To promote its LED industry, China will begin to manufacture MOCVD equipment within its own territory in early 2012 - a move which will lower the costs for the production LED epitaxial wafers as well as the prices of LED chips in China.

China has been developing MOCVD equipment to reduce the reliance on international firms. The first batch of MOCVD equipment will be tools that can produce 48 units of epitaxial wafers. Equipment that can produce bigger amount such as 100 and 200 units will also be introduced in 2012.

The reasons for developing its own MOCVD equipment are to lower cost and simplify operations. The market expects LED lighting applications to take off, hence demand for MOCVD equipment is likely to increase. However, the costs of the imported equipment are harder to control. In addition, it takes time to learn to operate equipment from international firms. Therefore China-made MOCVD equipment is aiming to use a "one button" mode to decrease the level of difficulties in operating the equipment.

With government subsidies, in 2010 alone China makers incepted 245 units of MOCVD equipment. In 2011 there was plan to add 600 more, but due to low market demand, new addition of MOCVD equipment only reached 420 units. Despite the lower-than-expected increase in the number of new tools, the capacity expansion has been causing the price of LED chips to drop significantly due to oversupply.

Industry sources believe the China-made MOCVD equipment will only be sold around US$1-1.6 million per unit compared to equipment from international firms which cost around US$2 million.