Expansion of production, localization of equipment... LED chip price reduction is expected?

After experiencing a series of events such as expansion expansion, overcapacity, and large-scale production reduction and capacity reduction, the upstream LED chip products began to rise in the second half of 2016. Moreover, with the increase of the entry threshold of LED chips, the industry concentration is further improved, and the downstream LED lighting and small-pitch products are driven. The LED core has also experienced expansion expansion, overcapacity, and large-scale production reduction and production capacity reduction. After a series of events, the upstream LED chip products began to increase in the second half of 2016. Moreover, with the improvement of the entry threshold of LED chips, the industry concentration is further improved, and the downstream LED lighting and small-pitch products are driven, the price of LED chips remains high, which makes many LED screen enterprises suffer. However, recently, some analysts believe that with the increase in production capacity, the expansion of enterprises, and the use of domestic equipment, LED chips are expected to cut prices. Concentration continues to increase, the chip three tyrants accounted for up to 50%. In the early years, due to the weak domestic LED chip strength, the government introduced high subsidies, attracting many speculators to join the LED chip industry. However, since 2011, due to the serious problem of overheating speculation, many governments have successively cancelled and tightened the subsidies for MOCVD equipment. Without the subsidy of about 5 to 12 million per device, the high cost of equipment in the LED chip industry has blocked the pace of many investors and greatly increased the entry barrier for the industry. When the speculative investment group retreated, the high demand for capital and technology in the LED chip industry gradually reflected, which also greatly promoted the industry's reshuffle integration. Moreover, due to the expansion of expansion in the early years, the LED chip has overcapacity, competition among enterprises is fierce, and price wars are also carried out. In this process, some small and medium-sized enterprises are gradually eliminated in the competition due to poor management or backward technology. The stronger the stronger the stronger the trend, the greater the concentration of the industry. It is reported that in 2016, the top ten LED chip manufacturers accounted for 77% of the market share, of which the top three manufacturers accounted for 50% of the market, the top ranked companies accounted for nearly 30% of the market share. In addition, after LED chip manufacturers over-expanded production capacity, resulting in a big price dip, large and small manufacturers have reduced production in 2016, and even some large enterprises shut down 25% of production capacity, prompting supply and demand to return to normal. In the second half of the year, driven by the shortage of raw materials for chips, the driving force of price hikes, and the strong demand from downstream applications, the price of LED chip products has been rising all the time, and it is still high, so the production cost of many downstream LED screen enterprises has also risen. Screen companies are even more difficult to bear. The market is prosperous and the LED chip companies are leading the way. Since last year, the small-pitch product market has exploded, which has driven the overall growth of the LED display industry, which in turn has stimulated the demand for LED chips. Moreover, due to the fierce competition in the downstream LED display industry and the expansion of production and low-cost competition, the display market has been further expanded, and the demand for midstream products has also been pushed up. According to the "LED industry market prospects and investment strategy planning analysis report" analysis, by the end of 2017, the demand for LED chips is about 92.35 million. Among them, the outdoor full-color display demand was 26.02 million pieces, an increase of 5% year-on-year; the indoor small-distance demand was 1.02 million pieces, a year-on-year increase of 50%. Due to the high concentration of the LED chip industry, large enterprises have mastered strong bargaining power. As the situation of supply shortages appears, the seller market has gradually formed. In addition, the tight supply of raw materials has undoubtedly brought price increases to LED chips. Since October 2016, the price of LED chips has been continuously improved, which has also made the profitability of chip companies good and the development prospects are good. In the first quarter, the LED enterprise report showed that the growth of the net profit year-on-year was the chip company, with a year-on-year growth of 36.32%, while other chip companies also had good results and high growth rate. Moreover, the data shows that as of the close of June 5, 11 LED companies have released interim results announcements, with a pre-happiness ratio of 100%. Overall, upstream chips and midstream packaging companies have the highest net profit growth rate. Relevant institutions believe that although the LED chip market is in good condition, but the three major enterprises continue to expand production, and the subsidy policy for purchasing equipment is tightening, small and medium LED chip manufacturers are still in a wait-and-see state, and dare not follow the expansion. Expansion of production, use of domestic equipment, LED chips are expected to cut prices In addition to the strong domestic market demand, the industry giants born with the LED chip industry reshuffle, also continue to develop foreign markets. According to the survey report, the global market share of domestic LED chip factories rose to 45% last year, and the proportion of large factories increased. Media analysis believes that the domestic LED industry has unbeatable price advantages in other countries, especially in the low-end market, so that foreign manufacturers have begun to purchase products from domestic LED chip manufacturers by means of OEM. As a result, it has undoubtedly pushed up the demand for domestic LED chips. In such a large environment, the expansion of production has become the consensus of LED chip companies, and many manufacturers have expanded their production to meet market demand and increase sales. At present, chip manufacturers have purchased new equipment, and some manufacturers have announced that they will expand production. Some even said that the production capacity has doubled from the beginning of the year and will continue to expand. In this regard, the research institute expects that the production capacity of LED chips will be gradually released in the fourth quarter of this year, when the price of LED chips will have a certain downward pressure. In addition, MOCVD equipment has been in the hands of European and American companies, and domestic manufacturers have higher equipment purchase costs. The research and development and production of domestic MOCVD equipment are also underway, and after the test of domestic chip manufacturers, it will gradually replace some foreign equipment and put into production operation. The domestically produced MOCVD equipment is relatively cheaper, which is also conducive to pushing down the price of LED chips. Although the current LED chip production still can not meet the needs of downstream application level, the price may not be able to decline in the short term, but with the release of production capacity, it will help ease the tight supply and demand situation. Moreover, the scale effect of the expansion will also reduce the cost of the product, coupled with the reduction of equipment costs and other factors, LED chip prices are expected to decline.

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