Leading LED chip companies step up production expansion, inventory rise and price decline

Recently, Aoyang Shunchang said on the interactive platform that the price of LED chips has decreased compared with last year, and the related costs have also declined. Aoyang Shunchang is committed to the R&D, production and sales of LED chips. Huai'an Aoyang Shunchang's LED chips are highly recognized by the market for their stable performance and high cost performance.

In 2015, the price of LED chips in mainland China plummeted, accelerating the transfer of global LED wafer orders to China, which led to a sharp increase in orders from Chinese manufacturers in 2016 and the expansion of capital expenditures. Compared with the trend of reducing investment and even exiting the LED industry in other regions of the world, Chinese manufacturers are still the most active in the LED industry. In 2017, the main MOCVD equipment expansion is from Sanan Optoelectronics, Huacan Optoelectronics (300323), and Photoelectric (300102) and so on.

After this large expansion, the production capacity of several leading manufacturers will gradually cross the threshold of 1 million pieces per month, and the concentration of LED chip production capacity will be significantly improved. At present, the problem faced by LED chip manufacturers is that although the profit situation is good, the inventory quantity is rising sharply. Compared with last year, in 2018, the inventory of Sanan Optoelectronics, Huacan Optoelectronics and Crystal Power Chips increased to varying degrees.

In the past two quarters, Sanan's inventory level has surged by more than 900 million. Q4 has increased by 510 million. Q1 has increased its inventory by 430 million in a single quarter. Huacan Optoelectronics also faces an increase in inventory, as of the first quarter of this year. Huacan Optoelectronics' inventory is about 780 million; Aoyang Shunchang is also facing such a situation. At the end of the first quarter of this year, its inventory value was 871 million, a quarterly increase of 73 million. The root cause of this phenomenon is the successive opening of new capacity of mainland LED chip manufacturers, but the terminal demand has not synchronized rapidly.

In addition, the production capacity of the new capacity is higher than that of the previous generation machine, which can reduce the production cost by 30%, which will strengthen the cost competitiveness of leading manufacturers such as Sanan Optoelectronics, Huacan Optoelectronics, and Dry Photo Optoelectronics. The chip maker of the device will accelerate the marginalization. Coupled with the increase in the inventory level of several major chip manufacturers, this also increases the risk of falling chip prices.

In fact, since the fourth quarter of 2017, LED chip prices have begun to decline. As the two largest LED epitaxial wafer and chip manufacturers in China, Sanan Optoelectronics and Huacan Optoelectronics cut their LED chip prices by 20% in the fourth quarter of 2017; then, in the first quarter of 2018, LED chip prices continued to fall.

In this regard, Huacan Optoelectronics believes that the current chip as an industrial product, there will certainly be a decline, slightly decreased in the first quarter, but the magnitude is not large, probably fell by 2-3 percentage points, the price of the second quarter to the second half of 2018 The trend must be a steady decline.

On the investor interaction platform, Sanan Optoelectronics responded that “the price of LED chips has a landslide risk”, saying that the price of chips should be reduced every year because the cost is decreasing. Whether it is an active price cut or a passive price cut, the active price cut is an action based on the cost reduction.

The price of LED chips has ended a two-year stable and small upward trend. The price reduction of the chip for LED packaging manufacturers has also eased the cost pressure caused by the price cuts for two consecutive years.

After experiencing nearly two years of rising raw material prices, rising costs, and rising demand for supply, at the end of 2017, as the demand for downstream led displays continued to expand, the demand for LED chips continued to rise in order to meet market demand. Increase sales and expand production have become the consensus of LED chip companies. The data shows that in 2017, the output value of LED chips in mainland China reached 18.8 billion yuan, accounting for nearly 40% of the global LED chip production. China has more than 1,600 MOCVDs. According to reports, China's LED epitaxial wafer and chip manufacturers are expected to be installed in 2018. 200-250 MOCVD equipment. Leading major chip companies have stepped up their production expansion, so what will this expansion tide trigger in the LED chip industry?

1 downstream market demand increased LED chip expansion tide

As the core of the LED display, the LED chip plays a vital role in the development of the led display. The current achievements and future development of led display rely on the unremitting efforts of the chip. At the same time, the expansion of the LED chip industry is directly related to the rising demand for downstream led displays. In the past two years, the small-pitch product market broke out, driving the growth of the entire LED display industry, bringing greater demand for LED chips. It is reported that by the end of 2017, the demand for LED chips is about 92.35 million pieces, of which 1.02 million pieces are required for small indoor space, a year-on-year increase of 50%. According to the performance reports released by major listed companies, the small spacing is still the mainstream of the industry development. As the small spacing is the market expanding, the demand for LED chips will also increase.

At the same time, China is a big exporter of led display. China's LED display products are sold all over the world. With the increasing number of LED display exports, overseas orders have also made the domestic LED chip market expand infinitely. The domestic LED industry has other countries. The price advantage that is unmatched in the region, especially in the low-end market, is so high that foreign manufacturers have begun to purchase products from domestic LED chip manufacturers by means of OEM. This has further pushed up the demand for domestic LED chips, and the output value of LED chips and the global market share have increased significantly, providing a large environmental background for the expansion of LED chips.

