LED supply and demand pattern analysis

2016 is the year of change in the LED industry. At the beginning of the year, small and medium-sized manufacturers were defeated by the LED winter, and international city giants such as Osram and Philips adjusted their strategies and shut down the product line. The overcapacity was alleviated. Local LED companies such as Sanan Optoelectronics, Mulinsen, and Feile Audio want to expand their coverage and technical strength through overseas mergers and acquisitions. 2016 is the year of change in the LED industry. At the beginning of the year, small and medium-sized manufacturers were defeated by the LED winter, and international city giants such as Osram and Philips adjusted their strategies and shut down the product line. The overcapacity was alleviated. Local LED companies such as Sanan Optoelectronics, Mulinsen, and Feile Audio want to expand their coverage and technical strength through overseas mergers and acquisitions. After the industry integration and production capacity clearing, the industry concentration has gradually improved and the pattern has gradually improved. In addition, the cost-end price increase and the mismatch between supply and demand have pushed the LED industry to ushered in four price hikes. The chip and package links are transmitted to the end products, corporate profits are rising, the industry is further returning to rationality, and the economy is picking up. Looking forward to 2017, especially in the development of emerging markets with high added value, small pitch, smart lighting, automotive LED, etc., we judge that the LED industry after the reorganization will have a better price trend under the influence of supply and demand. Supply and demand are different, the price increase of chips is expected to heat up in line with the order of industrial chain transmission. The LED chip enterprises at the front end of the industrial chain are mainly affected by raw materials, labor costs and manufacturing costs; 45% of the cost of packaging links comes from upstream chips; For example, 40% of the cost comes from the packaging. It can be seen that these three links have a mutual transmission effect, and the cost of the front end will be passed on to the downstream. Generally speaking, the mismatch between supply and demand will directly affect the price, and the change of price will reverse the supply and demand. According to the LED industry chain forecast, we believe that the annual output of LED chips will reach 73.68 million pieces (2 inches) in 2017. On the one hand, there is a disconnect between the expansion of the mid-stream packaging plant and the downstream application demand. The internal chain of the supply end can no longer be connected, and there is a difference between supply and demand with downstream applications. With the increase in demand for smart lighting, small-pitch display technology and automotive LEDs, the main melody of LED lighting penetration is still there, and the demand for chips in 17 years is 87.15 million. We judge that the LED chip price increase is expected to be clear. Target recommendation: Focus on Sanan Optoelectronics compliant with the industrial chain, at the chip end, we are optimistic about the 29% market share of the industry leader Sanan Optoelectronics. Based on the judgment of industry supply and demand, the company is optimistic about the future price increase. Compared with peers, Sanan has the following advantages: First, unparalleled effective production capacity, second, LED chip technology level has reached international lead, and third, the upstream of the chip industry chain has been completed, helping the company to seize the rapid rise of chip prices to achieve rapid performance. increase. Moreover, the compound semiconductor business is expected to bear fruit this year and is expected to become the foundry king of the 5G chip field. In addition, we are focusing on Hongli Zhihui and Guoxing Optoelectronics on the test side; on the application side, we are optimistic about the small-pitch display on behalf of Zhou Ming Technology and Liard. Production capacity clearing, from shopping to returning to rational LED is called the fourth generation light source. It is a semiconductor device that can convert electrical energy into light energy. Its energy saving, environmental protection, safety, long life and low power consumption are favored. It is mainly used in general lighting, display, backlight, decoration, automotive lighting and other fields. In addition to the downstream application areas, along the end products, the LED industry chain is divided into five major segments: substrate, epitaxial wafer, chip manufacturing, packaging and application. The chip produced by the mid-stream chip is transported to the downstream packaging factory and packaged into a single LED product to protect the chip. Therefore, for the number of LEDs required by the downstream application end, the matching degree between the chip and the package as the supply end and the downstream form the supply mechanism of the LED industry. Since 2003, China's LED industry has developed rapidly, covering upstream and downstream industrial chains including epitaxy, chips, packaging, and application products. Especially in the dual drive of backlight and lighting, the industry growth rate in 2010 reached 45%. However, since 2014, the lighting industry has become a major pillar due to the saturation of the backlight market and the price decline. Since then, there has been a chaos in the industry, and the low-cost strategy has been used to achieve small profits but quick turnover, which has led to resistance growth in the industry. In 2016, the industry showed signs of recovery and the annual growth rate rose to 23%. 