Abstract: Research data shows that the overall scale of China's LED chips is about 23.8 billion yuan in 2019, and is expected to be 27 billion yuan in 2020. The LED industry chain will enter a period of low-speed growth in the next few years.
(Article reprinted from: Gaogong LED / Zheng Qijia)
The past 2019 has been particularly "sad" for the LED industry, especially the LED chip field. The surplus of low-end and low-end production capacity, the continued decline in prices and other clouds have always shrouded the minds of chip manufacturers.
According to research data from the GGII LED Research Institute (GGII), the overall size of China's LED chips is about 23.8 billion yuan in 2019, and it is expected to be 27 billion yuan in 2020. The LED industry chain will enter a low-speed growth period in the next few years.
GGII believes that in 2019, chip overcapacity will be severe, and the utilization rate will be too low. Some companies will go to inventory to cut prices, and prices will fall by 30-50%. Many LED chip companies will halve their profits or even lose money.
The financial report data also proves this. Judging from Sanan Optoelectronics, Aoyang Shunchang, Jucan Optoelectronics, Huacan Optoelectronics, Qianzhao Optoelectronics, Silan Micro and other chip manufacturers that have disclosed the 2019 annual report and 2019 performance forecast, the net profit has different Degree of decline.
However, in the face of the increasingly imminent "crisis" of the chip market, various enterprises have also made corresponding preparations, upgraded their product structures one after another, and made efforts to apply market segments.
Leading net profit fell by 50%
On April 24, LED chip leader Sanan Optoelectronics disclosed its 2019 annual report and 2020 first quarter report. Affected by different factors such as the prosperity of the automotive industry, the decline in LED product prices and the epidemic situation, Sanan Optoelectronics' revenue and net profit both declined during the two reporting periods.
In 2019, Sanan Optoelectronics achieved revenue of 7.46 billion yuan, a year-on-year decrease of 10.8%; net profit attributable to its mother was 1.298 billion yuan, a year-on-year decrease of 54.1%. Although the number of sales has increased compared with the same period last year, the decline in revenue and net profit has increased compared with the same period last year.
It is worth noting that this has been Sanan Optoelectronics' consecutive decline in revenue and net profit for two consecutive years.
Image source: Oriental Fortune Choice data
Annual report data shows that in 2019 Sanan Optoelectronics compound semiconductor products (LED epitaxial chips, etc.) operating income was 5.72 billion, revenue accounted for 76.7%, gross profit margin was 12.3%, is the main source of Sanan Optoelectronics operating income last year.
As an industry-recognized leader in the LED chip industry, Sanan Optoelectronics pointed out when the revenue and net profit both fell since its first listing in 2018, "The LED lighting market is generally weak due to various uncertainties. The overall price decline is relatively large, resulting in a weak operating condition for the company. "
For both the decline in performance and profit in 2019, Sanan Optoelectronics also pointed out that the competition for LED chips is fierce. The price of products in the first three quarters has dropped significantly, and the price of products has gradually stabilized in the fourth quarter. In the reporting period, the company's cost decline was lower than that of product prices, resulting in a decline in gross profit margin and a decline in operating performance.
Sanan Optoelectronics' first quarterly report for 2020 released on the same day was also not optimistic. During the reporting period, Sanan Optoelectronics achieved revenue of 1.682 billion yuan, a year-on-year decrease of 2.74%; and realized net profit attributable to shareholders of listed companies of 392 million yuan, a year-on-year decrease of 36.95%.
Companies in the chip market
The multi-year development of the LED chip industry, coupled with technological progress and market competition, has led to a slowdown in the growth of the LED industry. The early government's vigorous subsidies to LED chip companies further led to overcapacity in the upstream, which led to the continued decline in LED chip prices.
Throughout the LED chip industry, Sanan Optoelectronics is just one of the many unsatisfactory LED chip businesses.
As the sales price of LED chips fell sharply, Huacan Optoelectronics suffered a loss of 1.048 billion in 2019. According to the annual report, Huacan Optoelectronics' accumulated losses in the first three quarters were relatively large. In addition to the impact of the annual large inventory impairment, the overall chip business suffered a large annual loss.
