LED supply and demand is undergoing fundamental changes.

Lighting and small spacing LED demand side are long-term good, so the next 2 to 3 years will continue to substantially pull the downstream needs of the LED industry chain; and at the same time, the overall industrial concentration of LED will continue to improve, which will increase the entry threshold of the whole industry, and the new entrants will be reduced. In addition, the government subsidies will be gradually increased in the 13th Five-Year plan. Step out, making the LED chip supply side disorderly production capacity to be suppressed, the upstream industry chain bargaining power is rising, so we can intuitively feel that the overall supply structure of LED is undergoing profound changes. LED industry supply and demand structure improvement signs are obvious, upstream price rise frequently, downstream performance outstanding signs: first, the LED industry chain upstream price rise frequently in 2016, some products rose more than 15% in March, such as wooden forest, Jingtai and other packaging enterprises have made some price increases on the part of products; in May, crystalline power was reduced by 25%. Under the circumstances, the price rose by 15%, and some products of San an also had a slight increase in price. In August, the prices of chip enterprises such as San an increased to varying degrees. Among them, the price of three dimensional photoelectric products was up 10%, and Huatan optoelectronics also adjusted the products with lower profits; in September,, The price increase of RGB bulbs is about 5%-10%. According to investigation and study, in the end of the 2 quarter of 2016, the price of many LED chip enterprises has begun to pick up, and the revenue situation has improved significantly. Take crystal energy as an example. In the early September, the capacity of crystalline electricity was fully loaded and extended to October. At present, its capacity utilization rate has exceeded 9. Among them, the Blu ray machine capacity is about 90%, the unit price and the better profit red light production line are full load. According to the data, we can see that the average price of mainstream packaging devices has stabilized. Compared with the price of packaging devices dropped by 50%~60% in 2015, the overall supply and demand relationship of packaged devices has been greatly improved. The larger package specifications can be seen in 5630 and 3030, which has declined in 3-4 months, but has stabilized since April. The price of size 2835 has been stable this year, and some of the prices have risen slightly in July. For example, since the middle of 6, the stock price has risen by 18%. The demand for all product lines has been fully recovered. The third quarter will officially enter the peak season, rather than just replenishing stock. Among them, the best performance of TV backlight is mainly driven by the demand of this year's Olympic Games. The order from mainland mobile phone backlight and display screen will also contribute significantly to the third quarter revenue. According to the data, the global LED bulb dropped by 9%, which is basically in the normal range compared to the 12.4% price drop of the global alternative 40W lamp in 2015 and the 9.9% decline in the price of 60W lamp, mainly due to the decline in overall consumables caused by the progress of packaging technology. At the same time, the price of China's LED bulbs dropped by about 11%. Compared to 2015, the price of China's alternative 40W bulbs dropped by 18.4%, and the price of 60W bulbs dropped by 32.37%. The downward trend has been greatly stabilized, reflecting the increasingly stable competition environment in the domestic light bulb market, and the pattern of supply and demand has gradually improved. There are indications that the supply and demand pattern of LED chips has changed. Signs two: in 2016, LED lighting business revenue ushered in inflection point, a number of enterprise revenue grew by over 40%, the downstream LED lighting enterprise revenue improved significantly, verify the LED lighting supply and demand pattern has ushered in the turning point, reversing the 15 year decline pattern. From a number of Listed Companies in the first half of 2016 revenue can be verified, sunshine and Foshan revenue grew by 40% over the same period, the revenue of Rex grew more than 90%, which is due to the lower LED lighting application base in the first half of 15 years, and also reflects the worst time has passed. In 2016, the downstream LED illuminated the application of the overall demand and supply structure. An inflection point has occurred. Demand side: LED lighting penetration space is still larger, small spacing to usher in the outbreak by UBS data show that in 2015 LED chip end demand has exceeded 90 thousand square inches, is expected to still be able to grow by 20% in 2016, although with the improvement of the LED chip luminous efficiency, LED backlight demand for chips will have an area. It will decline, but with the further improvement of LED lighting penetration and the outbreak of small spacing demand, it will continue to promote the demand for LED chips. From the demand side analysis one: LED lighting penetration rate is only 27.2%, "ban Bering" catalytic LED instead of LED lighting penetration rate is only 27.2%, in October 1st, "ban Bering" prompted LED lighting to further replace the Bai Baichi light. 1) lighting is the main application market in the downstream of LED, and WIND accounts for roughly 45% of China's data. According to DIGITIMES data, the scale of global LED lighting market has also increased significantly in recent years, from 1 billion 750 million US dollars in 2009 to 29 billion 900 million US dollars in 2015, with a compound growth rate of 60.5% during the period. But its penetration rate is still not high, only 27.2% in 2015, and more than 30% in 16 years. Therefore, its growth space is still huge. 2) according to the "China phased out incandescent road map" released by the national development and Reform Commission and five ministries in November 2011, the final test of incandescent lamp elimination in China is September 30, 2016, and in October 1, 2016, incandescent lamps for 15W and above are prohibited. Sale and import. This is interpreted by the industry as a "blanket ban" and a further release of the market demand for LED lamps. The domestic incandescent lamp storage space is huge. In the first half of 2016, the total output of incandescent bulbs reached 2 billion 12 million, with a monthly output of 3-3.5 million. According to CSA Research data, the domestic LED lighting capacity is about 6 billion in 15 years. If it is completely replaced, it will consume about 60% of the 15 year LED bulb capacity. From the demand side analysis two: the small space