LEDinside: Chinese LED packaging manufacturers are expanding production, the industry is expected to hit bottom

LEDinside, LED industry research brand under TrendForce, observes that prosperity of LED industry recovers in 2016, and price decline causes the LED penetration rate to further improve. In addition, due to the impetus of India, Southeast Asia and other emerging markets, the LED market demand has significantly increased over the same period. In recent years, many large manufacturers have signed the strategic cooperation agreement and collaborative signs are more obvious, so those manufacturers’ market share will continue to increase, which is the main driving force of their production expansion.

Large manufacturers' market share increases, with obvious signs of production expansion.

Table 1 Overview of Chinese LED packaging manufacturers’ expansion plans

Source: Company, Compiled by LEDinside

From the recent announcements, On October 10th, NationStar announces its plan to invest no more than RMB 400 million in LED package expansion. Since November 2015, NationStar has announced three LED package expansion plans. The first two plans are to respectively invest RMB 400 million and RMB 240 million in projects , and the production capacity has been gradually released.

In almost a year, NationStar, Lightning Opto, MLS and other manufacturers continue to release new capacity. And within the coming year, they will continue to expand production. Different from the collective expansion a few years ago, currently manufacturers of expansion are basically large enterprises. Few small and medium-sized enterprises expand production.

Market competition is still fierce, and manufacturers’ profitability is low.

Although large manufacturers have expanded production, LED market competition is still fierce and packaging manufacturers’ profitability remains low. According to the statistics of LEDinside, major Chinese manufacturers of 2Q16 obtain the gross margin of 24.5%, declining by 1% YoY. Gross margins in some fields are ridiculously low, such as lighting LED field. Refond’s gross margin of 1H16 is only 10.9%; while that of Jufei is just 9.4%. But as for 3Q16, because the chip prices rise and some packaging manufacturers have adjusted the prices as well, the gross margin is expected to get improved.

Chart 1 Major LED packaging manufacturers’ gross marginsin 1Q14-2Q16

Source: LEDinside

Price declining slows down, thus manufacturers are expected to enhance profitability.

In May 2016, Epistar was the first to raise prices of some chip specifications, but at that time Chinese manufacturers did not follow it. Nevertheless, their product prices have stabilized. In September, Chinese chip manufacturers including San’an Optoelectronics, TongFang and Zhongke Group have raised prices of the small-sized chips. The market demand for fine-pitch displays is strong, resulting in the demand for fine-pitch display-used LED chips growing sharply. And in the lighting field, the downstream manufacturers pursue the high lighting efficiency of lamps, stimulating demand for the small-sized lighting-used LED chips.

Prices of small-sized LED chips sharply decline in 2015, so many chip manufacturers gradually reduce production capacity of the small-sized chips, resulting in demand over supply of those chips in a short period of time and prices rising as well. Due to the price growth of chips, prices of LED packages also begin to rise. Especially in the display field, MLS, Puguang, Xindeco and other manufacturers announce raising prices at the same time. Compared with 2015, prices of LED package are inclined to be stable in 2016 .

Chart 2 Chinese LED package price decline slows down in 2016 (USD/K).

Source: LEDinside

Shuffle is intensifying, and the industry is expected to hit bottom.

Since 2014, the fierce market competition has led to the declining profitability of manufacturers. Many small and medium-sized packaging enterprises have been forced to withdraw from the market. The tide of mergers and acquisitions also makes great manufacturers’ scale larger. Before MLS was dominant; however, the scale of NationStar and Honglitronic is gradually increasing. This year they are expected to attain revenue scales over RMB 2 billion. Besides, other manufacturers in the second camp gradually enlarge their scales. This round of expansion wave is predominated by large enterprises, such as MLS, NationStar, Honglitronic and Xindeco. Production capacity is expanded, thus the industry reshuffle will accelerate. LEDinside considers that LED industry will gradually begin to bottom out. Large manufacturers’ market share will increase, with their bargaining power enhanced and profitability gradually improved as well.

