Analysis of current situation and future trends in the three fields of LED upstream/packaging/display

Upstream demand rises and prices continue to fall

Among the five major LED chip giants Sanan Optoelectronics, Dehao Runda, Aoyang Shunchang, Huacan Optoelectronics, and Qianzhao Optoelectronics, only Sanan Optoelectronics and Aoyang Shunchang increased both revenue and profits, Dehao Runda and Huacan Optoelectronics increased revenue but not profits, and Qianzhao Optoelectronics neither increased revenue nor profit. Among them, Dehao Runda and Huacan Optoelectronics suffered serious losses of tens of millions. In the first quarter of 2015 alone, Dehao Runda lost more than 90 million.

Current situation: The decline in performance and losses are due to the "off-season"

Profitable companies will not go into details, but companies with declining performance and losses feel the pain in their hearts and have to explain.

For this performance, Dehao Runda explained: 1. Due to the fierce market competition in the LED industry, the prices of LED chips and lighting products have dropped compared with the same period last year; 2. The company's LED chip and lighting product production capacity has been fully released in the first quarter of 2015, but the first quarter is the off-season for production and sales, and the capacity utilization rate is low, resulting in fixed expenses not being diluted and product manufacturing costs higher than the same period last year; 3. The product structure has changed. Of course, this is only a superficial reason. The most fundamental reason is the poor sales of its LED chips. Although the acquisition of NVC Lighting did clear up the sales channel of chips to a certain extent, in fact the problem has not been fundamentally solved.

The reason given by Huacan Optoelectronics is: Under the influence of the Spring Festival holiday, the LED industry showed a significant decrease in seasonal production and sales in the first quarter. During the reporting period, the company's operating scale and asset-liability ratio increased significantly year-on-year. Management expenses and financial expenses, including R&D and salaries, increased significantly.

Qianzhao Optoelectronics stated that operating profit, total profit, and net profit all decreased compared with the same period last year. The main reason was that the fixed expenses of the blue and green projects were offset by the company's profits during the commissioning and trial production stage.

Trend: Production capacity will be released and price competition will be fierce

According to data, the output value of domestic chip manufacturers reached 10 billion yuan in 2014, with a year-on-year growth rate of about 45%. It is growing rapidly, and its market share has increased to 83%. In 2015, China's LED chip output value is expected to reach about 16.1 billion yuan, and the market share of domestic domestic chip manufacturers is expected to further increase. However, it should be noted that due to the release of new production capacity, the increase in the industry's MOCVD startup rate and capacity utilization rate, and the decrease in overall chip production costs, the chip price per unit area will decline in 2015.

Due to the release of production capacity, the expansion of the epitaxial chip field has been driven. As the main material of epitaxial wafers, the demand for sapphire has also been strong. As one of the main materials for the growth of LED epitaxial wafers, the demand for MO sources will still maintain a high growth rate. However, under the combined effect of the increase in the total supply of MO sources and the "ceiling" effect in the total demand for MO sources, the market competition for MO source products, especially price competition, will still be fierce. At present, MO sources are still in a state of oversupply, product price competition is fierce, and the gross profit margin of the main product trimethylgallium is already at a low level. The decline in the price of rare earth raw materials directly led to the decline in operating income and net profit of rare earth luminescent materials for some companies from last year to the first quarter of this year. However, with the introduction of favorable policies such as the implementation of resource tax reform on rare earths, the rare earth market is expected to usher in an opportunity for recovery in the second half of this year.

"Potential stocks" emerge and packaging competition intensifies

The eight major packaging companies include Mulinsen, Lianchuang Optoelectronics, Nationstar Optoelectronics, Hongli Optoelectronics, Jufei Optoelectronics, Ruifeng Optoelectronics, Changfang Lighting, and Wanrun Technology. Among the equipment giants, Mulinsen, Lianchuang Optoelectronics, Nationstar Optoelectronics, Hongli Optoelectronics, and Ruifeng Optoelectronics have increased both revenue and profits, Wanrun Technology has increased revenue without increasing profits, Jufei Optoelectronics has increased profits without increasing revenue, and Changfang Lighting has neither increased revenue nor profits. But fortunately, no listed LED packaging company suffered losses in the first quarter of 2015.

Current situation: The packaging landscape has changed

Most of the LED packaging giants are large companies, such as Mulinsen, Lianchuang Optoelectronics, Nationstar Optoelectronics, and Hongli Optoelectronics, which have entered the "billion club", and Jufei Optoelectronics, Changfang Lighting, and Ruifeng Optoelectronics, which are just shy of entering the "billion club". They can be called "potential stocks" in the packaging industry.

Since Mulinsen's successful listing, the established "packaging leader" Nationstar Optoelectronics has encountered strong opponents. Regardless of other aspects, in terms of revenue alone, the emerging "packaging leader" Mulinsen has left Nationstar Optoelectronics behind. Wanrun Technology's performance was average. The production base was successfully relocated in the first quarter. However, during the relocation process, there was a certain loss of production personnel, which limited the release of production capacity. In addition, the expenses incurred during the relocation had a certain impact on the performance in the first half of the year. Changfang Lighting focuses on the packaging of white LEDs for lighting. Its performance in 2014 was good, but in the first quarter of 2015, it was shocking, with both revenue and profits declining. On the other hand, Jufei Optoelectronics has increased profits but not revenue. As the king of small-size backlights, its products have relatively high profit margins, which has attracted packaging giants to make moves in the small-size backlight market in the past two years. In addition, the medium and large-sized backlight business is developing well and has become a new profit growth point for Jufei Optoelectronics.