between home and abroad continues to be hot. In the next 2 years, the demand for 40 billion new products will continue to be hot every year, and there will be nearly 40 billion new demand every year in 17-18 years. In recent years, with the advantage of seamless assembly, the small spacing LED display is gradually replacing the DLP and liquid crystal mosaic display, and shows the trend of accelerated growth. According to the domestic half distance display leader, Riad semi annual report shows that its small spacing TV new order is 1 billion 100 million yuan, an increase of 104% over the same period last year. In 2016, 1-6 months, the revenue was 482 million yuan, an increase of 93% over the same period last year, and the gross margin of small spacing TV remained at 39.78%. Other listed companies such as Abison, Chau Ming technology, United Construction optoelectronics, alto electronics, Lehman shares and other LED display business, this year's display business performance is equally gratifying. From this we can see that the market of small spacing LED display is developing at a high speed. According to statistics, the average number of LED used in indoor LED displays per square meter has increased from 60 thousand in 2015 to 270 thousand in the next 2 years, and the number of upstream LED packages and chips has increased by more than 3 times under the same area. It is estimated that the consumption of LED will be 29 billion particles in 2016. With the gradual development of packaging materials in mainland China, the cost will further decline and promote the development of the market. In 2021, the LED consumption of small spacing will reach 189 billion 800 million particles, and the annual compound growth rate will reach 46%. In addition, outdoor display screens are beginning to show the trend of small spacing packaging. With the outdoor surface mounted LED gradually overcome the technical problems such as moisture-proof and ultraviolet protection, the trend of high-definition and high-density outdoor display is also gradually rising. The average distance from P10 to P6 progress is also expected to explode. LEDinside estimates that the number of outdoor LED consumption will grow from 93 billion 600 million in 2015 to 286 billion 400 million in 2021, with an annual compound growth rate of 20%. It is estimated that the total demand of small and medium-sized households within 16 years will reach 141 billion 300 million, and will grow at a compound growth rate of 28%, and there will still be nearly 39 billion new demand each year in 17-18 years. According to Gao Gong LED data, the small space LED is estimated to be around 70 billion units at present, so there will still be a big gap between supply and demand in the future. Supply side: chip capacity expansion is limited, packaging concentration significantly improved by UBS data show that in 2015, LED chip end supply capacity of about 92 thousand square inches, is expected to grow slightly in 2016, mainly through the 2015 industry depth shuffle, only about 4000 LED companies in China withdrew from the market. Overseas LED chip end factories have reduced production, and other wishes to continue to expand production have been significantly suppressed, and China's implementation of the supply side reform, narrowing the chip end subsidies, but also inhibit the expansion of the chip end capacity. From the supply side analysis one: industry subsidies are narrowing, significantly inhibiting the LED chip capacity disorder expansion, in 13th Five-Year plans no longer include the LED industry in the cultivation industry, upstream chip subsidies are gradually narrowing. The narrowing of subsidies at the government level will inhibit the disorderly expansion of LED chip capacity from the source of the industrial chain, and hopefully shift the subsidy to the LED lighting application terminal, which will pull the LED industry chain from the demand side. As a new industry in the past 09 years, the rapid development of LED industry has played an important role in government subsidies. Public information shows that China has subsidized the LED industry since 2009, with a large subsidy rate. In 2013, from the State Council to local governments, policies were launched to promote the LED industry. Statistics show that, taking the San an photoelectricity as an example, as the LED industry "subsidize a brother", from 2010 to 2015, the amount of subsidies was over 3 billion yuan. In 2010, Sunan received a total of 700 million yuan of government subsidies, accounting for 60% of net profit in 2010, 86% in 2011, 60% in 2012, 45.7% in 2013, and 50% in 2014, and 28% in 2014. According to the industry recently, after a round of shuffle, the government subsidy target has changed: at present, only subsidies can be made to those enterprises that can become leading enterprises. The patch has narrowed down, and some small and medium enterprises are less likely to get the subsidy. After the abolition of subsidies in 2015, the investment in the new production line of enterprises increased greatly. The price of a single MOCVD could reach 20 million yuan, and many enterprises would not be able to afford it. Narrowing government subsidies means that the disorderly production capacity of the LED chip end and the package end will be suppressed. At the same time, if the LED lighting application terminal is further subsidized in the future, the supply and demand pattern of the LED industry will be fundamentally improved. The LED industry chain is expected to benefit from the whole and become warmer. With the narrowing of the scope of government subsidies, domestic LED chip enterprises reduce the impulse to expand production. According to statistics, as of 2015, the total installed capacity of the global MOCVD platform was about 3130 units, of which, the total number of installations installed in the mainland amounted to 1473 units, accounting for 47% of the global total. The number of machines in Taiwan accounted for about 19% of the total global, Japan accounted for about 15%, and South Korea's proportion was about 13%. After the LED industry shuffled in 2015, large chip manufacturers adjusted their capacity to control the expansion plan. Crystalline electricity and CREE began to cut 25% respectively from the second half of last year (about 500 MOCVD units, 450 of which produced Blu ray LED, and the rest 50 of which were mainly four yuan LED). At the same time, San an photoelectricity terminated 47 procurement contracts for MOCVD in Germany at the beginning of the year. In May, Jing Dian completely shut down the production line. The new century had no expansion plan for 2~3 years, and no new machine will be added this year. Since the subsidy was abolished in 2015, the input of the new production line has become very large.