Sanan Optoelectronics recently issued a price increase notice, raising the price of S-30MB/S-32BB series products by 8%, which started the first shot of LED chip price increase in 2017. According to industry insiders, LED chips will be in short supply in 2017 due to a decline in supply capacity and a steady increase in demand.
Before 2016, LED chip manufacturers have expanded their business, resulting in overcapacity, and prices continue to decline rapidly, causing drastic changes in the LED industry. Many small enterprises with poor management have reduced production or transformation due to backward technology and other factors. A large number of LED enterprises have withdrawn from the market. At the same time, the state subsidies for MOCVD equipment have been reduced, and small enterprises lacking funds have been unable to expand production. The profits of overseas LED chip manufacturers have also fallen sharply, and the gross profit margin of products is low.
However, since 2016, with the steady growth of demand, the supply and demand relationship of the LED industry has gradually improved, and in recent days there has been an intensive product price increase. Industry insiders told China Securities Journal that not only LED chips are rising in price, but also screens are rising. Previously, manufacturers were too conservative in demand forecasting, resulting in insufficient capacity preparation. At the same time, intelligent products expanded rapidly, and the demand for products such as chip screens increased significantly. The superposition of these factors has intensified the contradiction between supply and demand.
On the one hand, the price increase of Sanan Optoelectronics is the cost; on the other hand, with the withdrawal of small and medium-sized manufacturers, the LED chip industry is mainly concentrated in the hands of several large manufacturers, and the seller status is stronger.
Concentration improvementExperts said that after the deep reshuffle of the LED industry, the supply side reform is more adequate.
From the upstream of LED, the degree of concentration is accelerated, and higher industry barriers are formed, and the disordered capacity expansion is curbed. At the same time, downstream application innovation drives the development of the industrial chain. From the current situation, LED lighting accelerates penetration, LED lighting intelligent, networked to promote the accelerated emergence of small-pitch display market, becoming the main driving force for the new round of LED industry growth.
According to estimates, by the end of 2017, the effective production capacity of LED chips is about 83.28 million pieces, and the demand is about 92.35 million pieces. Among them, the demand for lighting chips is 47.04 million, up 20% year-on-year; the demand for outdoor full-color displays is 26.02 million, up 5% year-on-year; the demand for small indoor space is 1.02 million, up 50% year-on-year; the demand for mobile phone backlights is 1.39 million. There are 440,000 tablets for backlighting, 6.99 million for computer and TV backlights, and 1.06 million for automotive lamps.
The industry believes that LED chip production capacity is still below demand. Considering the steady growth in demand in 2017, LED chips will be in short supply.
As the leader of the chip, Sanan Optoelectronics is the only company in China that is engaged in the production of full-color LED chips. The company is actively expanding its production capacity and is expected to have 400 MOCVD equipment by the end of 2017. Overseas LED giants such as Philips, Seoul Semiconductor, LG, Samsung, and CREE have basically stopped production, and new demand has been outsourced to Sanan. The company's overseas customer orders are expected to further increase.
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