LED industry big Hengda pattern will determine product price competition to return to reason.

In the autumn of September, news of raw material prices rose in LED industry. From the largest chip company in China, Xiamen Electronics Co., Ltd., Sunan to XinDa, and even packaging giant chip, such as chips and packaging manufacturers, the products are rising. The reasons for price adjustment are all caused by the price of raw materials and the increase of labor costs. As a matter of fact, since May, the price of crystalline optics announced on the other side of the Taiwan Strait has started to rise. The price of chips and packaging materials has increased, and the industry has applauded and wants to follow up. More professionals say that the rise in prices is due to the normal market rule, which indicates that LED market competition is gradually returning to rationality. Chips and packaging companies collectively rose. In May of this year, Jingyuan photoelectric fired the "first shot" of chip prices, and the price of blue light LED will rise by 15%. Subsequently, chip manufacturers such as San an and Hua Chan also made price adjustments. By the end of August, the LED chip and packaging enterprises had been raising prices collectively. The price of some small and medium-sized products of Xiamen San an was up 10%, which began in August 25th. OPP optoelectronics, XinDa photoelectric and Mu Lin Sen's RGB lamp price also increased by 5%, since September 1st. The price adjustment of San an photoelectric shows that raw material prices have bottomed out, of which gold (more than 27% above the beginning of the year), the substrate (up by more than 30% in June); meanwhile, due to the small size of the small and medium power chips, the later stage process consumes a lot of sorting and testing capacity, and the unit labor cost is rising, leading to the later stage production value. Sharp decline. The price of some small and medium-sized products has risen by 10%, and has been implemented since August 25th. The notice of price adjustment at Mun Lin Sen shows that due to changes in the market, the cost of products is rising. In order to coordinate the production development and maintain good business relationship between the two sides, according to the actual situation of raw material prices rising. In line with the principle of mutual benefit, the price of RGB bulbs will be raised by 5% in September 1, 2016. The price adjustment letter of XinDa optoelectronics shows that the price of RGB lamp beads has increased by 5% on the basis of the price rise of the upstream chip and bracket, which is generally higher than 10%, plus the continuous increase in labor costs. The price adjustment has been implemented since September 1st. The price adjustment includes Fujian XinDa, Guangdong XinDa, An Puguang, Xiamen XinDa and other four subsidiary products, and the price range is 5%. The main reason for the price adjustment offered by various manufacturers is that the cost of raw materials and labor costs has risen in recent years, which has exceeded the cost accounting price. From the price adjustment issued by various manufacturers, we can also see that in recent years, sapphire substrates, aluminum substrates, gold and so on applied to LED raw materials have risen to varying degrees. It is not difficult to find out the information of price increase issued by the major manufacturers. The products that are currently rising in price are all used for LED display chips and packaging products, especially small spacing products. LEDinside senior analyst Wang Fei believes that the small spacing LED display has entered the market growth period, the market is expanding rapidly. The strong demand and technological progress of the downstream will drive the small spacing package and the rapid growth of chip consumption. He believes that the display and backlight packaging products will be driven by the demand of small spacing display, there will be a certain increase in the price of the space, "and the lighting packaging will be facing the upstream and downstream extrusion." Prices are falling and profits are bottoming out. In fact, prices of LED chips, packaging and other products have been decreasing in recent years. At the recent 2016 Strategiesin Light (SIL) and LEDShow meeting, senior analyst Stephanie Pruitt said the incredible price drop has led to a decline in the revenue of the LED market. Pruitt pointed out that in the second half of 2015, the price of medium power LED dropped by 30% to 40%. High power LED is slightly affected by this effect, but it still drops by 20% to 30%. Pruitt believes that the sharp drop in prices of lighting and backlighting is the main culprit, as LED's shipments continue to climb. This is also reflected in the semi annual reports issued by major enterprises in recent years. In August 20th, poly flying photoelectric released semi annual report in 2016. It was a mixed blessing that the company's revenue grew by 57.32% to 655 million yuan in the first half of this year, while net profit dropped 12.56% to 59 million 414 thousand and 400 yuan over the same period. In the table of the main business composition, the gross profit margin of the LED products of Gaopai lighting