Price hikes lead to life and death choices for LED display manufacturers

On the first day of construction in 2017, a "price adjustment contact letter" from Sanan Optoelectronics, a leading LED chip company, once again stirred the nerves of the industry. This is Sanan's "first shot in the new year's price increase" following the four rounds of price increases in the LED industry in 2016. Will other manufacturers follow? Is the new round of price increase mode fully opened in 2017? This will bring a new round of impact on the LED display and lighting industry. It is worth mentioning that in 2016, the price of raw materials increased from more than 50% for the most common aluminum ingots to more than 10% for high-tech chips.

As 2017 approached, Sanan took the lead in launching the "first price increase at the beginning of the year". The reason for the price increase was mainly affected by the decline in government subsidies, the elimination of backward production capacity, and the increase in demand. The same price increase began on January 1, 2017 , It can be seen from the price adjustment notice that this round of price increase is mostly because the company cannot afford the upstream price increase and has to make adjustments. Downstream companies do not raise prices for LED display screens, backlights, and lighting. They can only offset the increase in raw materials by sacrificing the current gross profit margin. The increase in the price of raw materials is bound to affect the price increase of the entire industrial chain. Price increases in 2017 are inevitable. Among them, the price of LED chips continued to rise, and at the same time, the concentration of enterprises in the upstream chip market further increased in 2016, and the revenue of the top five chip companies accounted for 75%.

Some chip manufacturers are withdrawing. We use data to analyze. In 2016, the overall size of China's LED lighting market reached 457.6 billion yuan, an increase of 15.35% year-on-year, accounting for 65.4% of the world, and the proportion will continue to rise in the future; It is expected that from 2016 to 2017, the market will show a trend of rising prices of LED chips and lamp bead products, while the prices of terminal application products such as lighting will continue to decline. LED display manufacturers are also facing tremendous pressure. Upstream price increases are an inevitable trend. Downstream price increases will cause LED display price instability and customer instability. It is a real choice to really test whether LED display manufacturers can tide over the difficulties.

In terms of packaging, several major packaging manufacturers continued to expand their production in 2016, further increasing their market share, and small and medium-sized enterprises were forced to withdraw from the market. At the same time, the price of LED packaging devices has risen steadily, and it is expected that there will be room for growth in 2017. For enterprises, the price increase of raw materials has a great impact on enterprises specializing in the low-end market. Due to fierce market competition, they are afraid of losing market share and cannot pass all the prices on to the client. They can only reduce the gross profit margin of the enterprise itself and enter a vicious In circulation, Zhongke Xinyuan focuses on the ultra-high-power market segment, and its products focus on the mid-to-high-end market. The current round of price increases has little impact on us, and some raw materials that have increased in price account for a small proportion of the company's overall product price structure. What needs to be emphasized is that the best way for companies to deal with price increases is to innovate and use new technologies to reduce product costs.

In my opinion, under this trend, LED display manufacturers can only increase prices to alleviate the pressure of rising raw material prices from the most upstream. The industrial chain should be passed on layer by layer, because the entire industrial chain must guarantee a certain profit, otherwise Businesses can't do it. .