NANCHANG - Besides being an architectural marvel, the six-kilometer-long Bayi Bridge these days has one more attraction the city can be proud of - its array of light emitting diode (LED) lamps.

The "LED lamp zone" in Nanchang is not confined to the giant bridge across the Ganjiang River.

This year, it is expected to grow into an area lit by 10,000 LED lamps, encompassing 17 thoroughfares, 100 buildings on either bank of the river, 1,000 scenic spots and all expressways in and around the city.

In a way, it reflects the booming LED industry in the country.

In January, an agreement was inked for a 12-billion-yuan manufacturing base to be built in Wuhu, Anhui province. Another 6-billion-yuan investment in an LED project in the same city followed the month after.

In Changzhi, Shanxi province, two LED projects, worth 1.1 billion yuan in total, is expected to start production by year-end. The Central China LED Photoelectric Center, a four-storied building used for LED display and block trade, will be built in Zhengzhou, Henan province, the agreement for which was inked on Tuesday.

Such agreements are becoming common across key cities in China. Money is flowing in, construction is humming round the clock, and workers are toiling away as rows of factories and workshops are erected from nothing, stuffed with expensive hi-tech equipment that will make these LEDs.

All eyes are on China's growing market for LED products, but the threat of overproduction is also looming.

Lack of technical breakthroughs and global competition has marred some bright prospects, and very few companies have been able to withstand the pressure.

And, demand for LED TVs will be affected by products made out of organic light emitting diodes (OLEDs), a better technology, according to a report released by Nomura Securities on Wednesday.

However, since there is no clear sign of reduction in production capability, chances are high that overproduction will be the order of the day.

To regain market share, LED TVs will have to be priced lower by around 60 percent, the report said.

If that is done, "companies at the bottom of the industrial chain will be most affected, not us", Hou Changgui, Administration Supervisor of Lattice Power (Jiangxi) Co, one of the major LED chip producers in China, said in Nanchang.

Along the industrial chain, production of LED epi-wafers and chips account for about 70 percent of the profit, encapsulation of chips for less than 10 percent and applications, the rest.

Since only Japan, Europe and the US have smart technologies to produce epi-wafers and chips, most Chinese companies can only flock to the middle and bottom rungs of the value chain.

Of around 3,000 LED makers in China, 1,000 companies focus on encapsulation, less than 2,000 on application, and only fewer than 70 have been able to participate in the production of chips, according to the latest industry data.

"Traditionally, epi-wafers were made on silicon carbide (SiC) or sapphire underlay, but we managed to produce epi-wafers based on silicon underlay," Hou said.

The cost of one silicon underlay epi-wafer is about one tenth of the epi-wafers done through the sapphire underlay method, and those based on SiC are even more expensive than sapphire ones.

Besides, as the LED industry rapidly develops in China, dramatic surges in the price of sapphire have been witnessed, and it has often been in short supply. "But there is no need for such worries about silicon. At present, we are the only company that uses silicon," Hou added.

Inside the workshop, two workers in white full-length gowns shuffled along a narrow corridor between machines.

The tray for the production of epi-wafers was a frying-pan-shaped metal box, the insides of which were segmented into six circles, each containing seven silicon underlays. A lid shut out the box after the underlays were put in place.

Behind, six big Chinese characters, cut out of red paper, were stuck on the glass door, reading: "Less heat, more light".

LED chips have the potential to be widely used in lighting, and cell phone, TV and computer screens.

"When our technology grows more mature, we can make digital products like the iPad even thinner," Hou said.

When applied to the production of LED TVs, "our chips are less expensive and can last even longer", he added.

More importantly, domestic LED TV producers may no longer need to rely on the LED patents from Japan, Europe and US, and will be able get an edge in exports, he said.

"One of the leading domestic TV manufacturers is very interested in our technology, and has been eagerly courting us," Hou said.

Despite these advantages, this indigenous technology has yet to take up a substantial market share both at home and abroad.

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One major issue is that it has a much lower qualification rate than others, resulting in a cost per chip that is no less than those produced using sapphire or SiC.

Another problem is that chips produced in this way are more delicate and hard to handle, and "the company has to provide the clients with specialized instrument for encapsulation," said Hou.

Currently, as the company's limited production capability cannot cater to LED TV producers, chips produced from Lattice Power are mostly being used in LED lamps, such as the ones on Bayi Bridge.

"Our plan is to foster a complete industrial chain in this area," Qiu Yao, Director of Publicity of the Nanchang National Hi-tech Industrial Developing Area, said.

A 400-million-yuan investment in hi-tech machines will hike the company's production capability from 3 billion chips per year to 20 billion, becoming one the largest producers in China, local media reported recently.

Hou confirmed that the company's monthly revenue exceeded 10 million yuan recently, "and will continue to grow since new machines are to be put into production".

Driving his car around the lake in the hi-tech area, Qiu pointed to a piece of land, saying "there will be a screen manufacturing factory, and one day we may even bring in a silicon manufacturing company."

Far away, Bayi Bridge's glow reddened the rim of the night sky.