LED industry significantly expands production

Since the beginning of this year, the LED industry has been substantially expanding production, from the upstream chip, middle package to downstream applications, all companies are full of confidence and ambitious. However, after the glory, it will be another industry decline, worthy of all thinking.

LED ushered in the "Great Market Year"

"This year is definitely a big year for the LED industry!" An LED executive from a listed company in Guangdong forecast for the Shanghai Daily on the reporter's report at the beginning of the year. The same optimism was also seen in the number of LED listed companies that the reporter visited at the beginning of the year. It is not only caused by the LED industry. The overall prosperity of 2013 was also derived from the confidence of the industry in fully replacing traditional lighting products.

The data shows that compared with the overall decline in the industry's profits in 2012, the LED industry is beginning to recover in 2013, and most of the listed companies that have published annual reports have achieved positive growth in profits.

“In 2013, the increase in industry-wide demand is the direct cause of everyone’s profitability. We believe that this increase in demand will be sustainable in the coming years, and the speed of growth will also be rapid. The underlying reason for this confidence is that The price advantage brought by the price drop of LED products has completely replaced traditional lighting products. This is what the aforementioned senior executives told reporters.

A front-line salesperson of a LED company also told reporters that in 2011 and 2012, each time he participated in a large-scale exhibition to introduce to customers the energy-saving LED lights and various advantages, the customer showed great interest, but when it comes to At the price, the customer shook his head.

“At that time, 5W LED lamps were sold at 60 or 80, but the same brightness energy-saving lamps were only about 20 pieces. But since 2013, the price of indoor LED products has dropped significantly, and now 5W LED lamps have also lowered their prices to 20 The price of outdoor streetlights is not as large as it is indoors, but it has dropped to the same level as high-pressure sodium lamps. Therefore, we recently added a lot of civilian and commercial customers,” said the salesperson.

This phenomenon, a brokerage analyst pointed out that this is mainly the price of the upstream chip at a rate of about 30% per year decline, to the second half of 2013, began to transmit to the downstream end products, and the overall industry-wide cost reduction trend will still be carry on. Therefore, the LED industry has actually entered the stage of comprehensive replacement of traditional lighting products.

The drop in product prices has directly led to an increase in demand. According to the forecast of Xiangcai Securities, the scale of LED lighting market in 2014 is expected to double to 250 billion yuan, and it will double again in 2015 to 500 billion; UBS Securities predicts that the overall lighting market will increase from 2013 to 2015. The speeds were 36%, 37% and 38% respectively, of which the residential LED lighting market demand increased by 157%, 90% and 62% over the same period; Qilu Securities also forecasted that within 3 to 5 years, the compound growth rate of LED lighting demand scale reached 30 From 40% to 40%, the penetration rate of lighting products will increase from 10% to 15% to 40% to 50%.

Huge subsidies contribute to industrial scale

The LED industry, which recently recaptured the “pampering” of the capital market, is also headed by the “National Strategic Emerging Industry” aura, which brings more real benefits to related companies: in addition to a wide range of tax breaks and policy incentives. Local governments have also launched a huge subsidy policy for LED projects. This is considered by the industry as another major driving force for the expansion of production capacity.

An investment bank analyst from a foreign investment bank told reporters that LED companies have frequently been listed in major special funds for high-end general-purpose chips for electronic devices, central financial funds, and 863 plans, as well as a number of central special funds and bonus lists; The government also grants enterprises huge equipment purchase subsidies as investment conditions.

In 2009, the Yangzhou City Government took the lead in introducing a subsidy policy. Each company introduced a MOCVD machine (LED chip production equipment) and provided financial subsidies of 10 million yuan. In Hangzhou, companies purchase 40% of purchase price for MOCVD equipment.

According to public information, during the period between 2010 and 2012, BDO Runda, Wuhu DHL, Yangzhou Dehao, Dalian Dehao, and Dedehao each obtained 418 million, 25.746 million, and 76.6 million subsidies. And 75.8 million. In the past three years, Sanan Optoelectronics has received a government subsidy of nearly 3 billion yuan. A huge amount of government subsidies accounted for a large portion of the net profit of listed companies. From 2010 to 2013, Sanan Optoelectronics received a government subsidy amount of net subsidies. 60%, 86%, 60%, 45.7% of profits. Taking the Anxi project as an example, Sanan Photoelectric was stationed in Fujian Province, and Anxi County, Fujian Province invested 4 billion yuan to subsidize MOCVD and sapphire substrate production equipment, totaling 2.2 billion yuan. In the areas of land requisition, infrastructure and R&D centers, the construction investment is 1 billion yuan, and the supporting construction projects are invested 800 million yuan. In the Xiamen Ten Billion Project launched by Sanan Optoelectronics in April this year, the Xiamen Municipal Government will subsidize the purchase of 200 MOCVD equipment newly added by Sanan Optoelectronics. With a calculation of 5 million yuan each, the amount of direct subsidies will reach 1 billion yuan. .

Large expansion brings overcapacity

“Government subsidies can be said to play a role as a catalyst and an expansive agent in the process of enterprises expanding production capacity. Take Sanan Optoelectronics as an example, Xiamen’s 10 billion project was originally planned to be implemented in Lugu Lake, and it did not intend to buy so much at the beginning. Equipment, the total investment is only 4 billion, Xiamen's subsidy policy came out, Sanan photoelectric procurement of equipment increased to 200 units, the total investment has more than doubled.” The aforementioned brokerage analysts said.

In fact, after several rounds of capacity expansion, only the upstream LED chips, the total capacity of domestic companies has accounted for more than 60% of the world. The aforementioned LED listed company executives said that the current global production of MOCVD MOCVD equipment is about 1,500 units, while domestic companies currently have about 900 units of equipment. If Sanan Optoelectronics 200 sets of MOCVD equipment are all in production, the total number of equipment owned by the company will reach 350, and it will also exceed Jingyuan Optoelectronics (244 sets), Samsung (182 sets) and LG (160 sets), ranking fourth in the world. Rise to the first.

In response, an industry analyst who has long been concerned about government subsidies warned that concerns about overcapacity in the LED industry began to emerge from the end of 2011, but the release of demand in these two years completely reversed this situation. From the perspective of the current industry development speed, it may be too early to say that the LED industry may have excess capacity. However, if the demand growth rate in the future is slower than the speed of capacity expansion, the industry will begin to experience extreme phenomena such as oversupply, price wars, and industry reshuffle. . The subsidies for cow breeding and the subsidies for live pig farming carried out in earlier years are good examples.