The Research Center recently investigated several LED companies in Guangdong and discussed with the industry people about the development prospects of the LED industry and the company. Manufacturers said that price is the biggest obstacle to restricting the popularity of LED lighting, but price cuts are restricted by many factors, and they can pay close attention to the price reductions of big manufacturers. In the short-term, the industry is mixed, the degree of prosperity still needs to be observed, and price reductions can be closely watched. The research center believes that companies with cost-conscious LEDs will have excellent survivability and sufficient competitiveness so as to benefit from industry development in the long term.
Price is the biggest obstacle
Researchers at the Research Center believe that the current price is still the biggest obstacle to the popularity of LED lighting. In fact, after in-depth comparison of the initial acquisition cost of LED and energy-saving lamps, energy-saving costs, and replacement of labor costs, we found that the overall cost of LED lighting is lower than that of energy-saving lamps. The delay in the adoption of LED general lighting has not been achieved. In the final analysis, the reason lies in the price. With the same light intensity, the initial purchase cost of an LED lamp is almost twice that of an energy-saving lamp. At the same time, the actual use time of LED is often lower than its rated lighting time, and its energy-saving effect has not been recognized by the public.
From the results of the survey, LED manufacturers, especially mid-stream packaging manufacturers and downstream application manufacturers, are actually willing to trade in exchange for price increases. After the price reduction, the sales volume can be increased, which is beneficial to the scale effect of the manufacturers, thereby enhancing the bargaining power of the upstream chip manufacturers, and finally reducing the price by hedging the price, and maintaining the existing profitability of the manufacturers.
A manufacturer said that LED's profit level is higher, can withstand price cuts, and is willing to cut prices, and then bigger the entire LED lighting "cake", but they are unable to cut prices unilaterally. The reason is that domestic manufacturers are more focused on lighting packaging and application links, LED high-power chips with a higher proportion of costs are purchased from foreign manufacturers, and the concentration of chip merchants is relatively high. Chips such as Cree and Nichia are in short supply. Strong bargaining power, if chip manufacturers do not take the initiative to cut prices, domestic manufacturers cut prices is tantamount to taking the initiative to bear losses. In fact, even if the packaging and lighting companies take the initiative to cut prices, they will not be able to reduce the cost of the entire LED general lighting. Because the terminal price level of LED is determined by industry giants such as Philips, Osram, and Ops. For these giants, whether it is the use of energy-saving lamps, or the use of LEDs, the overall general lighting market size is a stock rather than incremental. Unless you can see the LED lighting start timing is already more mature, giants will not take the initiative to provoke a price war. From this logical point of view, paying close attention to the price reduction trend of LED lighting giants is an important method to determine the turning point of the industry.
It is worth noting that GE, Philips, Toshiba, Panasonic, etc. have gradually begun to emphasize the development of LED lighting applications, began to increase the types of LED lamps, and began to have advertising investment and integration of internal business units.
The degree of prosperity still needs to be observed
The long-term development prospects of the LED industry are promising, but it cannot be overlooked that the industry's recent performance still needs to be observed.
From the perspective of changes in Taiwan’s LED industry revenue, chip and packaging revenues have continued to decline since the Spring Festival in 2011, and have accelerated since the fourth quarter of 2011. The rate of decline has reached the highest in the year in December 2011, and the chip revenue cycle The decline of 31%, package revenue fell nearly 11%. In terms of inventory, the inventory of enterprises in Korea, Taiwan, and mainland China are all at historically high levels, and the destocking process is not yet over, and the prices of products may continue to decline. Although the LED backlighting needs to pick up in the short term, it is not enough to change the overall industry downturn. In addition, according to LEDinside's latest price survey report, in the fourth quarter of 2011 due to inventory clearance, LED average quoted price decreases by about 10%. Looking forward to the first quarter of 2012, after a sharp decline in the previous quarter, plus new product launches, It is expected that the decline in the average quoted price this quarter is expected to shrink.
During the investigation, some manufacturers stated that some buyers believe that the price of LED products will continue to fall, and prices will be lower than those bought earlier. This is another factor that restricts the popularity of LED. If the drop in the price of products is really narrowed, wait-and-see operators will release their demand in advance and the industry may be able to usher in a short-term recovery.
Cost advantage is long-term competitiveness
The continuing industry downturn has threatened the survival of many domestic LED industry chain companies. In the situation where the price of products has fallen, the test is actually the cost control capability of the manufacturers. According to statistics, among the cost of LED bulbs, LED epitaxial wafers and chips account for about 37% of the cost, LED packaging accounts for 24%, and sales costs 15%. With cost advantages, it also has better profitability, can fight price wars, and can welcome the market to reshuffle.
To reduce costs can start from the following aspects. The first is large-scale production and increase the yield. In this sense, the higher the scale of the company's business, the more obvious the advantages, related companies such as Sanan Optoelectronics, Hongli Optoelectronics, National Star Optoelectronics and so on. The second is to reduce costs through technological innovation. This is subdivided into three subdivision levels, including lowering the cost of epitaxial wafers, lowering the cost of packaging, and lowering the cost of sales. Enterprises that can realize upstream and downstream integration will have greater room for cost improvement. Domestic companies include BDO Runda and others. BDO Runda raise investment project to scale production of epitaxial wafers, covering the entire LED industry chain, as well as supporting sales channels, the same specifications of the product, the cost savings of 10% -20%. Packaging costs and lighting costs depend on the company's manufacturing capabilities and management level. Leading companies in this area include Qinshang Optoelectronics and Ruifeng Optoelectronics.
