Nothing can touch the nerves of LED industry players more than “price increases.” News, analysis, and reports about price increases have swept the headlines of major media in the industry in just a few days. On today's "big day" when prices are rising, Xiaoye excerpts the whole story of this price increase, as well as the industry's voice.
The main reason for the price increase given by various upstream manufacturers is the recent increase in various raw material and labor costs. Specifically, the prices of sapphire, aluminum substrate, copper foil, gold wire and silver bracket used in LED raw materials have increased to varying degrees. Coupled with the continued increase in labor costs, it is imperative to increase the price of LED products.
Inspur 1. Major chip manufacturers took the lead in initiating price increases
In May of this year, Jingyuanbaocheng Optoelectronics, the only official seller of Taiwan's Epistar Optoelectronics (referred to as "Jingdian") in the mainland, issued a document indicating that the price of some series of LED chips will increase. Epistar explained the price increase of LED chips as "due to the recent increase in various raw material and labor costs, which have exceeded the company's current cost accounting price, the company plans to gradually increase the prices of some series of chips currently on sale." This price increase is due to the obvious overcapacity of LED chips and the excessive price drop. After this increase, chip manufacturers will only return to a certain normal profit level.
In August, Sanan Optoelectronics’ price adjustment letter showed that raw material prices bottomed out, including gold (up more than 27% from the beginning of the year) and substrates (up more than 30% from June). At the same time, due to the small size of small and medium-power chips, the back-end process consumes a lot of sorting and testing capacity, and unit labor costs rise, resulting in a sharp decline in the output value of the back-end process. The price of some small and medium-sized products is now increased by 10% and will be implemented on August 25.
In addition to Sanan Optoelectronics, Huacan Optoelectronics and other unnamed first- and second-tier chip manufacturers have also raised the prices of some products, with product prices rising by 5%-10%. The products that several LED chip manufacturers have raised prices this time include small and medium-sized chips.
The person in charge of a certain first-line chip factory believes that the price increase of LED chips is due to rising raw material prices on the one hand, and on the other hand due to shortages in the packaging market, insufficient chip supply, and chip production capacity cannot keep up with the expansion of packaging production capacity. Not just small and medium sizes, but other models of chips as well.
Inspur 2. Price adjustment of display RGB lamp beads by major packaging manufacturers
The price adjustment letter from Cinda Optoelectronics shows that due to the sharp increase in the prices of upstream chips and brackets (generally above 10%), coupled with the continued increase in labor costs, the price of RGB lamp beads produced by the company will be increased by 5% on the current basis. The price adjustment will be implemented from September 1st. This price adjustment includes products from four subsidiaries including Fujian Xinda, Guangdong Xinda, Anpuguang, and Xiamen Xinda, and the price adjustment range is 5%.
Mulinsen’s price adjustment notice shows that due to market changes, product costs continue to rise. In order to coordinate the production development of both parties and maintain a good business relationship, based on the actual situation of rising raw material prices. Based on the principle of mutual benefit, the price of display RGB lamp beads will be increased by 5% from September 1, 2016. Mulinsen had already adjusted the prices of some products in late March and early April this year. It was probably to test the market response at that time, and now it is really taking action.
Nationstar Optoelectronics also issued a notice: Nationstar RGB LED device product prices will increase by 10%. The prices of precious metals such as gold and silver continue to rise, and the costs of gold wires and silver brackets, the core components of LED devices, are also rising. LED chips, the key components of LED devices, have also risen sharply due to the increase in the price of sapphire substrates. The cost accounting price has been exceeded, and the price has been increased in order to maintain profitability. Nationstar Optoelectronics made it clear that product price adjustments are to ensure high-quality output.
Industry insiders said that in the past two years, the competition among mid- and downstream LED packaging products has been very fierce. The overall price of the industry has been declining, and the profits of packaging companies are very thin. Nowadays, consumers' demands for LED displays have shifted from "high light efficiency" to "high quality", which has put forward more requirements for packaging. To develop and produce high-performance LED packaging products, packaging companies need to invest more funds. This year, enterprises' labor, raw material and other costs have continued to increase, and under such circumstances, prices will inevitably rise.
Inspur 3. Raw materials rise, and terminal displays follow suit
Downstream display screen manufacturer Fujian Jingcai Optoelectronics has issued a price adjustment notice for surface-mounted full-color products. The announcement shows that due to the increase in the price of lamp beads at packaging factories, the increase in PCB board prices at circuit board manufacturers, and the continued increase in labor costs, in order to ensure the supply of cost-effective products with guaranteed quality and quantity, the prices of some outdoor and indoor products will be adjusted.
Trina Optoelectronics also issued a unit board price adjustment notice. The content shows that due to the increase in supply prices from upstream manufacturers, in order to ensure product quality, the prices of some models of indoor unit boards will increase on September 1. There will be no adjustment for the time being for outdoor units.
There are rumors of "increases" and public opinions
Most people in the industry said that this price increase is a prelude for the market to return to rationality and products to return to quality, marking the need for companies to more strictly control product quality in the future. Samsung and Everlight also expressed optimism about the rise.
Tang Guoqing, general manager of Samsung LED China, even praised the price increase of LED chips. Mr. Tang believes that in a competitive market environment, the LED industry cannot go far in the long run just by relying on price reduction competition. Only when LED products return to their original value and the LED industry returns to a rational competitive environment can the market have hope and the motivation for long-term development.
In June this year, during the Guangya Exhibition, Everlight, a major Taiwanese LED packaging manufacturer, also provided opinions on the price increase of Epistar. Liu Bangyan, general manager of Everlight's production business group, said: The price of LED chips in mainland China has been very small this year. If the price in mainland China rises, we will be most happy. In the end, it still depends on the overall demand situation.
As for the real reason for this price increase, it must not be caused by a single situation. The result is a combination of rising raw material and labor costs; strong demand for downstream display screens and other competitive strategic factors. In any case, the price increase has become a fact. However, any price increase that does not lead to a quality war is just a hooliganism. The wave of price increases promotes the improvement of enterprises in all aspects of the industry, which is what everyone is most happy to see.
ANNA