Five key words for the development of the LED industry in the second half of the year

From January to May 2015, the overall scale of my country's semiconductor lighting industry reached 179.3 billion yuan, an increase of 22.7% over the same period last year, maintaining a relatively high growth trend. Among them, the scale of upstream epitaxial chips is approximately 6.6 billion yuan, a year-on-year increase of 15%, the scale of midstream packaging is approximately 25.9 billion yuan, a year-on-year increase of 20%, and the downstream application scale is 146.9 billion yuan, a year-on-year increase of 23.6%. Judging from the growth trend of each link in the first half of the year, due to fierce market competition, the upstream and midstream industries have slightly excess production capacity, and the overall growth rate has declined compared with last year. The downstream application segment is still growing rapidly. Relying on the continuous enhancement of national strength, the continuous improvement of industrial manufacturing levels, the high efficiency and competitive supply chain response speed combined with the cost advantage of large-scale production, China's LED application manufacturing industry will continue to increase its global market share. In the expansion of LED applications, traditional markets are growing steadily, and emerging markets have huge potential. So what changes will the LED lighting and display market see in the second half of the year? You might as well pay attention to five key words.

Keyword 1: Smart lighting

According to the "2015 Global LED Lighting Trend Report" released by an organization in early 2015, the global lighting market will reach US$82.1 billion in 2015. Among them, the LED lighting market size will reach US$25.7 billion, with a market penetration rate of 31%.

As to whether smart lighting can subvert the traditional lighting model, a research institute stated that the essence of customer demand is lighting itself, which dominates and will not change in the long term. The primary task of smart lighting is how to provide a more comfortable and high-quality lighting environment. At the same time, customers require that smart lighting products should be simple to use and not require complicated processes. Therefore, at this stage, smart lighting is not intended to subvert or replace traditional lighting, but as an effective supplement, mainly to meet some customers who have intelligent needs for lighting. Intelligent lighting is expected to account for 30% of total demand for lighting in the next 10 years.

The rise of mobile Internet and smart devices in 2014 set off a storm of wisdom in the lighting field, helping to form a breakthrough in the high-end residential lighting market. In the future, users can control the home lighting environment through mobile terminals, customize scene applications, and realize intelligent control of lighting equipment. Currently, major lighting manufacturers, including Philips and Osram, are investing in the field of smart lighting. Among them, Philips launched the HUE series of smart lighting products as early as 2012, featuring humanized functions such as limited time switches, theme changes, and application reminders, and has a good user experience. Currently, Hue has received high user ratings on both Amazon and Apple Store, with annual shipments of Apple Store alone reaching 3 million units. With the rapid rise of smart homes in China, smart lighting will completely change the lighting usage habits of mankind, and at the same time will greatly improve the quality of human life.

Due to factors such as green environmental protection, energy saving and efficiency improvement, and with the strong promotion of the government, municipal traffic lighting has become the first segment in which LED lighting products have entered and formed large-scale applications. Since the launch of the "Ten Cities Ten Thousand Lights" project in 2009, LED road lighting construction has been in full swing in various regions, and my country's LED street light market penetration rate (number of installations) has been continuously increasing. According to estimates by an authoritative market research agency, my country's LED street lighting market size was approximately 23 billion yuan in 2015, and the overall market penetration rate of my country's LED road lighting products will exceed 45%. With the decline in prices, the improvement of channels, and the increase in consumer awareness, the indoor lighting market for commercial and residential lighting will quickly start in the future, becoming the main driving force for the continued high growth of the LED lighting market in 2015.

Keyword 2: small spacing

LED display is a new display technology that developed rapidly around the world in the late 1980s. It has experienced the development process from single-color and two-color graphics and text displays to today's full-color video display. The earliest single- and double-color LED displays could only display text information, and were often found in bus hubs such as airports and train stations, as well as comprehensive information display screens in business halls such as banks and telecommunications. The emergence of full-color screens marks that LED display has officially entered the era of graphics. By encapsulating the three primary color chips of red, yellow and blue in the same lamp bead, a single pixel (lamp bead) can display full color. When the LED full-color display screen first appeared, the screen resolution was low due to the large spacing between packaged lamp beads. It was only suitable for large-screen displays and only suitable for long-distance viewing. Therefore, the LED full-color display screen first began to penetrate into outdoor large-screen displays. It is commonly used in large-scale outdoor advertising displays, live broadcasts of sports events, and background displays for stage performances.

As LED packaging technology continues to mature, the size of packaged devices is gradually reduced, and the spacing between pixels is gradually reduced from the previous 10mm to about 2mm, which is suitable for close viewing (the pixel spacing of the third-generation Huancai XMAX full HD LED TV released by Leyard has been reduced to 1.25mm, with a resolution of up to 19201080 pixels). By comparing with existing indoor large-screen display technology, we believe that LED small-pitch displays will move from outdoors to indoors, gradually completing the replacement of existing DLP and LCD splicing screens, and becoming another killer application in the field of indoor large-screen displays. According to the "2013-2017 China LED Display Industry Market Research and Forecast Report" released by a research center, my country's entire small-pitch display market size was 500 million yuan in 2013. It increased more than three times in 2014, reaching a market size of 2 billion yuan. In 2015-2016, this market will exceed 10 billion yuan.