In addition, in recent years, due to the government's policy support and intensive investment in R&D of enterprises, a large number of LED industry technology experts and teams from Taiwan and Korea have joined local enterprises, and the average technical level of domestic LED epitaxial chip companies has developed rapidly. The international advanced level provides a solid technical support for LED chip companies. Due to the high concentration of the LED chip industry, large enterprises have mastered strong technical capabilities. With the shortage of supply, the expansion of LED chips will follow.

2 output increased LED chips ushered in price cuts

As we all know, the expansion of LED chip production capacity will bring about the growth of potential production. The growth of output needs to be absorbed by the corresponding demand growth. If the demand cannot keep up with the expansion of production, the supply will have a stage surplus, and the oversupply will directly lead to Product prices have fallen. Since the fourth quarter of 2017, the price of LED chips has started to decline. As the two largest LED epitaxial wafer and chip manufacturers in China, Sanan Optoelectronics and Huacan Optoelectronics cut their LED chip prices by 20% in the fourth quarter of 2017; at the same time, LED prices fell more than in the first quarter of 2018. 10%.

The price reduction is divided into active price reduction and passive price reduction. Active price reduction is an action based on cost reduction. However, the price reduction of LED chips is different from the past. As the cost of LED chips is decreasing, the price of LED chips is decreasing year by year, but This does not affect the overall price of the product and the moisture, but also makes the chip companies profitable. In the first quarter of 2018, the LED enterprise report showed that the top-ranking growth of net profit was in the forefront of chip companies.

In addition to not affecting the profit of LED chip experts, this round of LED chip price cuts, the downstream chip buyers, the cost pressure has also been relieved to a certain extent. When the price of raw materials and related accessories rises, the LED display manufacturers are squatting in the market or for some purpose can only withstand the pressure and maintain the original price. The price reduction of the upstream chip will cause the cost price of the LED display to decrease accordingly. The price of display products will also be reduced within a certain range.

3 technology continues to upgrade, the market scale continues to expand

It is also because of the continuous maturity of LED chip technology, which reduces the research and development cost of LED chips, and improves the penetration rate of LEDs in existing applications such as lighting. In addition, with the continuous maturity of Micro LED technology, both brightness and resolution Degree, display effect and screen response time are more advantageous. It is regarded as the next-generation display technology. The comprehensive use of Micro LED has greatly increased the market demand for LED chips while promoting the continuous improvement of LED chip technology. Leading LED chip companies have begun to lay out the layout of Micro LED chips.

Nowadays, LED chips are getting smaller and smaller, and the number of chips that can be cut on a certain size of epitaxial wafer is increasing, thus reducing the cost of a single chip. On the other hand, the power of a single chip is getting bigger and bigger, as it is now 3W, and will be in the future. To 5W, 10W development. With the active promotion of domestic government policies, the technology of domestic LED chip companies has been continuously upgraded. Nowadays, it has reached the level of international big-factory technology, and the products made in China are also going global, gradually expanding the global market share.

With the technology gap between domestic technology and international big manufacturers getting smaller and smaller, foreign companies slow down the pace of expansion, and even some companies are gradually shrinking production capacity, domestic LED chip production capacity is increasing, and in the long run, the domestic LED chip market The scale is bound to continue to expand, especially the market share of the first echelon LED chip manufacturers will increase significantly.

4 industry competition is fierce and super-strong situation is formed

The expansion of LED chip capacity will become the main tone in the next few years, and industry competition will become more severe. With the advancement of LED chip production and processing technology and the improvement of product quality, the LED chip industry will accelerate the formation of a concentrated trend. The situation of the leading enterprise, Evergrande, is obvious, especially in the case of mainland LED chip manufacturers with the support of local governments, relying on funds, The advantages of scale and other aspects have been actively expanded, and the production capacity of LED chips has shifted to the mainland, and the concentration of the industry has increased significantly.

It is understood that in 2017, the mainland accounted for 58% of global production capacity, and the top three manufacturers accounted for 68% of the overall capacity of the mainland. In recent years, the localization of MOCVD equipment has helped domestic leaders to consolidate their competitive advantages. At the same time, Sanan Optoelectronics and Huacan Optoelectronics have integrated sapphire substrates upstream, and mainland LED chip leading enterprises are strong, and SMEs do not pay attention to product quality and technology. Innovation, with the help of the times, will make survival more difficult.

In addition, LED chip leading enterprises have strong capital, many companies have begun to expand their business through mergers and acquisitions, and carry out LED industry chain layout; some enterprises have entered new industries; more enterprises have gone abroad through mergers and acquisitions overseas companies to the world. In the field of LED chips, many chip companies have diversified through mergers and acquisitions, but at the same time, this move has further opened the gap between SMEs and SMEs.

From the current development of China's LED chip industry, the expansion of LED chip companies is already underway, the price of LED chips is gradually decreasing, the industry is more concentrated, and a super-strong situation has begun to take shape. From the perspective of the big situation, the development of the LED chip industry is very impressive. Whether it is from corporate profits or technological development, it has made great progress in recent years, which also promotes the development of led display.

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