is particularly noticeable. The revenue of the product is 74 million 109 thousand and 600 yuan, the operating cost is 67 million 141 thousand and 200 yuan, and the gross profit margin is only 9.4%. The intense competition and the tendency to become white hot are already the norm of the LED industry. "Injured" is not only a photovoltaic company, but the gross profit margin of LED application (including lighting products and others) in 2015 is only 7.17%. However, this year has not yet disclosed semi annual report. In addition, Lehman optoelectronics, which implements double main businesses, has achieved 250 million yuan in the first half of 2016, an increase of 49.41% over the same period last year, of which sports resources realized sales revenue of 25 million 820 thousand yuan, up 77.15% over the same period last year. But it is worth noting that the main business LED of Lehman optoelectronics, and the related packaging device products, lighting products and display products, although there has been a different increase in revenue, gross margins have dropped. Take LED business as an example. In the first half of 2016, revenue was 220 million yuan, gross margin was 29.25%, a 4.06 percentage point decrease compared with the same period last year. The same is true in the upstream chip industry. According to the semi annual report of San an photoelectric, the sales revenue in the first half of this year was 2 billion 778 million yuan, and the net profit attributable to shareholders of listed companies was 966 million yuan. However, the amount of non recurring gains and losses in the first half of the year was 324 million yuan, of which 348 million yuan was included in the current government subsidy. The net profit deducted from non recurring gains and losses of shareholders actually listed on the company fell by 9.49% compared with the same period last year. Nowadays, profit has hit bottom and has become a big pain for LED enterprises. Guo Xiu, Secretary General of Guangdong lighting and electrical appliances association, said, "the profit margins of the industry are very limited, especially in the field of encapsulation. There are also many enterprises with gross margin of 7%~8% in the industry." In view of this, manufacturers' price increase is actually an inevitable move under the heavy pressure of business. The reshuffle has arrived, and the Evergrande has increased the price of the manufacturers one by one. More people say frankly, price rise is a normal market rule, which is a good thing for enterprises. The products produced in the future will have their own characteristics, and will promote the research and development of the whole industry. Dr. Wang Sen, general manager of Guoxing optoelectronics, believes that the LED packaging industry is gradually concentrating, and the situation of the bigger and bigger will be more obvious. This is undoubtedly a new development opportunity for China Star. "The change of this pattern means that the LED packaging industry is gradually returning to rationality. After several years of price war and industry shuffling, the industry is changing from blindly pursuing low price to paying attention to the product itself, such as technology, performance and so on. Small and medium-sized enterprises without core technology have been closed down or shifted to a certain subdivision area, resulting in a gradual increase in the concentration of industries. This is also a trend for the industry as a whole. Dr. Wang Sen said. It is like packaging the leading wooden company, which has the advantage of large-scale cost. Mr. wood has recently publicly estimated that the current LED chip procurement volume of about 50 billion per month, estimated at the end of the year will reach 600~700 billion, with the expansion of Jiangxi Ji'an plant expansion, before 2019, the purchase volume increased to 150 billion, equivalent to 3~4 times the size of the purchase. In addition, the company has two rounds of expansion this year, and there is still expected expansion in the next year. In fact, the low gross margin of LED lighting products has been the norm in the industry. For poly photovoltaic, LED lighting accounts for only 11.32% of revenue, and it can support other companies to run the company. Many small and medium-sized LED companies may not be so lucky. Xu Yu photoelectric chairman Lin Jintian also believes that in the long run, price increase is not a bad thing. If the industry is "stumbling", it will only fall into the trap of vicious circle. The collective price increase of suppliers represents the industry's access threshold and is developing towards a benign direction. In the future, LED enterprises must be based on quality competition instead of abusing price wars. As long as they can survive the two years of market chaos, enterprises will have a healthy competitive environment, and the market prospect is still very promising. Tang Guoqing, general manager of SamSung China, also applauded the rise in chip prices, and said that every commodity has its attributes and has its value. Vicious competition and vicious bidding can not be maintained, and it can not always be "cheap and good", but it is impossible to create a brand that can be heard.