Keyword 3: Backlight replacement

Since Sony launched the first LED-backlit LCD TV in 2004, LED backlight has rapidly occupied the market due to its many advantages such as low energy consumption, high picture quality, long life and environmental protection. At present, the penetration rate of LED in the backlight of small and medium-sized tablets is close to 100%. In terms of smartphones, the penetration rate of LED backlight has also reached about 80% (the remaining 20% ​​of the market is mainly occupied by Samsung's OLED screens). In large-size backlight fields such as NB/PCMonitor/LCDTV, the penetration rate of LED is also close to 100%. Although the overall demand for LED backlight is close to saturation and market growth is limited, there are still alternative opportunities for domestic LED backlight packaging manufacturers. First, the technology of domestic packaging manufacturers has caught up, and the cost-effectiveness advantage has begun to become prominent; second, the rise of downstream brand manufacturers has also led to a steady improvement in the performance of A-share backlight packaging companies. Global LED backlight packaging manufacturers, especially large-size backlights, are mainly concentrated in Taiwan, Japan, and South Korea. In recent years, the gap in product performance between mainland China and Taiwan manufacturers has continued to narrow. Coupled with manufacturing cost advantages, the cost performance of my country's LED backlight components has continued to improve, slowly replacing the market share of Taiwan, Japan and South Korea manufacturers.

Secondly, my country is a major production center for televisions, mobile phones, and laptops. The shipments of mobile phone manufacturers such as Xiaomi, Huawei, and Lenovo have ranked among the top five in the world; the shipments of TV manufacturers such as TCL, Hisense, Skyworth, and Konka have also ranked among the top ten in the world. Under the premise of certain technical performance, domestic brand manufacturers will naturally give priority to mainland packaging companies. In terms of small and medium sizes, Xiaomi, Huawei, and Lenovo have begun to gradually adopt domestic LED backlight devices since 2013, and the current penetration rate is gradually increasing. In terms of large size, my country's four major TV manufacturers have begun to fully use domestic large-size LED backlight devices as early as Q2 of 2012, and the application proportion has gradually expanded. Therefore, with the backlight market almost saturated, we believe that the rise of Chinese brands such as LED backlights in 2015 will help accelerate the process of domestic substitution and accelerate this structural change.

Keyword 4: E-commerce

Promoting LED lighting products through e-commerce channels can significantly reduce sales costs and cater to the needs of young consumers. For emerging LED lighting brands, since there are no interest disputes and pricing issues with traditional physical channels, their willingness to open e-commerce channels is stronger, the pace of development will be faster, and the O2O model (online and offline combined marketing) is also growing rapidly. In order to cope with the impact of e-commerce on physical channels, under the active promotion of manufacturers, many dealers have tried to combine e-commerce with physical channels to integrate online and offline sales resources. Local merchants have entered into e-commerce, placing orders online, and providing after-sales services through offline delivery and installation, achieving a close integration of physical stores and e-commerce. At the same time, the EMC model is rapidly making profits in the LED commercial field. Product price reductions and energy-saving efficiency improvements have all contributed to the rapid breakthrough of the commercial LED lighting market. The centralized management of lighting functions in the commercial field has led to the rapid rise of smart lighting and EMC models. Commercial LED lighting has also driven the sales of smart power supplies. It is estimated that China's LED lighting smart power supply market size is expected to reach more than 2 billion yuan in 2015, maintaining explosive growth for three consecutive years. In terms of exports, since international LED product prices are relatively stable, domestic LED lighting companies can use their own process and manufacturing advantages to OEM for global brands, thereby gaining profits from the manufacturing process, focusing on exports, and sharing the global market.

Keyword 5: Mergers, acquisitions and reorganizations

As early as January this year, there were more than 80 concept stocks related to the LED lighting industry. Among them, 22 companies have been listed through the concepts related to the LED industry chain, mainly focusing on LED chips, packaging, displays, outdoor lighting, supporting materials, and supporting equipment. As the LED lighting industry matures, mergers and acquisitions are an inevitable process. In 2015, the LED industry chain M&A integration has or is expected to present the following characteristics: First, the overall M&A amount will exceed previous years, and M&A cases with a scale of more than 1 billion yuan will increase; second, the critical period for LED indoor lighting integration will come in 2015; third, there will be successful M&A cases in the sapphire and chip sectors in 2015; fourth, traditional lighting companies will focus on mergers and acquisitions; fifth, LED lighting industry mergers will become internationalized. The number of overseas mergers and acquisitions in the LED lighting industry will increase in 2015. With the increasing intention of outstanding domestic LED industry chain companies to go abroad, the integration of overseas LED lighting industry chain companies and channels has been put on the agenda. As competition in the LED lighting industry chain intensifies, companies are facing greater competition and survival pressure. Excellent companies in the LED industry chain need to change their concepts. Whether they can successfully use mergers and acquisitions strategies is the key to their success in internationalization.