Market intelligence firm CCM says companies are increasingly focusing on "more minor amino acids", like valine, isoleucine, and glutamine.
As those products are mostly sold to the healthcare and medicine industries, the profit for producers is higher than that earned from bulk amino acids, such as glycine and taurine.
Some Chinese manufacturers are also looking to introduce amino acids in cosmetics, but the lion's share of the market is still accounted for by the feed sector, due to the huge demand for poultry, and the livestock-raising industry.
However, with more enterprises increasing capacity, an oversupply situation may occur as a result, warns CCM.
"The industry is already facing heavy environment pressure, which has been closely related to the fluctuations in the domestic amino acid price in the past few years. Recent years have seen increasing investments into China's amino acid production.
"Leading producers announced their latest development in production techniques or production expansion. Yet, such continual production expansion is likely to result in overcapacity in the foreseeable future, despite the growing market demand.
"Whether the overcapacity will become serious needs further observation on future production projects," added the firm.