In recent years, the LED downstream market has experienced significant growth, driven by cost advantages in labor and raw materials, along with supportive government policies. As a result, China has emerged as a key player in global LED packaging production. According to data from the Gaogong Research Institute (GGII), the global LED packaging market reached $20.9 billion in 2016, reflecting a year-on-year growth of 2.9%. The market is expected to grow further, reaching $21.95 billion in 2017, an increase of 5% compared to the previous year.
Notably, over half of the world’s LED packaging output value was generated in mainland China in 2016. As global manufacturing capacity continues to shift toward China, the country's share of the LED packaging market is expected to rise further. This trend highlights the growing importance of China in the global supply chain for LED components.
According to GGII, China's LED packaging market expanded from RMB 64.4 billion in 2015 to RMB 73.7 billion in 2016, representing a 14% annual increase. In 2017, driven by the recovery of the LED lighting market and strong demand in niche sectors, the market is projected to reach 87 billion yuan. This growth underscores the increasing role of LED technology in various industries.
As an energy-efficient and environmentally friendly industry, LED has attracted substantial investment due to favorable national policies. Over the years, China's LED packaging sector has developed rapidly. Major companies such as Muli Sen, Guoxing Optoelectronics, Hongli Zhihui, Wanrun Technology, Zhaochi, Ruifeng Optoelectronics, Jufei Optoelectronics, and Xiamen Xinda have emerged as leading manufacturers in the field.
According to GGII data on revenue from major LED packaging companies in the first half of 2017, Muli Sen, Guoxing Optoelectronics, and Hongli Zhihui ranked among the top three in terms of revenue, each surpassing 1 billion yuan. Several other companies also exceeded 500 million yuan in revenue, demonstrating strong performance in the industry.
Muli Sen, Guoxing Optoelectronics, and Hongli Zhihui were among the top ten global LED packaging manufacturers in the first half of 2017. Muli Sen, in particular, ranked fourth globally, achieving revenue of 3.624 billion yuan. The company is actively expanding its upstream and downstream supply chain to enhance the competitiveness of its products.
Hongli Zhihui and Guoxing Optoelectronics continued their rapid growth, with revenues increasing by over 50% compared to the same period in 2016. Industry experts suggest that domestic packaging companies are likely to expand production capacity and adjust product strategies in the second half of the year to avoid price wars.
Despite China's leading position in the global LED packaging market, many domestic companies remain large but not necessarily strong. The operating conditions of many small and medium-sized enterprises are unstable, with uncertain future prospects. In recent years, several companies have struggled or even collapsed due to intense competition.
Industry insiders note that the pace of competition in the LED packaging sector is accelerating, with both international and domestic players expanding their presence in the market. With packaging equipment prices at their lowest point, larger manufacturers benefit from economies of scale and centralized procurement, while smaller companies find it difficult to maintain profitability.
According to analysts from the High-tech LED Industry Research Institute, the concentration of China's LED packaging industry remains low. In 2016, the top single company accounted for only 7.5% of the market, while the top ten companies together held 21.7%. The trend of larger companies expanding and smaller ones being absorbed is evident, and industry consolidation is expected to continue.
Profitability remains a key factor for evaluating enterprise performance. According to GGII data, the gross profit margin of leading LED packaging companies like Muli Sen, Guoxing Optoelectronics, Hongli Zhihui, and Jufei Optoelectronics was around 30%-35% in 2010. However, this margin declined gradually from 2011 to 2015, settling at 20%-25% by 2015. In 2016, as the domestic LED market recovered, gross margins rebounded slightly.
This indicates that companies with competitive advantages saw improved profitability following price increases in 2016. When chip manufacturers and packaging companies form collaborative systems, profit margins tend to rise in a positive way. Market trends in the second half of 2016 showed a warming up in the packaging market, with steady improvements in company gross profits.
Observations from the High-tech LED Industry indicate that most LED packaging companies are now extending into downstream applications, while some stronger firms are moving upstream. Looking ahead, how will the LED packaging market evolve? The China LED Packaging Industry Market Analysis Report (Sixth Edition) by the Gaogong Research Institute (GGII) will provide detailed insights.
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