Prices of LED electronic screen upstream chip manufacturers return to rationality

The price of upstream chip manufacturers of LED electronic screens has returned to rationality. LED chips have always been the core components of LED electronic screens. The display effect and stability of LED electronic screens, light-emitting chips have played a decisive role. In recent years, both Taiwanese companies and domestic well-known chip manufacturers In order to race around, the price of LED electronic screen chips was lowered, which caused some companies to withdraw from the market in 2015. In recent years, the competition in my country's LED electronic screen industry has been extremely fierce, and most LED electronic screen companies are at a loss. As the price of LED electronic screens returned to rationality, corporate performance began to reverse.

Regarding the company's profitability, Huacan Optoelectronics said that the scale effect is the key to a successful turnaround. In 2017, the company will continue to promote the expansion of LED electronic screen modules and sapphire modules of its Zhejiang subsidiary to ensure future performance growth. Huacan Optoelectronics (300323, SZ), a listed company in the LED electronic screen chip supplier industry, released its 2016 annual report on February 27, showing that its operating income for the year was 1.582 billion yuan, an increase of 65.62%; 378.43%, turning losses into profits compared with the previous year. In the view of industry insiders, as the last round of price war draws to a close, after a round of reshuffle in the LED electronic screen industry, the market has been occupied by several large LED electronic screen companies, and the previous vicious price war may be difficult to resume. Come.

Chip sales increased by 130.96%. At the same time, the production efficiency and product performance of HC Semitek’s epitaxial wafers have been further improved. The epitaxial wafers exported to South Korea have increased significantly, and the export revenue has increased by 217.60% compared with the previous year. The gross profit rate of exported products is higher than that of domestic sales. The annual report shows that in 2016, the sales volume of HC Semitek's chip products increased by 130.96% over the previous year. At the same time, the acquisition of Blue Crystal Technology also further increased the overall income, achieving operating income of 1.582 billion yuan, an increase of 65.62% over the same period last year.

The price increase of LED electronic screen chips has spread from RGB to white light, and the structural imbalance between supply and demand has emerged. Following the shortage of quaternary LED electronic screen chips in 2016 Q3 and the price increase, Taiwanese manufacturers have increased the production capacity of quaternary LED electronic screens. In January 2017, domestic LED Sanan Optoelectronics, the leader in electronic screen chips, issued a price adjustment letter, raising the price of some white light products by 8%, and the price increase of LED electronic screen chips spread from RGB to white light. On the one hand, this reflects the structural imbalance of LED electronic screen chips, that is, display applications and LED electronic screen applications compete for the production capacity of GaN blue-green chips. On the other hand, it also reflects the vigorous downstream demand of the chip industry. According to the survey feedback, the recent orders for white LED electronic screen chips, packaging, and screens are in good condition, the industry is booming, and corporate profitability is gradually recovering.

The increase in production capacity has led to a substantial increase in the company's sales scale and sales revenue compared with the same period last year. The company's scale benefits are gradually reflected, and costs have been reduced. It has become one of the main sources of the company's profit growth this year. Regarding the reasons for the company's performance growth, Huacan Optoelectronics stated in its annual report that during the reporting period, with the completion of the company's upgrading and transformation projects, the production and sales scale increased significantly, and the company's LED electronic screen chip production volume increased by 93.95% over the same period last year. On the other hand, the reporter noticed that Huacan Optoelectronics has obtained a lot of government subsidy income. According to the data, the impact of non-recurring gains and losses on the company's net profit in 2016 was 241.6818 million yuan, which contributed a lot to the growth of net profit.

In addition, Huacan Optoelectronics expects to make a profit of about 76 million yuan to 81 million yuan in the first quarter of 2017, which is a year-on-year loss. In addition, actively promote budget management, strictly control various expenses, and adopt hedging risk management measures for foreign currency liabilities and foreign currency payments at the beginning of the year, so that the company's actual comprehensive financial expenses this year have decreased compared with 2015. In this regard, Liu Rong, president of Huacan Optoelectronics, told the "Daily Economic News" reporter, "The rise in the price of LED electronic screen chips is the main reason for the company's performance growth.