Price is the biggest obstacle
Researchers at the Research Center believe that the current price is still the biggest obstacle to the popularity of LED lighting. In fact, after in-depth comparison of the initial acquisition cost of LED and energy-saving lamps, energy-saving costs, and replacement of labor costs, we found that the overall cost of LED lighting is lower than that of energy-saving lamps. The delay in the adoption of LED general lighting has not been achieved. In the final analysis, the reason lies in the price. With the same light intensity, the initial purchase cost of an LED lamp is almost twice that of an energy-saving lamp. At the same time, the actual use time of LED is often lower than its rated lighting time, and its energy-saving effect has not been recognized by the public.
From the results of the survey, LED manufacturers, especially mid-stream packaging manufacturers and downstream application manufacturers, are actually willing to trade in exchange for price increases. After the price reduction, the sales volume can be increased, which is beneficial to the scale effect of the manufacturers, thereby enhancing the bargaining power of the upstream chip manufacturers, and finally reducing the price by hedging the price, and maintaining the existing profitability of the manufacturers.
A manufacturer said that LED's profit level is higher, can withstand price cuts, and is willing to cut prices, and then bigger the entire LED lighting "cake", but they are unable to cut prices unilaterally. The reason is that domestic manufacturers are more focused on lighting packaging and application links, LED high-power chips with a higher proportion of costs are purchased from foreign manufacturers, and the concentration of chip merchants is relatively high. Chips such as Cree and Nichia are in short supply. Strong bargaining power, if chip manufacturers do not take the initiative to cut prices, domestic manufacturers cut prices is tantamount to taking the initiative to bear losses. In fact, even if the packaging and lighting companies take the initiative to cut prices, they will not be able to reduce the cost of the entire LED general lighting. Because the terminal price level of LED is determined by industry giants such as Philips, Osram, and Ops. For these giants, whether it is the use of energy-saving lamps, or the use of LEDs, the overall general lighting market size is a stock rather than incremental. Unless you can see the LED lighting start timing is already more mature, giants will not take the initiative to provoke a price war. From this logical point of view, paying close attention to the price reduction trend of LED lighting giants is an important method to determine the turning point of the industry.
It is worth noting that GE, Philips, Toshiba, Panasonic, etc. have gradually begun to emphasize the development of LED lighting applications, began to increase the types of LED lamps, and began to have advertising investment and integration of internal business units.
The degree of prosperity still needs to be observed
The long-term development prospects of the LED industry are promising, but it cannot be overlooked that the industry's recent performance still needs to be observed.
From the perspective of changes in Taiwan’s LED industry revenue, chip and packaging revenues have continued to decline since the Spring Festival in 2011, and have accelerated since the fourth quarter of 2011. The rate of decline has reached the highest in the year in December 2011, and the chip revenue cycle The decline of 31%, package revenue fell nearly 11%. In terms of inventory, the inventory of enterprises in Korea, Taiwan, and mainland China are all at historically high levels, and the destocking process is not yet over, and the prices of products may continue to decline. Although the LED backlighting needs to pick up in the short term, it is not enough to change the overall industry downturn. In addition, according to LEDinside's latest price survey report, in the fourth quarter of 2011 due to inventory clearance, LED average quoted price decreases by about 10%. Looking forward to the first quarter of 2012, after a sharp decline in the previous quarter, plus new product launches, It is expected that the decline in the average quoted price this quarter is expected to shrink.
During the investigation, some manufacturers stated that some buyers believe that the price of LED products will continue to fall, and prices will be lower than those bought earlier. This is another factor that restricts the popularity of LED. If the drop in the price of products is really narrowed, wait-and-see operators will release their demand in advance and the industry may be able to usher in a short-term recovery.
Cost advantage is long-term competitiveness
The continuing industry downturn has threatened the survival of many domestic LED industry chain companies. In the situation where the price of products has fallen, the test is actually the cost control capability of the manufacturers. According to statistics, among the cost of LED bulbs, LED epitaxial wafers and chips account for about 37% of the cost, LED packaging accounts for 24%, and sales costs 15%. With cost advantages, it also has better profitability, can fight price wars, and can welcome the market to reshuffle.
To reduce costs can start from the following aspects. The first is large-scale production and increase the yield. In this sense, the higher the scale of the company's business, the more obvious the advantages, related companies such as Sanan Optoelectronics, Hongli Optoelectronics, National Star Optoelectronics and so on. The second is to reduce costs through technological innovation. This is subdivided into three subdivision levels, including lowering the cost of epitaxial wafers, lowering the cost of packaging, and lowering the cost of sales. Enterprises that can realize upstream and downstream integration will have greater room for cost improvement. Domestic companies include BDO Runda and others. BDO Runda raise investment project to scale production of epitaxial wafers, covering the entire LED industry chain, as well as supporting sales channels, the same specifications of the product, the cost savings of 10% -20%. Packaging costs and lighting costs depend on the company's manufacturing capabilities and management level. Leading companies in this area include Qinshang Optoelectronics and Ruifeng Optoelectronics.
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