In 2019, the net profit attributable to shareholders of listed companies in Jucan Optoelectronics was 8.143 million yuan, a year-on-year decrease of 60.02%. One of the reasons is that due to the objective factors such as the decline in the overall demand growth rate of the LED chip industry, the product cost decline is only slightly greater than the sales price decline, resulting in a limited increase in gross profit margin.
The price of Silan's subsidiary Silan Mingxin LED chips fell by 20% -30% compared with the same period last year, and its net profit fell by more than 90% in 2019.
DHL Runda finally chose to shut down the LED chip factory for the package in 2019. In addition to betting on the wrong timing of LED flip chips, the continuous decline in LED chip prices and operating losses are also important factors. DHL Runda director and actual controller Wang Donglei even lamented that he should exit the LED chip business earlier.
The LED chip industry is in a period of macro-adjustment in 2019. The release of new capacity in the market has led to an oversupply of overall chip production capacity and fierce market competition. Affected by this, the price of LED chips continued to fall. The prices of ordinary white light chips, low-end display chips and other products completely eroded the profitability of enterprises, and the prices of middle and high-end chips also fell generally.
However, some industry insiders believe that the current status of the LED chip industry is an inevitable result of the overall scale after experiencing a high-level development with a continuous growth rate of more than 30%.
Strengthen the application market segment
Affected by the expansion of LED chip companies, the release rate of production capacity is much higher than the terminal demand.
However, in 2018-2019, LED chip companies that experienced profit warnings all adjusted the product structure and production capacity to increase the proportion of high value-added and high-margin products.
Huacan Optoelectronics actively deploys the third generation semiconductors and adjusts its management team for this purpose. It is understood that from the second half of 2019, Huacan Optoelectronics will optimize the corporate governance structure by optimizing the personnel mix, setting up product divisions and other forms, and strategically adjusting the layout of products, refocusing on the main business of LED chips, and exerting power on Mini LED and Micro LED new display high-end market.
From the first quarter of this year, the proportion of Huacan Optoelectronics' high-end backlight LED chips, high-efficiency LED chips, and Mini LED chips increased significantly year-on-year, and the company's strategic adjustment has achieved initial results.
Silanwei said in its annual report that it will accelerate the layout of high-end industries. While accelerating the development of Mini LED chips, high-brightness white light chips, etc., and stabilizing the market share of color screen chips, it will also accelerate its entry into the mid-to-high-end LED lighting chip market. It is expected that its operating income will gradually pick up in the future. Not only that, the company said it will bet more chips on the IC business in the future.
Jucan Optoelectronics is mainly engaged in the business of lighting and backlight chips. In the future, it will also actively deploy the new Mini LED display direction. In addition, Suqian base has obtained the production qualification of red and yellow light epitaxial chips. In addition to blue and green light chips, red and yellow light chips will also be one of the development directions of Jucan in the future.
Sanan Optoelectronics, as the largest company in the LED chip industry, has achieved mass production and sales of Mini LED in 2017, and has become one of the global Mini LED chip suppliers with scale advantages. In recent years, it has cooperated with Samsung Electronics and Apple. , TCL Technology and other customers who have advantages in the terminal market.
Not only that, Sanan Optoelectronics is also actively deploying emerging applications such as Micro LEDs, high-efficiency LEDs, automotive LEDs, and ultraviolet / infrared LEDs.
Sanan Optoelectronics believes that in the long run, all previous adjustments in the LED industry have resulted in the clearing of backward low-end production capacity and the increase in the proportion of mid-to-high-end products in the industry. Industry leaders have further increased market share through their long-term technical accumulation.
Wang Dong, general manager of Silan Micro LED product line, once said, "Only with the advantages of resources and technology, and the products have their own intellectual property rights, such companies can survive."
It has been the consensus of the industry to adjust product structure and upgrade, take a differentiated route, and apply market segments, but most companies are still in the high investment stage. How much benefit can be obtained in the future, whether it can maintain and expand the company's own leading position and competitiveness in the LED field, need to wait and see.