Recession in the hottest LED chip industry is expe

In recent years, China has gradually become the world's major LED chip production base, and major domestic LED chip manufacturers are scrambling to expand production. The problem of overcapacity in LED chips is beginning to appear. Affected by this, chip prices fell

China's LED industry started in the packaging stage, and chips were mainly imported in the early stage. In recent years, with the rapid development of downstream industries such as LED lighting, the cautious expansion of major foreign LED chip manufacturers, the tight supply growth, and the policy support of domestic local governments, Chinese LED chip manufacturers such as San'an optoelectronics, Aoyang Shunchang, Huacan optoelectronics have increased their R & D investment, and have successively expanded their production relying on the advantages of capital and scale. The domestic LED chip industry has developed rapidly, and the global LED chip production capacity has gradually shifted to Chinese Mainland. At present, the global market share of China's LED chips has increased from 27.00% in 2013 to 37.10% in 2017

the price of LED chips has gradually declined

since 2016, due to the rising price of raw materials such as gold, silver and copper, the cost of core components of LED devices has gradually increased, while the demand for downstream end products has increased sharply, and the LED chip market is in short supply, so the price has increased accordingly

however, the improvement of manufacturers' technology has promoted the improvement of LED light efficiency, and the price of LED chips has been reduced through the improvement of light efficiency. With the increasing number of chips that can be cut on epitaxial wafers per unit area, the cost of chips gradually decreases, the price of chips also decreases year by year, and the return on investment in the industry gradually decreases. In this case, foreign LED chips are not willing to expand production, while domestic manufacturers accelerated the expansion during this period after mastering the technology

the expansion of domestic chip manufacturers has increased the production capacity of LED chips, resulting in a situation of oversupply, and triggered panic in the market about the imbalance between chip supply and demand and vicious competition. Since the fourth quarter of 2017, the price of LED chips has decreased significantly. San'an optoelectronics and Huacan optoelectronics, the two largest LED chip manufacturers in China, lowered the quotation of LED chips by 20 percentage points in this quarter. Since then, the price of LED chips has ended the steady upward trend in the past two years, and there has been a continuous decline. In addition, due to the slowdown in the growth of the downstream industry of LED chips and the impact of the trade war in 2018, the price of LED chips fell further. In the first three quarters, the low-end white light price fell by 30%-40%, and the high-end white light price fell by 10%-20%

the demand of the LED industry increased significantly in 2017. The downstream LED lighting, LED display and other major subdivisions need to reduce the friction between the spring plates, so as to drive the output value of the upstream LED chip industry to achieve a high-speed growth of 29%. At the beginning of 2018, the market generally predicted that the demand growth in that year would be as high as 20%. However, from the second quarter of 2018, there have been adverse factors in the market, such as the gradual increase in the Sino US trade war, the lower than expected macroeconomic and investment data, and the intensification of exchange rate fluctuations, which have had a certain impact on the demand of the LED industry, especially exports. Midstream and downstream enterprises in the LED industry began to actively destock, affecting the shipment and sales of upstream chip enterprises, resulting in an imbalance between supply and demand in the LED chip industry, accelerating the overcapacity of LED chip products, and promoting the further decline in the price of machine parts

under the adverse background of trade war, macroeconomic downturn, exchange rate fluctuations and so on, LED chip prices continue to decline, the performance growth rate of most LED chip manufacturers is lower than expected, and the growth rate of the LED chip industry in the whole year is higher than that in 2014 It is almost a fact that the cleaned samples are placed orderly in the sample basket and safely placed in the cooling tank for 7 years

according to the performance statistics of major domestic LED chip manufacturers, in the third quarter of 2018, the revenue of LED chip manufacturers was only slightly increased by Huacan optoelectronics, while San'an optoelectronics remained stable, and the revenue of other enterprises fell to varying degrees. In terms of net profit, except for the increase of Huacan Optoelectronics, other enterprises fell significantly, among which crystal electronics, Kerry technology and dry lighting optoelectronics fell by more than 100%. From the monthly revenue of major led companies in Taiwan stocks, the revenue of major LED chip companies in November 2018 was NT $2.2 billion, with a year-on-year growth rate of 22%. Overall, the prosperity of LED chips has decreased significantly

from the perspective of the revenue growth rate of three enterprises, San'an optoelectronics, Huacan optoelectronics and Jingyuan optoelectronics, compared with the industry peak in 2017, the growth rate of the operating revenue of all LED chip manufacturing enterprises has significantly slowed down, and the profit margin has remained flat or declined year-on-year since the second quarter of this year. Due to the manufacturing business of III-V semiconductors such as silicon carbide, Cree's revenue growth is relatively guaranteed. However, at present, it is very difficult for small and medium-sized LED chip manufacturers to obtain government subsidies, and the possibility of production expansion is low

in addition, the weak demand will be an important factor affecting the LED chip market. From the perspective of terminal demand, although the major led terminal product manufacturers still achieved 19% revenue growth in the third quarter of 2018, it fell significantly from the 32% growth rate in the second quarter of 2018. According to the data of the General Administration of customs, the year-on-year growth rate of China's total exports of LED lighting products in the first October of 2018 is only 1.7% of the operating revenue of its parent company in the consolidated statements. Affected by the 25% tariff imposed by the United States on China's 200billion goods since the third quarter, the export volume of LED lighting products in September fell sharply by more than 30% year-on-year. Looking forward to 2019, in addition to the trade war that may continue to exert influence on the industry, and the tariff rate will be raised again from January 1, the main terminal demand of LED such as real estate (lighting), automobile (headlights), television (backlight) is facing the problem of decline or slowdown, and the reduction of local government subsidies will also affect the growth rate of landscape lighting and other industries. In addition, the GDP growth rate in 2019 may be slightly lower than that in 2018; The exchange rate may continue to fluctuate significantly, affecting exports. Of course, there may also be some positive factors in 2019, including the continuous progress of LED technology, the substantial increase of mini LED (RGB and backlight) shipments, the considerable growth rate of small spacing LED market, and the overweight of infrastructure investment in 2019. However, on the whole, the impact of negative factors is obvious, and the possibility of relying on technology to achieve high growth in the industry is small

conclusion

affected by risk factors such as overcapacity caused by the expansion of LED chip manufacturers, slowing demand in the downstream of chips, unclear prospects for trade war, large exchange rate fluctuations, it is expected that the prosperity of LED chip market will be difficult to improve in 2019, and the development of the industry will be hindered