China's LED industry encountered an “inflection point” in the second half of 2013. In the first quarter of 2014, LED industry’s “warming up” signs were even more prominent. This shows that the strong demand for LED downstream lighting has been passed to the upstream and downstream packaging and chip companies.

LED lighting products market share to expand chip overcapacity crisis eased

In the first quarter of 2014, the total output value of China's LED industry reached 74.68 billion yuan, a year-on-year increase of 25.9%, and the overall industry started well.

According to Gaogong LED data, the total output value of China's LED industry reached 74.68 billion yuan in the first quarter of 2014, a year-on-year increase of 25.9%, and the overall performance of the industry performed well. Among them, the following are the most prominent:

The market share of LED lighting products continues to expand. Specifically in:

First, the domestic emerging LED lighting business revenue is good. In the first quarter, domestic LED lighting companies had better revenue. For example, the revenue of LED lighting products in the first quarter of Sunshine Lighting reached RMB 300 million, which doubled from RMB 140 million in the previous year; Huacan Solar’s ​​revenue increased by 150% year-on-year in the first quarter; Sanan Optoelectronic’s revenue increased by 30% in the first quarter. Hongli Opto's first-quarter operating income and net profit increased by 30.26% and 71.95%, respectively.

Second, the penetration rate of LED in the lighting field has been continuously improved. According to the data for the first quarter of 2014, the penetration rate of LED lighting has increased from less than 3% in 2012 to 7%. As LED lighting will accelerate the replacement of traditional lighting in 2014, the industry will enter a period of rapid growth.

The structural overcapacity crisis in the chip segment was alleviated. Specifically in:

First, the market demand for downstream lighting applications is picking up, and the utilization rate of the capacity in the chip market continues to increase. In the first quarter of 2014, the output value of China's LED chip industry exceeded 2 billion yuan, a year-on-year increase of 21.6%, and the growth rate increased compared to the same period of 2013. Benefiting from the upsurge in downstream demand, shipments of domestic chip makers increased rapidly in the first quarter of 2014.

Second, the unfavorable situation in which chip prices continue to decline has been reversed. After a continuous and significant decline from 2010 to 2013, there is limited room for chip prices to fall. Entering 2014, the trend of rapid decline in chip prices has stopped. In the first quarter, the overall chip prices stabilized and some chip prices even rose slightly.

Sapphire materials usher in a new round of investment frenzy. Specifically in:

First, the semiconductor lighting market is picking up, driving the industry's demand for sapphire materials. Starting from the fourth quarter of 2013, the demand for LED lighting in China continued to increase, especially from the financial reports of the major manufacturers in the first quarter of 2014. The profitability of the LED industry was rapidly strengthened. With the recovery of this round of industry prosperity, the market's demand for sapphire substrate materials has picked up.

Second, the consumer electronics market represented by smart phones has stimulated the industry's demand for sapphire materials. Apple, Samsung, Xiaomi and other mobile smart terminal manufacturers have stated earlier this year that they will use sapphire materials in the cover glass of smart phones and wearable devices, further increasing the investment tilt of the market for sapphire. TrendForce predicts that the number of sapphire materials used in mobile smart terminals in 2014 will be the same as the number of sapphire substrates used in LEDs. In 2015, it will be twice the demand for LED sapphire substrates.

Industrial development continues to accelerate the process of industrial chain integration

In the second quarter of 2014, the utilization rate of chip and other capacity will be optimized, the market share of domestic LED backlight sources will be increased, and the industrial chain integration will be accelerated.

On the whole, the development of China's LED industry in the second quarter of 2014 will continue its stable trend in the first quarter and continue to improve, especially in chips, raw materials, industrial applications and other areas with more optimistic development prospects, specifically in the following three aspects:

While the release of chip and raw material production capacity continues, the capacity utilization rate will be further optimized. Looking forward to the second quarter of 2014, it is expected that as international and domestic application companies accelerate the layout of LED lighting products, and further accelerate the pace of eliminating incandescent lamps, LED lighting demand will be quickly penetrated. In general, the utilization rate of LED chips in the second quarter of 2014 will further increase, and it is expected to reach more than 90%. Therefore, it is inferred that this will drive the continuous improvement of the demand for key substrates such as sapphire and Mo for LED substrates.

The market share of domestic LED backlights will further increase. By the end of 2013, the global share of domestic backlighting has increased from less than 10% to 20%. Looking forward to 2014, the proportion of domestic backlighting will continue to increase, and the global share is expected to reach more than 25%. At the same time, in 2013, the global backlight supply market will shift its focus to China, and it is expected to have a positive effect on domestic backlight manufacturers in the second quarter of 2014. At the same time, the electronic development fund's support for backlight display chips will further enhance the domestic manufacturers' competitive enthusiasm and technical strength. As the proportion of localization increases, more manufacturers will enter the backlight area. At present, it is known that the upstream Huacan Optoelectronics and the downstream Hongli Optoelectronics are actively involved in the TV backlight supply chain.

The process of industrial chain integration will be significantly accelerated. With the guidance of industrial policies of government departments and the rapid development of LED lighting technology in recent years, the speed of integration of the LED industry has been significantly accelerated. Leading companies with core technological advantages, patent advantages, brand advantages, strong competitiveness, and reasonable industrial layout have already begun to go through mergers and acquisitions. And acquisitions increase their market share. Looking forward to the second quarter of 2014, with the slowdown in industry prices and the gradual maturity of the industry chain, it is expected that the LED industry will further strengthen the trend of industrial concentration, and acquisition and integration will gradually evolve into the main means for expansion of enterprises.

LED lighting is expected to become a new growth point diversified layout is conducive to product promotion

LED lighting and diversified channel layout will become two hot spots in China's LED industry in 2014.

LED lighting is expected to become an emerging growth point in the industry. With the rise of the emerging lighting industry, people's lighting needs in the areas of furniture, urban landscape, and public transportation are also moving toward a more humanized and intelligent direction. Intelligent lighting will inevitably become a choice. At present, the market penetration rate of smart lighting products in China is less than 2%. The application of products is mainly reflected in the dimmable LED landscape light, color temperature-adjustable LED street light and its monitoring. In the future, the market space for smart home lighting and smart road lighting will be greatly expanded.

Diversified channel layouts are conducive to the further promotion of domestic LED application products. The traditional lighting companies' monopoly on traditional channel resources such as circulation and engineering squeezes the sales channels of many emerging LED companies. With the increasing diversification of sales models, the application and development of e-commerce channels and designer invisible channels have become the focus of LED lighting companies in channel layout. For example, starting from the second half of 2013, a number of LED lighting listed companies, such as Qinshang Optoelectronics, Tsinghua Tongfang, and Chau Ming Technology, have opened online stores on Tmall, Jingdong and other online platforms; Foshan Lighting, NVC Lighting The lighting companies transformed from traditional lighting, such as Mitsuo Aurora and Mitsuo Aurora, also focused on the e-commerce platform. It is expected that this trend will be further deepened in 2014 and the diversified channels will be conducive to the promotion of LED products.