2016 is the year of change in the LED industry. At the beginning of the year, small and medium-sized manufacturers were defeated by the LED winter, and international city giants such as Osram and Philips adjusted their strategies and shut down the product line. The overcapacity was alleviated. Local LED companies such as Sanan Optoelectronics, Mulinsen, and Feile Audio have expanded their coverage and technical strength through overseas mergers and acquisitions. After the industry integration and production capacity clearing, the industry concentration has gradually improved and the pattern has gradually improved. In addition, the cost-end price increase and the mismatch between supply and demand have pushed the LED industry to ushered in four price hikes. The chip and package links are transmitted to the end products, corporate profits are rising, the industry is further returning to rationality, and the economy is picking up. Under the adjustment in 2016, the LED industry structure, supply and demand structure, and price increase trend will undoubtedly become the focus of 2017. Looking forward to 2017, especially in the development of emerging markets with high added value, small pitch, smart lighting, automotive LED, etc., we judge that the LED industry after the reorganization will continue to increase its price under the influence of supply and demand. The pattern is improving. Supply and demand are different, the price increase is expected to heat up. The LED chip pattern is stabilizing, and the amount of equipment is increased. The LED chip link refers to adding electrodes to the epitaxial wafer for packaging and application. The LED epitaxial wafer refers to a specific single crystal film grown on the substrate substrate, which is the most technically demanding link in the entire industrial chain, directly affecting the final product quality and production cost. At present, LED epitaxial wafer production was the bottleneck in the development of China's LED industry, mainly using Veeco and German Aixtron's MOCVD equipment for epitaxial growth. In 2012, China's first self-developed MOCVD equipment was successful; during the 12th Five-Year Plan period, the state continued to strengthen its focus on the epitaxial wafer field and encouraged enterprises to expand upstream. At this point, the domestic LED epitaxial wafer technology has improved rapidly, and the products can reach the medium and high level. According to the data of Gaogong, if the MOCVD data is uniformly converted into the K465i model, the installed capacity of MOCVD machines in the world reached 3,130 units in 2015, of which China contributed 1473 units, accounting for 47% of production capacity. In addition to the scrapped equipment, in 2015 China's MOCVD possession was 1,220 units. Despite the significant increase in the number of MOCVD equipment in China and the increasing localization rate, MOCVD equipment as a production equipment for LED epitaxial wafers has always been a key indicator for calculating LED chips. Therefore, calculating the number of MOCVD equipment according to the industry pattern and the expansion of the manufacturer is the main method for estimating the supply of LED chips. Industry Development and Patterns In 2015, China's LED chip production grew rapidly, achieving 60% growth. However, the sharp increase in output is not optimistic. Under the chaotic image of weak demand in the European and American markets and low-cost competition in the industry, the price decline is also large. It is expected that the demand for LED chip industry will continue to increase this year. Chip companies are also holding high price hikes in price wars. The price decline trend has slowed down slightly, and the chip industry will accelerate integration. In the field of upstream LED chips, local chip manufacturers such as Sanan Optoelectronics, Huacan Optoelectronics, and Dehao Runda continue to expand their market share through expansion and integration, and the industry concentration continues to increase. In addition, the small factory closure and the market of crystal power are eroding, and the pattern of China's LED chips has stabilized. It is estimated that by 2016, the top ten manufacturers in the LED chip market will account for 77%, and the market may become a trend in their respective alliances. Based on the top three LED chip market, the three camps of Sanan system, crystal power system and Huacan+Aoyang Shunchang+Mulinsen system have taken shape. Most LED chip manufacturers are involved in the production of epitaxial wafers. By collecting the current MOCVD equipment of various enterprises, further official LED chip market share has a certain relationship with MOCVD possession. Moreover, in line with the industry concentration characteristics, manufacturers with expansion plans are big manufacturers. Therefore, by observing the investment situation of chip manufacturers on MOCVD equipment, it is possible to initially estimate the future production capacity trend. Expansion plan and capacity prediction until the beginning of 2016, the supply and demand problem of LED chip industry still needs to be resolved. With the 25% capacity of the company shut down, the supply