In 2014, the growth rate of LED companies generally fell short of expectations, and low concentration restricted performance growth.

After a year of fierce competition, LED companies have begun to disclose last year's performance. Previously, the cost of LED lighting fixtures has been gradually declining, and the replacement of traditional incandescent lamps has begun to accelerate. Some industry insiders therefore predict that 2014 will be a year of explosive growth for LED companies. However, in fact, the answers submitted by LED companies are not satisfactory.

Take Guangdong, a major LED province, as an example. Up to now, a total of 18 key LED listed companies in Guangdong have announced performance forecasts or annual reports. Although more than 80% of the key companies are profitable, the growth rate is generally lower than expected, and only a few companies have a net profit growth rate of more than 50%.

Some people in the industry pointed out that due to the low threshold of the LED industry, various capitals are vying to enter, supply is gradually increasing, industry concentration is dispersed, and the "cake" that large enterprises can share has shrunk. Even if the market conditions are better, corporate performance "blowouts" have not occurred.

Strong growth expectations have been disappointed

Under the policy of banning incandescent lamps in various countries, the LED market ended its long-term downturn last year and started to recover. A large number of industry insiders predict that 2014 will be the "explosion year" of LED and the year of explosive growth in the performance of LED companies.

However, recently disclosed statistics show that the performance "answers" of related LED companies are not as good as expected, and it is difficult to say that there will be explosive growth. Taking Guangdong, a major LED province, as an example, the total output value of the LED industry in Guangdong in 2014 was 346.006 billion yuan, a year-on-year increase of 23.09%.

In terms of profit growth, 8 of the 18 key LED listed companies are expected to have a net profit growth rate of more than 20%. Among them, three companies, Lianjian Optoelectronics, Changfang Lighting, and Unilumin Technology, are expected to have a net profit growth rate of more than 50%. Others have experienced profit declines or losses.

“The performance has not grown explosively. First of all, it is because the domestic environment has changed. The lighting industry has a greater relationship with the real estate market. The real estate downturn has led to a slowdown in the growth of the LED industry.” Wu Yulin, president of the Foshan Lighting and Lighting Industry Association, told reporters.

Low concentration restricts performance growth

Some industry insiders believe that although the LED industry has picked up in 2014, whether it is upstream chips, midstream packaging and downstream applications, industry concentration is low, which is the main reason for restricting the explosive growth of corporate performance.

It is understood that in the LED upstream field, commercial chip manufacturers such as Sanan Optoelectronics and Huacan Optoelectronics have increased their concentration with the strong support of local governments. However, the entire upstream field still needs to further eliminate small manufacturing companies to increase concentration.

In the midstream packaging industry and the downstream lighting application industry, the industry concentration is even more lackluster.

Ping An Securities analyst Liu Shunfeng said in a research report that in 2014, the production expansion of China's major packaging manufacturers increased by 50% year-on-year, while the production expansion of chip manufacturers only increased by 20% year-on-year. In 2015, the surplus of packaging production capacity will exceed that of chips. Due to the low industrial concentration and scattered distribution of the packaging industry, the industry threshold is low and fierce competition makes it difficult for the industry to retain profits. "Whether it is LED packaging or LED lighting applications, the concentration is too low. Currently, no LED company's market share can account for 5% of the entire 200 billion yuan LED market, and few companies can achieve sales of one or two billion yuan." Wu Yulin told reporters that it will take at least 2 to 3 years for a big brand to emerge. Although the LED industry is recovering, due to the entry of various capitals, low industry concentration, fierce competition, and continuous corporate shuffling, explosive growth in performance is difficult to occur.

Liu Shunfeng further pointed out in the research report that the LED industry will still maintain a situation of oversupply in 2015, and the LED industry structure is expected to undergo tremendous changes. Powerful large manufacturers will further expand production capacity and increase market share, while small and medium-sized manufacturers will be eliminated at an accelerated pace. The entire LED industry will present a situation of eliminating the weak and retaining the strong.