Author: Allen Yu / LEDinside

LEDinside 2016 Chinese LED Chip and Package Industry Market Report

Release: 30 June 2016

Language: English

Format: PDF

Page: 246

Chapter I: Chinese LED package market scale in 2015-2020 are forecast; Chinese LED package market scales by market camps (international / CN / TW) and power type in 2015-2020 are analyzed; top 10 LED package manufacturers revenue in China
Chapter II: Market segments are discussed; Chinese backlight LED, lighting LED, and display LED market scales in 2015-2020; product specification requirement in backlight, lighting, display; Chinese top 10 manufacturer revenue ranking in backlight, lighting, and display
Chapter III: Merge and acquisition cases in 2014-2015 are compiled and analyzed (cases study, reason alanysis, impacts)
Chapter IV:20 Chinese LED package manufacturers are analysis, covering revenue, operating activities, capacity expansion plan, major customers, and LEDinside perspective
Chapter V: 17 International and Taiwanese manufacturers are surveyed, covering revenue and profit, business in China, operating activities, major products and major customers.
Chapter VII:16Upstream LED chip manufacturers are introduced, covering market forecast, policy subsidies, manufacturers introduction, supply chain, and operating business

Market:Market opportunities and challenges in China are discussed
Company:Chinese LED package manufacturer product, technology, expansion plan, future development are discussed
Strategy:International and Taiwanese LED package manufacturers opportunities and challenges in China

Chapter I Chinese LED Package Industry Overview

Chinese LED Package Industry Developments
2015-2020 Chinese LED Package Market Size
2015-2020 Chinese LED Package Market Size By Market Camps
2015-2020 Chinese LED Package Market Size By Power Types
Top 10 LED Manufacturers Revenue Ranking in China

Chapter II Chinese LED Market Segments- Market Scale, Market Shares, Product Specifications, Supply Chain, and LED Manufacturers' Rankings by Applications

Smartphone Backlight and Flash LED Markets
Middle and Large-Sized Backlight Market
Lighting Market
Display Market

Market Trend and Scale
Product Requirement
Supply Chain Analysis
Top 10 Chinese LED Manufacturers Ranking- Backlight, Lighting, Display

Chapter III 2015 Market Issue: Marge and Acquisition Case Analysis

Major Mergers & Acquisitions Cases
Causes for Mergers & Acquisitions
Impacts on Mergers & Acquisitions on Package Industry

Chapter IV Major Chinese LED Package Manufacturers Analysis

NationStar
Honglitronic
Refond
Jufei
Mason
ChangFang Lighting
MLS
Kinglight
Smalite
Hkled
Wenrun
Dongshan Precision
Lightning Opto
Runlite
Shineon
MTC
APT
Glorysky
Sunpu
JIUZHOU

Content

Revenue and Profit
Product Mix
Production Capacity Expansion Plan
Business Summary for 2015
Profitability Analysis
Operating Analysis (Days sales of inventory, Days of Sales Outstanding)
Debt Paying Ability Analysis (Debt-Assets Ratio)
Product Specification
Overall Evaluation
- Product
- Technology
- Scale
- Main Customers
- LEDinside’s Perspective
- Note: Not specified currency in this chapter regarded as RMB
- Note: Capacity is from company source

Chapter V International LED Manufacturers Business Activities in China

European and U.S. LED Manufacturers Operating Activities in China
- Lumileds, Osram Opto, Cree, Luminus Devices
Japanese LED Manufacturers Operating Activities in China
- Nichia, Citizen
Korean LED Manufacturers Operating Activities in China
- Samsung LED, LG Innotek, Seoul Semiconductor
Taiwanese LED Manufacturers Operating Activities in China
- Everlight, Lite-on, Lextar, Unity Opto, AOT, Harvatek, Edison Opto, Brightek

Company Profile, Product and Business Strategy
Revenue and Gross Margin
Revenue from Chinese Market and Share
Major Clients in China

Chapter VI China’s LED Package Manufacturers Competitiveness

Chinese and International Manufacturers’ Competitiveness
China’s Domestic Manufacturers Competitiveness
- Maturity in The Industry
- Industry Concentration
- Industry Integration Trend
Industry Growth Opportunities and Threats

Chapter VII Chinese Chip Market Analysis

Chinese LED Chip Market Overview- Policy Subsidies, Government Support, Capacity Expansion Plan
Chinese LED Chip Market Scale Analysis- Global Market Scale, Global Market Share By Region, Players Market Share in China
Chinese Chip Manufacturers Analysis

Chapter VIII Conclusions and Suggestions

If you would like to know more details, please contact:

Joanne Wu (Taipei)

joannewu@trendforce.com

+886-2-8978-6488 ext. 912

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