of small plants is reduced and the downstream drive, the supply and demand structure is gradually adjusted; In the half year, downstream demand drove the upstream supply to a strong level, and once it appeared tight. Chip makers' expansion plans are also followed up. For example, the second phase of the Sanan chip project is on the ground, the Australian Ocean Shunchang equipment is added, and Huacan Optoelectronics has also launched a total investment of 6 billion yuan in LED epitaxy, chips and sapphire projects. In addition, medium-sized epitaxial wafer manufacturers are also launching expansion plans. We estimate that the total shipment of MOCVD equipment in mainland China will reach 232 in 2017. Based on the understanding of the general situation of the industry, the following assumptions are made: 1. Considering the aging of equipment, 80% of the equipment before 2015 is converted; 2. The new installed capacity in 2017 is divided into 4 quarters, and the average is added. That is, the monthly platform; 3. The production capacity is converted by a 2-inch 54-chip machine. The LED package test growth rate is slowing down, and the expansion of the atmosphere is rich. The LED package is packaged into a single finished product, protecting the chip to prevent its long-term exposure or damage, which can stabilize the chip performance, improve the light extraction rate and emit light. Efficiency and longevity. Moreover, the technology and capital threshold of the packaging process is relatively low, and the market is most closely connected, which has become the fastest growing part of LED production in China. Through the packaging methods of Lamp-LED, TOP-LED, Side-LED, SMD-LED, etc., the chip chip is formed into a granular shape after solid crystal mounting, gold wire mounting, phosphor coating, lens assembly and potting. Finished product. Industry Development and Patterns Since the beginning of 2015, the price of LED packaging devices in China has declined tremendously, exceeding 50%. The atmosphere of the industry's many years of melee needs to be resolved and officially entered the competition elimination period. The increase in penetration rate, the promotion of emerging markets, the increase in price of chips and the increase in downstream demand led to the slow recovery of the LED packaging industry in 2016, and the demand is on the rise. Driven by obvious cost advantages, application requirements and expansion of packaging manufacturers, China has already become the largest global LED packaging device production base, and the localization rate has increased rapidly. Since 2014, the fierce competition in the market has caused small and medium-sized factories to be forced to close or be merged. The size of the big factories is getting bigger and bigger, the signs of the group are showing up, and the concentration of the industry is increasing. At present, in addition to the traditional big plant Mu Linsen, Guoxing Optoelectronics, Hongli Optoelectronics and other LED packaging plants are also making efforts. The concentrated development of the LED packaging industry has become a trend, but unlike the upstream chip segment, the industry threshold is low, the concentration is not significant, and the reshuffle is still expected. As of the third quarter of 2016, the average gross profit margin of major LED packaging manufacturers was 21.42%, up 0.41% year-on-year. It can be seen that the superior packaging giants have improved their profitability after the price hike in September. Especially after the chip manufacturers and package manufacturers form a cooperation system, the profit margin will be upside. At present, in order to increase the gross profit and expand the market share, the major packaging manufacturers actively expand production on the one hand, and extend downstream or upstream on the other hand. Expansion plan and capacity prediction The packaging plant can have more financial strength to expand production in the multi-domain layout, the downstream market is improving, and the industry is improving. Especially after the merger, the strong and stable big companies continued to follow up on the production capacity, while the small and medium-sized factories that were blindly more annoying and put into production slowed down the production capacity after the industry shuffled. In addition, the packaging and testing links are directly linked to downstream applications, and the capacity is the most closely related to downstream demand. Therefore, paying attention to the current expansion of large factories is also a major criterion for judging supply. In the past two years, packaging manufacturers have aimed at the expansion of lighting, automotive LEDs and display panels, and the pace is significantly faster than that of upstream chip manufacturers, prompting LED chip manufacturers to increase supply. In October last year, Guoxing Optoelectronics released another 400 million in LED packaging projects, and the production capacity was overweight. In addition, Mulinsen, Hongli Zhihui and Jufei Optoelectronics have plans to expand production. Based on the industry market share and the proportion of production and sales, the following assumptions are made: 1. The ratio of production and sales of Jufei Optoelectronics is used as the benchmark; 2. The unit price of each LED product is uniform. We estimate that the LED packaging output in mainland China will reach 453 billion in 2017. The display will be added on both