NEW YORK ( TheStreet) -- It's been a difficult week for Veeco ( VECO) and Aixtron ( AIXG), the makers of core equipment in the LED market.

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Veeco shares are down 15% through midday Friday, and Aixtron shares are down by roughly half that amount. All it took was a downgrade from Citigroup -- based on fears that the Chinese subsidy support for the equipment makers' sales will be cut off -- to send the stocks down early in the week.

The LED equipment stocks tanked again on Thursday afternoon, though, after a Chinese newspaper quoted an official from Yangzhou as saying that the subsidies will be cut as of July 1, 2011. The Chinese press report also quoted the Citigroup analyst.

Between Citi and the Chinese region where the LED subsidies first began, the LED equipment makers can't catch a break. On Friday, Aixtron shares continued sliding, while Veeco share bleeding stopped after its 15% loss for the week.

That said, several LED stock specialists say that all the focus on the China subsidy issue, particularly as it only focuses on one city in China, is missing the forest for the trees when it comes to analyzing what will make or break LED stocks in 2011.

For one, Mark Miller, LED analyst at Noble Financial, noted that several Chinese provinces had previously indicated plans to cut the LED subsidies for equipment purchase in the third quarter 2011. The quote from the Yangzhou official in the Chinese press, therefore, was stating a fact already expected.

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