The global LED market entered the fourth season of the traditional off-season but ushered in shocks. The supply chain industry pointed out that after nearly a year of tight supply of LED prices, LED manufacturers including Sanan and Huacan have taken the lead in price reduction for mainstream LED products. The drop is even as high as 20%. The global LED market entered the fourth season of the traditional off-season but ushered in shocks. The supply chain industry pointed out that after nearly a year of tight supply of LED prices, LED manufacturers including Sanan and Huacan have taken the lead in price reduction for mainstream LED products. The drop is even as high as 20%. The price cut indicates that the overall supply and demand of production capacity has reversed. In the end market demand slowdown and the continuous release of plant capacity, some industry insiders believe that the crisis of oversupply in the LED market may also reappear, and downstream manufacturers are still waiting to see. Regarding the price of LED chips and the relationship between supply and demand, Huacan Optoelectronics said in response to questions from investors last month that the price fluctuations of LED chips are fierce and unreal. For Huacan Optoelectronics, the overall price fell by less than 5% in the fourth quarter, and the gross profit margin was stable. Jin Zhangyu, chairman of Ganzhao Optoelectronics, said that at present, the overall market situation of LED is better, the demand is increasing linearly by about 20% every year, and the supply side may be pulsed, but this will bring short-term oversupply. Of course, this process There will be other variables in the supply and demand relationship. For example, after the new production capacity comes up, the original part of the production capacity may be withdrawn due to the low efficiency of production and operation. However, although the LED price collapse is not a big chance, this wave of price declines will continue into the first quarter of 2018, which will have a certain impact on some manufacturers. The industry analysts believe that the reasons for the price cut are mainly internal and external. External external environments that have been in demand for more than a year have changed. In 2015, the LED chip price cuts made the LED chip market price in the Chinese market far lower than the cost of internal production of international manufacturers, which prompted the LED chip foundry business, which was gradually started to negotiate after 2016, to enter the acceleration phase. For a time, several major chip factories in China received a large number of OEM orders for LED chips from international brands. At the same time, the price drop in 2015 also caused the number of new equipment orders to drop to a freezing point, so that despite the reserve capacity of Sanan and Huacan in 16 years, it is still insufficient to cope with the incremental demand. The original market growth of OEM orders has led to an increase in total LED chip demand of 20% to 40% per year. This makes China's chip industry's capacity growth rate far lower than the demand growth rate, a huge gap in supply, chip prices have risen. However, from the perspective of supply growth, by the end of 2017, there will be a 65% increase from the end of 2016. Therefore, by the end of 2017, the pattern of tight supply and demand has undergone a fundamental change, and the price of LED chips has no external conditions that continue to rise. Internally, due to strong manufacturing, R&D, and customer scale effects, powerful chip makers have had a certain degree of decline in production costs, so there is room for price cuts. For the sake of maximizing profit, big chip manufacturers will increase market share by cutting prices and eroding the original share of small manufacturers without scale effect. This may be a chip price cut into a continuous action. In 2017, several major chip manufacturers released production capacity. For example, the leading manufacturer Sanan Optoelectronics, this year, Sanan purchased a large number of MOCVD equipment, and will put into operation 450 equipment next year, with the goal of 30% of the world's production capacity. Huacan Optoelectronics is also not far behind. Its investment in Yiwu is 6 billion yuan, covering an area of ​​350 mu. The first phase covers an area of ​​140 mu, and the building area is 290,000 square meters. This year's production capacity is gradually released. The company's production line is fully loaded, producing and selling. The amount has increased significantly over the same period last year. On November 22nd, the commencement ceremony of the second phase of Huacan Optoelectronics Project was held in Yiwu Information Optoelectronics High-tech Zone. The second phase of the project invested 3 billion yuan, with a land area of ​​143 mu and a construction area of ​​150,000 square meters. The second phase of the project was completed and put into operation. The production scale of the chip will be unprecedentedly strong, and the LED chip manufacturing will be upgraded to a new height. Huacan Optoelectronics will also enter a new stage of development. At that time, Huacan Optoelectronics Yiwu Plant will realize an annual output of 12 million LED epitaxial chips and 52 million sapphire substrate materials. Recently, the company also sent a message to AIXTRON to order a number of AIX 2800G4-TM MOCVD cluster system equipment to expand its production capacity based on gallium arsenide (GaAs) red yellow orange (ROY) LED. Aoyang Shunchang's December 12 disclosure of institutional research records shows that by the end of this year, the monthly production capacity of LED chips will be around 1 million pieces, and the new capacity will continue to be built in the first half of next year. First, 1.4 million pieces of expansion plans will be reached. The goal of the month. From the perspective of global chip supply and demand scale, domestic LED chip manufacturers have already occupied most of the global production capacity. The huge capacity release of the chip industry can fundamentally change the relationship between supply and demand. Under this circumstance, it is not surprising that the price of the chip is reduced. Everything is expected. LEDinside analyst Wang Fei believes that despite the uncertainty of the income growth caused by price cuts, the price cuts of leading manufacturers are still somewhat indicative of the pressure on marginal manufacturers. In particular, LED chips for lighting are currently the main market for edge manufacturers. For the 2835 chip, Sanan's one-time price reduction of 20% is actually pushing the market price directly to the variable cost of most small and medium chip manufacturers. Below the line, this part of the manufacturer is forced to fall into a situation of loss and withdrawal. By lowering the price to the position of maximizing profit, and forcing marginal manufacturers to withdraw, and reducing the revenue expectations of new entry manufacturers, it is probably the main motive of the strategic behavior of several chip giants actively cutting prices this round. The analyst said that this round of LED price cuts is the inevitable result of the internal and external factors that maintain price stability, and there are also leading players' strategic behaviors. In the long run, LEDs will still return to the trend of falling prices. Extreme price collapses and continuous rises are occasional phenomena that occur under certain conditions. Therefore, there is no need to fall on the future of the industry.
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