVD equipment at its plant in Hefei, China but has yet to announce a specific schedule.

Compared to the other two firms, Epilight Technology has a relatively comprehensive distribution channel. The firm is responsible for producing upstream LED chips while other subsidiaries within the group are responsible for packaging and producing LED lighting and displays. Silan Azure has a subsidiary that provides packaging services, but the firm has yet to enter the end market product segment. Tsinghua Tongfang produces LED chips, backlight modules, lighting and display products but issues OEM orders for packaging.