LED outbreak will open in the fourth quarter

In March of this year, Shenzhen announced the abolition of the LED industry planning policy. The outside world once interpreted it as avoiding the emergence of a second “photovoltaic”. Recently, China Securities Journal reporter conducted research on the status of LED companies. From the first-line situation, since the beginning of this year, LED backlighting and lighting market demand, chip, package and application manufacturers full orders. Some entrepreneurs and industry analysts believe that the LED outbreak will start in the fourth quarter of this year, and the next will be a seven to eight-year boom.

LED industry space huge lighting market explosion is approaching authoritative data, forecasting that by 2020 the global lighting market will exceed US$150 billion, an increase of 11.9% from US$134 billion in 2010. Although the overall scale does not increase significantly, the lighting product structure will change significantly. Among them, the LED lighting market share will increase from about 5 billion US dollars in 2010 to 75 billion US dollars. That is to say, 15 times expansion in 10 years. In addition, according to data from the Taiwan Topology Industry Research Institute, the penetration rate of global LED lighting is currently only 10%. By 2015 or at the latest by 2020, the penetration rate will reach 50%.

From the LED front-line entrepreneurs feel equally optimistic, that "industrial outbreak is imminent." When Mr. Gu Wei, Chairman of Mega Shares (002429, shares), said in an exclusive interview with the China Securities Journal, “The LED industry has huge room for growth and it is absolutely impossible to become the second photovoltaic.” The reason is that LED belongs to consumer electronics, and the biggest feature of consumer electronics is that it is widely used and the market is extremely broad. He judged that the critical point of a major outbreak in the LED market is already near, and that the industry will flourish in the next seven to eight years.

In fact, due to the high cost of chips and heat sink materials, the application of LED products, especially lighting products, has been limited for a long time. Relevant data show that at the beginning of 2013, the cost of LED lighting acquisition was 7-8 times that of ordinary energy-saving lamps and 2 times that of energy-saving lamps with dimming function. For example, LED lighting products from mainstream brands in Europe and America are priced at $19 per 1000 lumens, while conventional energy-saving lamps are sold for only $2.5 per thousand lm, and energy-saving lamps with dimming function are also available at $10 per 1,000 lm.

However, it is understood that there are many places where LED lighting can save costs, and the space is not small. For example, the chip is expected to continue to drop by 20% in the future, and the heat-dissipating aluminum material can save 30%. Gu Wei said, "As the chip continues to cut prices, at the same time, the chip's luminous efficiency is improved, and the heat sink is greatly simplified. The price of LED lighting products is continuously approaching energy-saving lamps."

The quote from the merchant confirms this. According to the data of Jingdong Mall in May 2013, the price of a lighting brand of 800 lumens (equivalent to 60W incandescent lamp brightness) is only RMB 50, which is equivalent to US$ 10 per 1,000 lumens. If you take into account the export tax rebate, the export price is about 9 US dollars / 1000 lumens. This is already possible with the energy-saving lamps with dimming function as a “respect for courtesy”.

Gu Huaihuai, an analyst at Huaxi Securities, estimated in the research report that the LED light source could fall to US$15 per thousand lumens by the beginning of 2014, and the price of some of the aggressive lighting manufacturers in the Asia-Pacific region will be reduced to US$8 per 1,000 lumens. In about two to three years, the cost of LED lighting products will drop to the critical replacement point for large-scale replacement of global energy-saving lamps (US$5).

He reasoned that the LED lighting market may erupt in the fourth quarter of this year or the first quarter of next year. From a product perspective, large-scale replacement of traditional light source products by LED may be the first in the commercial lighting field, especially the market segment that needs dimming function. In terms of sub-regions, regions with higher electricity and industrial prices such as Europe and Japan may be the first to start. Taking Japan as an example, the cost of using an LED light source over an ordinary energy-saving lamp can be recovered in two years. “It is expected that the home LED lighting market in Europe and Japan will start in early 2015. At the same time, the industrial and commercial lighting market in developing countries will also start.”

The cost reduction space is still obvious brand manufacturers have obvious advantages Although the LED market space is very large, but due to lower access thresholds, brand manufacturers and cottage manufacturers fight fiercely. Some cottage products even have more price "advantages" than brand manufacturers. Insiders pointed out that the brand manufacturers with the advantages of production scale and product cost performance will win in the future. First of all, compared with the cottage manufacturers, large-scale enterprises have strong bargaining power in chip procurement; secondly, brand manufacturers are more competitive in terms of product design process and technological innovation. Although the cottage products are cheap, the main reason is the use of cheap chips and drive power, while the heat sink device also has to cut corners.

In fact, Siu Chi shares as early as in 2010 to plan the LED industry, and set up a subsidiary Shenzhen Zhao Chi Energy Saving Lighting Co., Ltd., plans to develop LED packaging, TV backlighting and lighting business. In 2011, the company officially launched LED packaging, TV backlighting and lighting production. In the second half of the year, the company achieved a complete self-sufficiency in TV backlighting; the lighting products achieved cooperation with first-line brands such as Oupu, Sanxiong Laser (Japan), TCL Lamps, Mitsubishi Chemical (Japan), and Supergigatronics GP (Europe). LED revenue reached 270 million yuan that year. The year of production, profitability in the current year, and sales in the current year were achieved.

Judging from the current revenue structure of domestic LED manufacturing companies, most of the revenue comes from the domestic market, and most of them are related to government projects. Gu Wei believes that Siu Chi has three major differences compared to it. The first is its own huge demand for TV backlighting. He said, and other LED companies to experience the process of growth from embryos, babies, and adults are not the same, Zhao Chi itself has a great demand for TV backlighting, so the company's LED industry was born as an "adult." The second is the tradition of "cost reduction by technological innovation." He said that technological innovation around cost reduction has become a company's gene. “This is the key to the company’s ability to stand out in the fierce TV ODM market. We will also leverage this capability in the LED business to gain a competitive advantage.” Once again, it is a solid overseas customer resource. After years of hard work, Mega has precipitated a large number of solid customer resources in overseas markets, including brand and store customers. The company's LED business will be "the first month to get the water." Judging from the situation in the past two years, Mega LED lighting business is the first breakthrough from the overseas market, and then playing high praise song.

By the end of 2012, in addition to continuing cooperation with the above-mentioned old customers in 2011, the company's lighting products also added new products such as Zhejiang Sunshine, South Korea Kasamatsu, Hivann, Lidl, TCL, Johnson and Hongyan Electric. In addition to its own use, TV backlight products are also supplied to other TV manufacturers and professional television module manufacturers, Skyworth, Panda, Tsinghua Tongfang, and Diguang Electronics, Taiwan Fuxiang and others. In addition to its own use, the packaged products are also supplied to Shenzhen Topbond, Snowlight, Dajin Dongfang, Shanghai Yaming and Zhejiang Sunshine.

Gu Wei said that the current LED is like TV in 2006 and 2007. You just have to invest in doing it all. This industry will grow quickly because the market is infinite. The company considers that it will tilt its resources to LED in the future, continuously expand its quality customers at home and abroad, and quickly increase its production capacity, turning LED into the company’s second largest performance engine. Income should be 50% or even more of the company's revenue.

It is understood that Zhao Chi shares currently has 50 LED packaging lines and 8 lighting assembly lines. Next, in order to meet the needs of market development, the company will rapidly expand production capacity. "Whether it is to make DVDs or to make television, Siu Chi is the first, and the worst is also the top 3. To do LED, we will also hold high and fight high, and strive to be the industry's industry leader," Gu Wei said.