LED industry oversupply worries surfaced, Taiwan LED upstream manufacturers interest rates fell for the 3 consecutive quarter

With the LED plant has been announced in 2008 Q3 profit, we found that LED upstream of the chip manufacturers have been the 3 consecutive quarterly decline in interest rates show signs of profit decline exceeded market expectations. Show in the global downturn, the substantial expansion of the upstream manufacturers sequelae began to emerge. However, in the absence of demand, but also related to the impact of potential competitors in the footsteps of the LED industry has been oversupply, it is considered a benign development.

Upstream and downstream manufacturers profit performance

According to LEDinside research shows that the performance of the downstream manufacturers in Taiwan LED different tone, the performance of the downstream packaging manufacturers in line with the performance of the traditional season, but the upstream chip manufacturers profit is significantly reduced. The profitability of the downstream LED manufacturers for comparison (Figure-1), the upstream average profit rate of 6.3% of the average profit ratio of the chip manufacturers, compared to the same period in the second quarter of this year fell by more than 9.9%. The average profit margin of the downstream packaging manufacturers was 10%, compared to the 2008 second quarter 8.6% edged up 1.4%%.

Figure-1 Taiwan Companies Operation LED Margin

Low utilization of capacity led to poor profitability upstream manufacturers

In the third quarter for LED manufacturers to the traditional peak season, but the upstream manufacturers profitability is grain for the 3 quarter continued to decline, especially the leading manufacturers of crystal electric and canyuan camp interest rate by the second quarter 9~12% dropped to about 3%. The reason for the decline in profits is due to the upstream grain manufacturers in 2008 to expand the production rate is too fast, and the demand can not keep up with the expansion of production capacity utilization rate is low. In addition, the third quarter of 2008, mobile phone and digital photo frame to the needs of the poor, making the original planning sales to mobile phone and digital photo frame customers LED must be transferred to sales to the indicator margin poor products, and transferred to the LED display products. These factors, combined with the impact of upstream manufacturers profit performance.

In terms of inventory days, regardless of the upstream chip manufacturers or downstream packaging manufacturers, inventory days have a slight decline. Upstream chip manufacturers inventory days decreased from second to 126 days in the 128 quarter. The number of downstream packaging manufacturers inventory is second days from the 75 quarter fell to 70 days.

Figure-2 Taiwan Companies Inventory turn over LED days

Mobile phone demand is not as good as in previous years, the peak season

From the LED demand side analysis, in LED applications, mobile phones and small and medium size backlight performance is still poor in the third quarter. According to LEDinside statistics, the global mobile phone shipments in the third quarter of 2008, the total number of about 310 million, compared with the 2008 quarter of second shipments of about 303 million growth of about 2%. If compared with the same period last year, 5.5% growth in the 2008 quarter of third, the mobile phone market began to reflect the impact of the global recession. As the wave of the global economic downturn will continue until 2009, so LEDinside expects mobile phone shipments in 2009 will be flat with the figure in 2008. Although the trend of smart phones in 2009 big screen makes the demand for LED particles increased, but also improve the brightness of LED, will also offset the growth of mobile phone applications LED.

Recession delays the expansion of potential competitors

Outlook 2009, LEDinside observed the impact of the global downturn does affect the LED related industry chain. Reflected in the demand side, consumer electronics products bear the brunt of the number of mobile phones and digital photo frame began to repair. Currently only the remaining NB backlight and lighting related products for the growth momentum of the LED industry in 2009. The upstream manufacturers also feel weak demand, began to reduce capital expenditures in 2009. This wave of depression or even deter panel related manufacturers and mainland LED industry expansion schedule, perhaps for LED industry development trend is more healthy.

Source: LEDinside