In 2022 China's total LED output value will reach 214.84 billion RMB
In 2021, China's LED industry will rebound and grow under the influence of the substitution effect of the new crown pneumonia epidemic, and the export of LED products will reach a record high. From the perspective of the industry, LED equipment and material revenue has seen a big increase, but the LED chip substrate, packaging, and application profits are thinning, and they are still facing greater competitive pressure. Looking forward to 2022, it is expected that China's LED industry will continue to maintain double-digit growth under the influence of substitution transfer effect, and hot application fields will gradually turn to emerging application fields such as smart lighting, small-pitch display, and deep ultraviolet disinfection.
Basic judgment of the situation in 2022
(1) Substitute transfer effect continues, China's manufacturing demand is strong
Affected by the impact of a new round of COVID-19, the recovery of global LED industry demand in 2021 will bring rebound growth. The substitution effect of my country's LED industry continues, and exports in the first half of the year hit a record high. On the one hand, Europe and the United States and other countries have restarted their economies under the monetary easing policy, and the import demand for LED products has rebounded strongly. According to data from the China Lighting Association, in the first half of 2021, the export value of China's LED lighting products reached 20.988 billion US dollars, a year-on-year increase of 50.83%, setting a new record for exports in the same period, of which exports to Europe and the United States accounted for 61.2%, an increase of 11.9% year-on-year. On the other hand, large-scale infections have occurred in many Asian countries except China, and market demand has reversed from strong growth in 2020 to a slight contraction. In terms of global market share, Southeast Asia decreased from 11.7% in the first half of 2020 to 9.7% in the first half of 2021, West Asia decreased from 9.1% to 7.7%, and East Asia decreased from 8.9% to 6.0%. As the epidemic further hit the LED manufacturing industry in Southeast Asia, countries were forced to close multiple industrial parks, which severely hindered the supply chain, and the substitution effect of my country's LED industry continued. In the first half of 2021, China's LED industry effectively made up for the supply gap caused by the global epidemic, further highlighting the advantages of manufacturing centers and supply chain hubs.
Looking forward to 2022, it is expected that the market demand of the global LED industry will further increase under the influence of the "home economy", and the Chinese LED industry will benefit from the substitution transfer effect. On the one hand, under the influence of the global epidemic, residents went out less, and the market demand for indoor lighting, LED display, etc. continued to increase, injecting new vitality into the LED industry. On the other hand, Asian regions other than China have been forced to abandon virus clearance and adopt a virus coexistence policy due to large-scale infections, which may lead to the recurrence and deterioration of the epidemic situation and increase the uncertainty of resumption of work and production. CCID think tank predicts that the substitution effect of China's LED industry will continue in 2022, and LED manufacturing and export demand will remain strong.
(2) Manufacturing profits continued to decline, and industry competition became more intense
In 2021, the profit margins of China's LED packaging and applications will shrink, and the industry competition will become more intense; the production capacity of chip substrate manufacturing, equipment, and materials will increase greatly, and profitability is expected to improve. In terms of LED chips and substrates, the revenue of 8 domestic listed companies is expected to reach 16.84 billion RMB in 2021, a year-on-year increase of 43.2%. Although the average net profit of some leading companies has dropped to 0.96% in 2020, thanks to the improved efficiency of large-scale production, it is expected that the net profit of LED chip and substrate companies will increase to a certain extent in 2021, and the gross profit margin of Sanan Optoelectronics' LED business is expected to increase. Correct. In the LED packaging segment, the revenue of 10 domestic listed companies is expected to reach 38.64 billion RMB in 2021, an increase of 11.0% year-on-year. The gross profit margin of LED packaging in 2021 is expected to continue the overall downward trend in 2020, but thanks to the faster growth in production, it is expected that the net profit of domestic LED packaging companies will increase slightly by about 5% in 2021. In the LED application segment, the revenue of 43 domestic listed companies (mainly LED lighting) is expected to reach 97.12 billion RMB in 2021, an increase of 18.5% year-on-year; 10 of them will have negative net profits in 2020. Since the growth of LED lighting business cannot offset the increase in cost, the LED application segment (especially lighting application) will shrink greatly in 2021, and a larger number of enterprises will be forced to reduce or transform traditional businesses. In terms of LED materials, the revenue of five domestic listed companies is expected to reach 4.91 billion RMB in 2021, a year-on-year increase of 46.7%. In terms of LED equipment, the revenue of six domestic listed companies is expected to reach 19.63 billion RMB in 2021, a year-on-year increase of 38.7%.
Looking forward to 2022, the rigid increase in manufacturing costs will squeeze the living space of most LED packaging and application companies in China, and some leading companies have an obvious trend of shutting down and turning around. However, thanks to the increase in market demand, LED equipment and material companies have benefited significantly, and the status quo of LED chip substrate companies has remained basically unchanged. CCID think tank statistics show that in 2021, the revenue of listed LED companies in China will reach 177.132 billion RMB, a year-on-year increase of 21.3%; it is expected to maintain double-digit growth in 2022, and the total output value will reach 214.84 billion RMB.
(3) Investment in emerging applications has grown, and enthusiasm for industrial investment has risen
In 2021, many emerging fields of the LED industry will enter the stage of rapid industrialization, and product performance will continue to be optimized. Among them, UVC LED photoelectric conversion efficiency has exceeded 5.6%, and has entered the large space air sterilization, dynamic water sterilization, complex surface sterilization market; The penetration rate of LEDs continues to rise, and the growth of the automotive LED market is expected to exceed 10% in 2021; the legalization of medical marijuana cultivation in North America stimulates the popularization of LED plant lighting, and the market expects that the annual growth rate of the LED plant lighting market will reach 30% in 2021. At present, the small-pitch LED display technology has been recognized by mainstream machine manufacturers and has entered a rapid mass production development channel. On the one hand, complete machine manufacturers such as Apple, Samsung, and Huawei have expanded their Mini LED backlight product lines, and TV manufacturers such as TCL, LG, and Konka have intensively released high-end Mini LED backlight TVs. On the other hand, active light-emitting Mini LED panels have also entered the stage of mass production. In May 2021, BOE announced the mass production of a new generation of glass-based active Mini LED panels, which have the advantages of ultra-high brightness, contrast, color gamut, and seamless splicing. In 2021, leading companies and local governments are enthusiastic about investing in the LED industry. Among them, in the downstream terminal field, in May 2021, China has invested 6.5 billion RMB to build a Mini LED display industrial park, and the output value is expected to exceed 10 billion RMB after completion; in the midstream packaging field, in January 2021, China plans to invest 5.1 billion RMB to build 3500 A small-pitch LED production line, with an estimated annual output value of more than 10 billion RMB after reaching production. It is estimated that in 2021, the new investment in the whole Mini/Micro LED industry chain will exceed 50 billion RMB.
Looking forward to 2022, due to the decline in the profits of LED traditional lighting applications, it is expected that more companies will turn to LED display, automotive LED, UV LED and other application fields. In 2022, the new investment in the LED industry is expected to maintain the current scale, but due to the preliminary formation of the competition pattern in the LED display field, it is expected that the new investment will decline to some extent.