Trend Analysis Of LED Chip Packaging Industry In China In 2019

- Dec 28, 2018-

In 2018, due to the global economic downturn and trade frictions between China and the United States, the growth rate of LED market demand is not as expected, while in the supply side, whether in chip or packaging industry, due to the expansion in 2017, the capacity of 2018 is continuously released. Overall, the phenomenon of oversupply in the industry is obvious.——LED chip

Market demand is sluggish, the growth rate of lighting export is declining

As the largest application of LED, the growth rate of LED lighting export declined significantly in 2018. According to the statistics of China Lighting Electrical Association, China's LED lighting exports in the first three quarters of 2018 totaled US$23 billion, up only 2% from the same period last year. Compared with the growth rate of 20% in 2017, the decline is obvious. As the largest export province in China, the total export volume of LED lighting in Guangdong Province in September dropped 56% compared with the same period last year. Sino-US trade frictions are expected to have a greater impact in the fourth quarter. Therefore, the total export volume of LED lighting in the whole year does not exclude the possibility of negative growth.——LED chip

The chip market is 17.1 billion, and the growth rate of output value is far less than that of capacity.

According to the statistics of LED inside, the market of LED chips in China reached 17.1 billion RMB in 2018, up only 4% from the previous year, compared with 19% in 2017, and the growth rate dropped significantly. Starting in the second half of 2017, the capacity of manufacturers continued to release. By the end of 2018, the total capacity of mainland LED chip manufacturers reached 11.2 million chips per month (2 inches), an increase of 31% year on year. Capacity growth is faster than demand growth, leading to high inventories and falling chip prices.——LED chip

In terms of local chip manufacturers, the total sales volume in 2018 was 15.5 billion yuan, an increase of 4% over the same period last year. Including Sanan, Huacan, Shunchang, Australia and other large factories, revenue is still rising steadily, while other small and medium-sized manufacturers, due to no increase in capacity, the decline in market prices led to a decline in revenue.——LED chip

In terms of chip supply, in 2018, 81% of mainland China's manufacturers and 18% of Taiwan's manufacturers and 18% of Taiwan's importers were crystal power. On the export side, the export rate of mainland chips in 2018 was 12%. Mainland manufacturers, including Sanan and Huacan, have sold chips directly to Taiwan, Korea and other markets. However, since the mainland is the world's leading packaging base and international orders are gradually shifting to the mainland in recent years, the total export volume of chips is expected to remain stable.——LED chip

In terms of industry concentration, the top ten chipmakers accounted for 85% before 2018, an increase of 2 percentage points compared with 2017, and the industry concentration increased steadily. Sanan Optoelectronics is still the dominant company, accounting for 32% of the total in 2018. Among the top ten manufacturers, only one is Taiwanese, and the rest are mainland Chinese manufacturers.——LED chip

Packaging market size is 69.7 billion, the growth rate is not as expected

In terms of packaging, according to the statistics of LED inside, the market size of LED packaging in mainland China in 2018 was 69.7 billion yuan, an increase of 6% over the same period of last year. Since the second half of 2018, due to Sino-US trade frictions, LED lighting exports will be greatly affected, and the impact will be difficult to eliminate in the short term. Therefore, the market demand in 2019 is still not optimistic, and the internal demand of the mainland market will be the main driving force for growth, including automotive LED, high-end business license, high-end backlight and display market.——LED chip

In terms of products, lighting is still the biggest application of LED, accounting for 49% in 2018. Traditional display screen and traditional backlight market still account for a large proportion, but the future growth scale is very limited. New Mini LED backlight or Mini RGB is expected to become a new growth engine in the future, but the current market acceptance is still low. Vehicle lighting market is the most noteworthy market in the next two or three years. The rise of domestic automobiles and new energy vehicles will form a new supply system, and the original closed automobile supply chain is expected to be broken. It's an opportunity for new entrants in Taiwan or mainland markets.——LED chip

From the supply side, the mainland manufacturers are still the main supply camp, accounting for 70% of the market in 2018, but the increase is not obvious. The main reason is that the high-end vehicle, high-end backlight and lighting market is still dominated by international manufacturers. In 2018, the revenue of international manufacturers in the mainland market remains 4% growth. In 2018, the revenue of mainland domestic manufacturers was 48.8 billion yuan, an increase of 7% compared with the same period last year. The first-tier factories, including Mulinsen, Guoxing, Hongli and Jufei, still maintained rapid growth in revenue.——LED chip

In terms of industry concentration, the top ten packaging manufacturers accounted for 50% of the market before 2018, a slight increase compared with 2017. Mulinsen continues to rank first with a 9% market share, followed by Niya Chemistry. The top ten manufacturers also include Guoxing, Hongli and Jufei.——LED chip

Market environment is not optimistic in 2019, and production capacity will continue to grow

In the context of Sino-US trade frictions, the total amount of LED-related products affected reached US$8 billion. In the second half of 2018, some international manufacturers have taken a wait-and-see attitude, and the number of orders actually implemented has decreased. It is not excluded that orders will be transferred to Taiwan, Vietnam, India and other places in the future.——LED chip

On the supply side, capacity will continue to increase. According to the statistics of LED inside, the production capacity of LED chips is expected to increase by 1.4 million chips per month (2 inches) in 2019. At present, manufacturers'inventories are at a high level. With the release of new production capacity in 2019, chip market prices are expected to continue to fall.——LED chip

Overall, the growth rate of market demand in 2018 is far less than that of production capacity. Prices have fallen and business growth has not increased. In 2019, the demand side, affected by the global economic downturn and Sino-US trade frictions, is not optimistic; in the supply side, expansion projects continue to increase, and the problem of overcapacity will continue.——LED chip

In the past ten years, driven by MOCVD subsidy policy and demonstration projects such as "Ten Cities, Ten Thousand Strongs", China's LED industry has achieved high-speed growth. The market of lighting, backlight and display screen is the main driving force for the industry's progress. After ten years of rapid growth, these traditional LED application industries have entered a mature stage. Therefore, the LED industry needs to look for the next decade of the LED industry, and explore applications with high growth potential in the future. Emerging applications such as Mini/Micro LED, vehicle lighting, high-end health lighting and UV/IR LED deserve market attention.——LED chip

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