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LED equipment patent war upgrade industry capacity is facing test

The global LED market has entered the fourth quarter, but the traditional off-season has ushered in shocking bombs. Supply chain industry players pointed out that after nearly a year of LED price reductions and tight supply, recently LED factories including Sanan and HC Semitek have taken the lead in reducing prices for mainstream LED products. The decline in varieties is even as high as 20%.

The price cut shows that the overall production capacity supply and demand has reversed. With the slowdown in the end market demand and the continuous release of production capacity in mainland factories, some industry insiders believe that the crisis of oversupply in the LED market may also reappear, and downstream manufacturers are still waiting to see.

Regarding the price of LED chips and the relationship between supply and demand, last month, Huacan Optoelectronics said when answering questions from investors that the price of LED chips fluctuated wildly and untrue. For Huacan Optoelectronics, the overall price drop in the fourth quarter was within 5%, and the gross profit margin was stable.

Jin Zhangyu, chairman of Qianzhao Optoelectronics, said, "At present, the overall LED market is in good condition, and the demand increases by about 20% linearly every year. The supply side may grow in pulses, but this will lead to a temporary oversupply in the middle. Of course, this In the process, there will be other variables in the relationship between supply and demand, for example, after the new production capacity comes up, some of the original production capacity may be withdrawn from the market due to low production and operation efficiency.”

However, although there is little chance of LED price collapse, this wave of price pressure may continue to the first quarter of 2018, which will have a certain impact on some manufacturers.

Industry analysts believe that there are two main reasons for the price reduction, internal and external. The external environment, which has been in short supply for more than a year, has changed. The price reduction of LED chips in 2015 made the market price of LED chips in the Chinese market far lower than the cost of internal production by international manufacturers, which prompted the LED chip foundry business, which was only gradually negotiated after 2016, to enter an accelerated stage. For a time, several major local chip factories received a large number of LED chip OEM orders from international brand manufacturers. At the same time, the sharp drop in prices in 2015 also brought the number of new equipment orders to a freezing point, so that in 2016, although Sanan and Huacan had reserved production capacity, they were still not enough to meet the incremental demand. The orders transferred from the foundry are superimposed on the original market growth, so that the total demand for LED chips is expected to grow by more than 20% to 40% per year. This has caused the growth rate of production capacity in my country's chip industry to be far lower than the growth rate of demand, resulting in a huge gap in supply and rising chip prices.

However, from the perspective of supply growth, if it reaches the end of 2017, there will be a 65% increase compared to the end of 2016. Therefore, by the end of 2017, the pattern of tight supply and demand has fundamentally changed, and the price of LED chips no longer has the external conditions for continuous rise.

Internally, due to the strong manufacturing, R&D, and customer scale effects, the production costs of powerful chip manufacturers have dropped to a certain extent, so there is room for price reductions. For the sake of maximizing profits, large chip manufacturers will expand market share by reducing prices, eroding the original share of small manufacturers without economies of scale. This may be the chip price cut to become a continuous action.

In 2017, several major chip manufacturers released production capacity one after another. For example, Sanan Optoelectronics, a leading manufacturer, has purchased a large number of MOCVD equipment this year. By next year, the number of equipment will reach 450, and the goal is to account for 30% of the world's production capacity.

Huacan Optoelectronics is not far behind. Its investment of 6 billion yuan in Yiwu covers an area of 350 acres. The first phase covers an area of 140 acres, with a construction area of 290,000 square meters. This year, the production capacity has gradually been released. The company's production lines are at full capacity. The volume increased significantly compared to the same period last year. On November 22, the commencement ceremony of the second phase project of Huacan Optoelectronics was held in Yiwu Information Optoelectronics High-tech Zone. The investment of the second phase project was 3 billion yuan, with a land area of 143 mu and a construction area of 150,000 square meters. Af

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