Emerging markets bring greater opportunities and export growth benefits the entire LED industry chain

Since the beginning of this year, with the full launch of the downstream market, the LED industry that officially emerged in 2009 has finally come to fruition. Sanan Optoelectronics, Dehao Runda, Sunshine Lighting, Leyard, etc. have become leaders in various fields. They have full say not only domestically but also globally. China has become the world's LED manufacturing center.

In terms of market value, Sanan Optoelectronics’ total market value has reached 34.3 billion yuan, making it the undisputed leader in the sector. The company has also become one of the top five companies in the LED chip industry. Dehao Runda, Silan Micro, Leyard, and Qinshang Optoelectronics followed closely behind. There are already nine companies with a market value of more than 5 billion in the sector. Compared with the entire electronics industry, this is rare. This also means that the LED industry is very important in the capital market.

The rise of LED technology has given rise to the upstream and downstream development of the industrial chain, the most obvious of which is the sapphire field. Before LED technology, sapphire was basically used in watches and some luxury consumer goods. The industry had serious overcapacity. However, with the rise of LED, sapphire as a raw material for chips has a huge export capacity. In addition, as smartphones also take aim at sapphire material, sapphire, which was ignored by the industry in the early stage, has become a hot commodity in the capital market. Since this year, many listed companies have raised huge sums of money to increase their investment in sapphire.

The biggest feature of LED lighting products is energy saving. In the early stages of industry development, its development was slow due to price issues. However, since last year, LED manufacturers' sharp price reductions and the "white ban" policy have made LEDs begin to replace incandescent lighting in an all-round way.

At the same time, as industry trends become more and more certain, the LED sector’s flexibility in valuation has lost its former glory. Since the beginning of this year, Sanan Optoelectronics' secondary market has fallen by 13%, while Dehao Runda has risen by only 2%.

These two companies are both in the upstream of LED - the chip field. As the front end of the industry, LED chips are facing a serious price war problem, which has also led to controversy in the industry about the company's profit expectations. From the perspective of the secondary market, LED downstream applications are on the rise this year. The stock with the largest increase in the sector is Absen, a new stock that has just been listed, with an increase of 170% this year, followed by Leyard, with an increase of 159%.

These two companies are both LED display lighting companies. Their products are mainly used to replace the traditional rear projection and projection market. Previously, due to technical and price issues, the industry had doubts about the market acceptance of their products, but the brilliant performance of the two companies has given the market reassurance. Data shows that the revenue and net profit of Absen's mid-term report increased by 59% and 57% respectively, and the revenue and net profit of Leyard's mid-term report increased by 51% and 73% respectively, ranking among the top in the sector. What excites the market even more is that the gross profit in this field is huge. Gross profit of more than 30% is basically unimaginable in other LED products. In addition, there are few market participants and the threshold is relatively high.

In recent years, with the global economic downturn, many domestic industries have encountered difficulties in exports, but LED has outperformed the cycle. Overseas emerging markets are bringing greater opportunities to Chinese LED companies, among which Russia has become the second largest export market for my country's LED lighting products as a dark horse. In 2013, the export value of my country's LED lighting products to Russia was US$227 million, a year-on-year increase of 260%. In the first half of 2014 alone, the export value was approximately US$327 million, a year-on-year increase of 571%.

Russia has become my country’s second largest export market in one fell swoop, accounting for about 9% of my country’s total exports of LED lighting products. Among the BRICS countries that export China’s LED lighting products, its market share is as high as about 75%. In 2013, the export value of my country's LED lighting products was approximately US$5.5 billion, of which US$390 million was exported to BRICS countries. In the first half of 2014, the export value of my country's LED lighting products was approximately US$4.35 billion, of which approximately US$440 million was exported to BRICS countries, a year-on-year increase of 350%. The rapid growth of exports from overseas emerging markets will fully benefit the entire domestic LED industry chain.