Market competition is still fierce, and manufacturers' profitability is low.
Although large manufacturers have expanded their production, the competition in the LED market is still fierce, and the profitability of packaging manufacturers is still low. According to LEDinside statistics, the average gross profit margin of major Chinese manufacturers in 2016 was 24.5%, down 1% year-on-year. In some areas, the gross profit margin is too low. For example, in the field of lighting LEDs, Ruifeng Optoelectronics' 1H16 gross margin is only 10.9%, and Jufei Optoelectronics' 1H16 gross margin is only 9.4%. However, in 3Q16, due to the increase in chip prices, some packaging manufacturers have also adjusted the price, and the gross profit margin is expected to improve.
Price slowdown slows, manufacturers' profitability is expected to improve
In May 2016, Jingdian took the lead in price increase for some chips, but at the time Chinese manufacturers did not follow, but the price has stabilized. In September, Chinese chip makers, including Sanan, Tongfang and Zhongke, have raised prices for small-size chips. The demand for small-pitch display screens is strong, which makes the demand for small-size display chips rise sharply. In addition, in the field of lighting, the demand for small-sized lighting chips has increased due to the pursuit of high-efficiency of lamps by downstream manufacturers.
Due to the sharp decline in the price of small-size chips in 2015, many chip manufacturers have gradually reduced the capacity of small-sized chips. As a result, small-size chips are in short supply in a short period of time, and prices have risen. Due to the increase in chip prices, device prices have also begun to rise, especially in the display field, such as Mulinsen, Ampang and Cinda Optoelectronics, also announced price increases. Compared with 2015, the price of LED packaging in 2016 has stabilized.
Shuffle, the industry is expected to bottom out
Since 2014, fierce market competition has led to a decline in the profitability of manufacturers, many small and medium-sized packaging companies have been forced to withdraw, and the emergence of mergers and acquisitions has also led to the growing size of large factories. In the past, the Mulinsen company was the largest company. However, the scale of Guoxing Optoelectronics and Hongli Optoelectronics has gradually increased. This year, it is expected to exceed the revenue of RMB 2 billion. The scale of other second-tier manufacturers has gradually increased. This round of expansion is mainly led by large enterprises, including large companies such as Mulinsen, Guoxing, Hongli, and Cinda. The scale of production capacity is expanding and the industry reshuffle will accelerate. LEDinsdie believes that the LED industry will gradually enter the stage of bottoming out, the market share of large manufacturers will continue to expand, bargaining power will be improved, and profitability will gradually improve.
