Affected by the global economic downturn and the Sino-US trade conflict, the global LED lighting market has slowed down significantly. LED inside estimates that China’s general lighting LED packaging market will be 5.2 billion US dollars in 2018, and the compound annual growth rate from 2018 to 2023. At only 3%, the growth rate dropped significantly.
In terms of profitability, the LED chip industry has seen a significant downward trend in the gross profit margin of the LED chip industry since the third quarter of 2018. If the Chinese government subsidies are deducted, most of the LED chip companies are already at a loss, so the current wafers have almost no price cuts space.
The profitability of global LED packaging plants is also declining. Although the decline is not as large as that of chip manufacturers, the profit margin of enterprises is also continuously compressed. From the recent financial information disclosed by Chinese packaging companies, the average gross profit margin of the industry is at 20- 25%, of which the LED gross margin of lighting LED is low, and it is between 10-15% for a long time. The profit margin of the lighting LED market is lower than the industry average.
Trend Force analyst Wang Ting said that due to the limited decline in the price of LED chips for first-line brands, and the profit margin of LED package manufacturers is very small, most package manufacturers are reluctant to continue to seize market share in a price-competitive manner in the case that costs cannot be reduced. And at the same time reduce the rate of utilization to reduce inventory pressure. Therefore, the overall price of packaging in the Chinese market in June was small, and the prices of some high-power and medium-power LED packaging products fell slightly. In the high-power segment, the average price in June fell by about 1%. In the middle power segment, the price changes mainly occurred in the 5630 LED, 0.5W and 0.2W 5630 LED product prices fell by 0.5% and 2.4% respectively.
For most packaging manufacturers, the lighting LED business is not the main driver of profitability. Due to the decline in market size, the effect of replacing orders with low prices is not obvious, because competitors will also maintain market share with price cuts. Most manufacturers are more willing to develop new services, such as the Mini LED display market, including many companies including Hongli Zhihui and Zhaochi, which take the opportunity to enter the display field.