sides. The demand gap will be expanded. The LED application is the final step to form the final product. The application manufacturers will make LED packaging products into LED lighting according to market demand. Lamps, displays, LCD backlights and more. In 2016, the output value of LED applications reached 428.6 billion yuan, a year-on-year increase of 23.9%. The LED general lighting market has become a well-deserved industry pillar with an output value of 204 billion yuan, accounting for 47.6%. The display field is a new wave of low-pitch LED technology, with a production value of 54.8 billion yuan. In the field of backlighting, under the squeeze of new display technologies such as OLED and QLED, the growth is slow and it has entered a period of stagnant development. In addition to the traditional application of large categories, in recent years, intelligent lighting, small-pitch display technology and automotive LEDs are bringing demand growth to the industry. And under the call of incandescent lamp replacement, LED lighting penetration rate is still the biggest force of LED demand. Demand direction 1: LED lighting In the rhythm of incandescent lamps being quickly eliminated, LED has become the mainstream light source for lighting. According to semiconductor lighting calculation, the penetration rate of China's LED lighting products in China reached 42% in 2016, an increase of 10%, of which domestic LED lighting products output is about 8 billion, up 33% year-on-year; domestic products are about 3.8 billion, up 35% year-on-year. . In terms of market structure, local enterprises, with the support of the government, have the advantage of cost and market to defeat strong foreign manufacturers. Since 2014, foreign university manufacturers have chosen to withdraw or be acquired. China's lighting products market has gradually expanded, and the demand for upstream LED products has also surged. The development of LED lighting technology and the decline in the price of upstream LED chip materials have become a booster for the LED lamp market. Front-end chips and packaging and testing vendors continue to drive down product prices and reduce profits, providing opportunities for LED lighting penetration. Demand direction 2: Display + small spacing In the second half of 2016, the LED display industry has grown rapidly, with small-diameter displays contributing significantly. The small-pitch LED display features high-definition picture quality to meet consumer demand; in addition, its small pitch feature doubles the average number of LEDs used per square meter of LED display. Even when the demand area remains the same, the number of LED chips and packages used will increase by a factor of four. In addition, the small-pitch LED display has entered the market growth period. According to statistics, the output value of the small-pitch market is expected to increase at a compound annual growth rate of 21%, from 300 million US dollars in 2016 to 800 million in 2021. Dollar. Therefore, according to LEDinsides, the number of small-pitch LEDs will increase at a compound growth rate of 46%, and will consume 198 million particles in 2021. Faced with the huge pressure of capacity competition, many LED application manufacturers are in the field of small spacing, such as Liard, Ai Biesen. Driven by the small-spacing market last year, the company's profitability is outstanding. In the future, the small-pitch field will welcome more companies to participate, and chip and package requirements will be further enhanced. Based on the growth of each sub-application industry and the growth of chip demand, the following assumptions are made: 1. Based on the demand for chips in 2015, the number of segments will be divided into segments by market share; Field market capitalization growth rate estimated demand. We estimate that the demand for LED chips in mainland China will reach 84.92 million in 2017. In the three major links, the supply and demand transmission conforms to the order of industrial chain transmission. The LED chip enterprises at the front end of the industrial chain are mainly affected by raw materials, labor costs and manufacturing costs; 45% of the packaging link costs are from upstream chips; downstream is lighting, for example. 40% of the cost comes from the packaging. It can be seen that these three links have a mutual transmission effect, and the cost of the front end will be passed on to the downstream. In this way, we can explain the price increase of last year and the price increase of this year. First, chip makers change the price of different size chip products based on raw materials, cost, and downstream demand. Secondly, for the packaging enterprise, the chip end price increases, the entire cost end has improved. Generally, the company guarantees the profit by raising the price and increasing the automation rate, and has a certain ability to digest the upstream price increase. Finally, on the application side, due to the large number of market segments, the increase in demand in one area will cause insufficient supply in the field. Second, while the chips are heavily invested in hot industries, LED supply shortages will occur in other fields. Demand has increased, and price increases have spread to other non-popular applications. Generally speaking, the mismatch between supply and demand will directly affect the price, and the change in price will reverse the supply and demand.
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