At the same time, the company has increased the company's production and sales scale through technological transformation, which has driven the increase in the company's sales revenue and is also one of the main reasons for the company's performance growth. "In the eyes of industry insiders, behind the rise in the performance of these LED electronic screen companies is the stabilization of the competition among LED electronic screen companies. As far as the entire industry market is concerned, since China's LED electronic screen industry is at the low end of the industrial chain, the technical threshold is relatively high. Low, also makes a lot of money into this industry, the final result is the same as the photovoltaic industry back then, forming a situation of overcapacity.

In order to break out from the situation of overcapacity, the price competition among enterprises has become disorderly. Competition in the LED electronic screen industry has stabilized. In addition to the performance growth achieved by Huacan Optoelectronics, most of the listed companies in the LED electronic screen industry have also shown different degrees of growth. Among them, the 2016 annual performance forecast of Aoto Electronics stated that the net profit attributable to shareholders of listed companies from January 1 to December 31, 2016 is expected to be 80 million to 90 million yuan, an increase of 273.55% to 320.24% year-on-year; Lehman The company's 2016 annual performance forecast shows that the net profit attributable to shareholders of listed companies in 2016 is expected to be 50.4865 million to 56.5448 million yuan, an increase of 150% to 180% over the same period of the previous year.

Among them, from 2014 to 2015, the price competition of LED electronic screen enterprises reached its peak. Data from Gaogong LED Electronic Screen Research Institute shows that in 2015, more than 20%, about 5,000 LED electronic screen related companies withdrew from the market due to the reshuffle brought about by price competition. In addition, the LED electronic screen chip industry where Huacan Optoelectronics is located has also failed to avoid vicious price competition.

According to the data from Gaogong LED Electronic Screen Research Institute, there are currently about 15 domestic LED electronic screen chip companies in normal operation. These 15 companies are from 50 in 2010, and the remaining companies after the price war reshuffle. In this regard, Liu Rong said in an interview with the reporter of "Daily Economic News" in September 2016 that the competition in the LED electronic screen industry will continue, but this competition will tend to be stable, because there is not much room for price wars among enterprises. , "Price wars will still be fought, but there is not so much room for them. The cost has already gone there, and there is not much room for price reduction. Next, there will be large enterprises. It is small and medium-sized enterprises. Because large enterprises are making new investments, and with the new investment, the cost will continue to decrease. Large enterprises seem to be struggling very hard, but in fact they still have a gross profit of 20%. The cost of small enterprises has hardly changed, and there is no room for further price cuts. Without price cuts, the market will be lost, and they will naturally go bankrupt. In the end, these small and medium-sized enterprises will give up the market space.

On February 27, Liu Rong told the "Daily Economic News" reporter, "The reason for the increase in the performance of LED electronic screen companies last year is that the vicious competition in prices has come to an end, and the disorderly competition has stabilized. After the round of price competition reshuffle, the market has been occupied by several large LED electronic screen companies, and the price war will no longer be as fierce as before, so the company's performance will be reversed. "Supply side: Price wars have obvious crowding out effects, and the industry's competitive landscape has improved. According to statistics, the continued production of LED electronic screen chip factories in mainland China has made the ratio of oversupply of LED electronic screen chips as high as 22% in 2015. From 15Q1 to 2016 In Q1, the price of mainstream LED electronic screen chips fell by more than 30%, and the price of packaged products generally showed a drop of more than 20%. According to the data of China Light Industry Network, the cumulative loss of the national screen industry in the first three quarters of 2015 was 16.66%. In contrast, the operating conditions of domestic-funded enterprises are better than those invested by foreign investors, Hong Kong, Macao and Taiwan.

