The LED industry has transitioned from over-competition to an era of stable returns.
Published Time:
2021-08-04
As an emerging industry, LED lighting has enjoyed significant government favor since 2009, with massive subsidies. For some companies, government subsidies accounted for half of their performance, enabling them to turn losses into profits. Statistics show that San'an Optoelectronics, for example, as the "subsidy king" of the LED industry, received over 3 billion yuan in subsidies from 2010 to 2015.
Government subsidies are narrowing, and the supply and demand structure of the LED industry will gradually improve.
As an emerging industry, LED lighting has been favored by the state since 2009, with huge subsidies. Some companies even received government subsidies that accounted for half of their performance, enabling them to turn losses into profits. Statistics show that San'an Optoelectronics, for example, as the "subsidy leader" in the LED industry, received over 3 billion yuan in subsidies from 2010 to 2015.
Analysis suggests that as the LED industry matures and undergoes restructuring, during the "13th Five-Year Plan" period, the government will gradually adjust its subsidy policies, and subsidies for upstream chips are gradually narrowing. The government's reduction in subsidies will curb the disorderly expansion of LED chip production capacity from the source of the industry chain and is expected to shift subsidies to the LED lighting application end, thus driving the LED industry chain from the demand side. The supply and demand structure of China's LED industry chain will gradually improve.
Accelerated Market Penetration of LED Lighting; Small-Pitch Displays Poised for Explosive Growth
From October 1, 2016, incandescent lamps of 15W and above for general lighting were banned from sale and import. This is interpreted by the industry as the full rollout of the "ban on incandescent lamps," and the domestic market penetration rate of LED lighting products will further accelerate. The domestic market penetration rate of LED lighting products is expected to reach 48% in 2017.
2016 was a year of vigorous development for small-pitch LED display products; a situation of upstream shortages and supply exceeding demand even arose in the third quarter. The total demand for indoor and outdoor small-pitch LEDs in 2016 was 141.3 billion units, while the current production capacity of small-pitch LEDs is around 70 billion units, leaving a significant supply-demand gap in the future. We expect small-pitch displays to experience explosive growth in the next 2-3 years.
In 2017, the replacement rate of small-pitch LEDs for DLPs could reach more than 40-50%, and by 2020, the replacement rate is expected to reach 70-80%.
New Blue Ocean for LED Manufacturers: Unlimited Business Opportunities for Infrared LEDs/Laser Lighting in 2017
The global adoption of biometric technology, including in smartphones, tablets, and wearable devices, will continue to increase rapidly. Because iris and facial recognition applications use IRLED components, the future market has considerable growth potential. It is estimated that by 2020, the output value of IR LEDs (excluding sensors) will reach US\$710 million (approximately RMB 4.711 billion), with a compound annual growth rate of 24%, becoming a new blue ocean for LED manufacturers.
On November 13, 2016, Shuji Nakamura's laser lighting laboratory was unveiled in Shenzhen. Laser lighting has a smaller light-emitting area, higher luminous efficiency, and is easier to focus and has a longer irradiation distance, making it widely applicable in automotive headlights and other fields. In automotive lighting applications, world-renowned automotive brands such as BMW and Audi are working to apply this technology to new products. However, due to the currently high cost of laser lighting, the application rate is not high, but it is believed that it will be a major trend in the future.
Outdated Production Capacity Gradually Eliminated; LED Industry Transitions from Era of Over-Competition to Era of Stable Profits
Since the second half of 2016, with the continuous substantial increase in the prices of raw materials such as circuit boards and gold wires, as well as increases in labor and rent costs, LED companies have shifted from "price wars" to "value wars." Since 2016, LED chips and packaging have seen consecutive price increases, marking the end of the reshuffling of the overall LED industry chain, and the industry has transitioned from an era of over-competition to an era of stable profits. It is expected that in 2017, under the price increase cycle driven by rising costs in the overall LED industry, some less competitive small and medium-sized enterprises will gradually be eliminated from the market. Future orders will gradually concentrate on major manufacturers, and the phenomenon of "survival of the fittest" in the LED industry will become more apparent.
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