LED chip price phenomenon of economic analysis -- LEDinside

The recent LED chip prices up to two years of stable and a slight upward trend has ended, the first time the price to the incident occurred two years. According to LEDinside, the main chip sales can have different ranges of three and China adjusted decline of individual species or even as high as 20%.

The main reason is the price of more than a year of continuous chip supply external environment has changed. For chip manufacturers, sales price does not move, the cost is relatively a lot of decline, also have the price of the internal conditions. On the downstream procurement chip manufacturers, two years is not caused by the price of cost pressure has been eased to some extent.

There is no doubt that the price of a LED chip supply and demand demand shift to an important characterization of oversupply, but the price is beginning not to evolve into a LED chip industry to start a new round of price competition?

Overinterpret this price event will undoubtedly bring error for the future price trend, understand the logic behind the price to price trend in the future industry more clear judgment. LEDinside analysis of the price behind there are three primary reasons:

1. the relationship between supply and demand in short supply to oversupply formed by LED chip price conditions

LED chip 2015 big price to price level LED chip market Chinese market is far lower than international manufacturers internal production cost, LED chip manufacturing business to 2016 after just gradually began to negotiate into the acceleration phase. A few local time chip plants received LED chip OEM orders a large number of international brands.

At the same time, the 2015 price drop also makes the new equipment orders dropped to the freezing point, so that 16 years although Huacan reserves and three launch capacity, but still not enough to cope with the incremental demand. OEM orders transfer market growth makes the LED chip stacking the original total demand is expected to have annual growth of more than 20%~40%.

However, from the supply growth if by the end of 2017, compared with an increase of 65% by the end of 2016. So by the end of 2017, the tension between supply and demand pattern has undergone a fundamental change, LED chip prices have continued to rise with the external conditions. In fact, the balance of supply and demand may appear earlier, the three quarter of the market supply and demand balance has been restored, but the price response manufacturers have a certain lag.

The semiconductor industry attribute 2. LED chip prices have internal price trend of LED to support the regular price

LED chip to the current stage of industrial development, although the absolute scale of investment in fixed assets compared to the semiconductor and panel industry to a quantitative level, but still has the characteristics of high fixed cost and low marginal cost. With this cost structure characteristics of the industry has a strong scale effect, long term, cost curve is continued downward, do not exist in the traditional industry faces diseconomies of scale constraints.

From the price trend of LED history, have a certain price range per year. Manufacturers get through the expansion of the scale of production of the internal economies of scale and industrial cluster to obtain external economies of scale, coupled with the continuous improvement of material and technology to reduce the cost of maintenance, expansion of the scale, the scale of revenue growth and profit level is relatively stable.

LEDinside statistics for more than 6 years the bulb price trend, based on the regression time series will find that the long term, to replace the 40W LED bulb price per month decline to reach 1.7%, the annual decline of 18.9%.

While some packaging products for the mainstream lighting price, the price decline in the industry's largest in 2014 to 2016 is a quarterly decline in 7.1%~22%. This is certainly a very extreme market price, but also do not forget like 2016~2017 market prices, put in the special case LED industry development history longer is rare, most of the time in the 15~20% industry price is normal range.

The price rises of 2016~2017 to some extent understandable retaliatory rebound 2014~2015 sharp price decline. The so-called the motion of the way, this is really good.

The 3. leading LED chip manufacturers profit maximizing business goals lead to price

After the current round of the chip manufacturers big expansion, three leading manufacturers capacity gradually across the 1 million / month threshold, compared to small and medium manufacturers have a more obvious economies of scale. Another plus is the expansion brings higher efficiency of new capacity than the previous generation machine, the average cost is lower, unable to update the equipment manufacturers gradually marginalized. LEDinside by leading enterprises - edge structure of the enterprises in the industrial organization theory to describe such a market, through this model to explain the significance of enterprise price behavior of the dominant strategy.

The market demand curve is D, the supply curve of single edge manufacturers is MC curve of the manufacturers, the supply curve is the overall edge manufacturers supply curve added more than the result of edge manufacturers (P), S S (P) is characterized when the price is above P* the supply of Q is greater than 0, when the price is lower than the P*, the price of marginal producers cannot cover short-term variable costs, choose to turn off the machine out of the market supply.

Therefore, the demand curve of leading manufacturers is facing the blue line in the picture, a bent demand curve. In the above P* price range, leading manufacturers will face edge manufacturers price competition, the demand curve has greater elasticity, when the market price reaches P*, the demand curve of leading manufacturers face is equal to the overall market demand curve.

When the leading manufacturers cost advantages have not obvious, such as in the figure MC1, price P