In this competitive environment of survival of the fittest, after Samsung withdrew from the LED electronic screen business in all markets outside South Korea in 2014, in 2016 internationally renowned manufacturers Philips, Osram, and GE also withdrew from the Chinese market one after another, providing domestic LED electronic screen The industry provides a larger market space, and the industry competition pattern improves. Before 2016, LED electronic screen chip manufacturers expanded their business one after another, resulting in obvious overcapacity and continuous and rapid price decline, which caused drastic changes in the LED electronic screen industry. Due to technological backwardness and other reasons, many poorly managed small companies have reduced production or transformed, and a large number of LED electronic screen companies have withdrawn from the market.

However, since 2016, with the steady growth of demand, the relationship between supply and demand in the LED electronic screen industry has gradually improved, and there have been incidents of intensive product price increases recently. Industry insiders said that not only LED electronic screen chips are rising in price, but LED electronic screens are also rising. How does this roller coaster development affect the industry? Demand side: With the rise of small-pitch, Micro-LED electronic screens, IR, and automotive lighting markets, screen engineering welcomes good opportunities for development. In the demand structure of the domestic LED electronic screen industry, in 2016, general-purpose screens accounted for 47.6%, and landscape screens accounted for 47.6%. 13.5%, backlight applications accounted for 12.1%, display screens accounted for 12.8%, and automotive screens accounted for 1.4%.

Referring to the growth rate in the past two years, it is assumed that the growth rate of general-purpose screens in 2017 is 15%, that of landscape screens is 7%, that of small-pitch LED electronic screens is 70%, and that of LED electronic screens (except small-pitch) is 4%. With a growth rate of 6% for vehicles, the growth rate of domestic LED electronic screen industry demand is about 10.44%. Considering the impact of the price decline of LED electronic screen products in 2015, the growth rate of demand quantity should be higher than the growth rate of output value. With the rise of small-pitch LED electronic screens, Micro-LED electronic screens, IR, and car lighting markets, and the good development opportunities for screen projects under the financial expansion cycle, the demand for LED electronic screens is accelerating. In 2017, only small-pitch LED electronic screens screen screen will need to add about 26 MOCVD equipment. The demand for inventory replenishment is determined, and consumption upgrades are good for leading manufacturers. The LED electronic screen industry has entered the inventory digestion stage since 2012. According to the data of Shenwan LED electronic screen sector, since 15Q3, the industry's inventory turnover days have dropped from 117.94 days to 102 in 16Q3. 92 days, at the lowest level since 2009Q3. In the future, a new round of inventory replenishment demand will push up the industry's prosperity.

In addition, we believe that "good money driving out bad money" is happening on the demand side. When the price of LED electronic screen bulbs falls to the "comfort zone" of consumers, benefiting from consumption upgrades, some small and medium-sized manufacturers are less able to increase their willingness to purchase through price differences. Increase the competitive pressure of some small and medium-sized manufacturers from the demand side, accelerate the reshuffle of the industry, and benefit leading manufacturers. Taiwanese factories focus on the quaternary chip market, and the transfer of the GaN LED electronic screen industry center to the mainland is accelerating. Due to the rise of small-pitch LED electronic screen screens and IR sensing applications, Taiwanese quaternary LED electronic screen manufacturers are actively expanding quaternary production capacity: Epistar From the implementation of the expansion plan in 16Q2, Huashang Optoelectronics concentrated its production capacity in Siyuan in 2016.

At the same time, Epistar and Cree began to reduce GaN production capacity in 2016, and major domestic manufacturers began to invest in GaN production lines this year. Considering the equipment purchase and commissioning cycle, the new investment in MOCVD by local chip manufacturers throughout the year was about 135 Taiwan, considering the exit of about 125 sets of equipment from Epistar, the new equipment in the world in 2017 is limited, and the domestic growth rate is lower than 11%. On the one hand, due to the need for twice the production capacity of blue and green to match the production capacity of red and yellow in full-color LED electronic screens, on the other hand, due to the withdrawal of major international manufacturers, the downstream LED electronic screen manufacturers have provided greater space for domestic substitution. Manufacturers are speeding up the transfer of GaN LED electronic screen industry centers. .