As the fourth quarter is the peak period of LED lighting, TV and other products consumption, the sales of the upstream component industry will also rise periodically. With the implementation of the policy of ban on the sale and import of 60 watts and above incandescent lamps on October 1, China's roadmap for eliminating incandescent lamps has been opened, and the penetration rate of LED lighting will continue to increase. According to industry insiders, only the incandescent lamp replacement market will add more than 12 billion light source requirements each year.
LED boom improves mining industry chain opportunities
Driven by factors such as policy escort and sales increase, LED has become one of the recent investment hotspots in the capital market. Among them, Xinhaiyi [2.88% fund research report], Fujing technology [1.34% fund research report] and other performances are eye-catching. As the fourth quarter is the peak period of LED lighting, TV and other products consumption, the sales of the upstream component industry will also rise periodically. With the implementation of the policy of ban on the sale and import of 60 watts and above incandescent lamps on October 1, China's roadmap for eliminating incandescent lamps has been opened, and the penetration rate of LED lighting will continue to increase. According to industry insiders, only the incandescent lamp replacement market will add more than 12 billion light source requirements each year.
LED market has broad prospects
LED products are mainly used in the three fields of backlight, color screen and indoor lighting. Since the backlight is the largest application market for LEDs at this stage, the LED industry has been growing at a high speed in recent years. Under the influence of factors such as the decline in product prices and the rise of a new round of global ban on incandescent lamps, indoor lighting will replace backlights as the fastest growing segment of LEDs in the future. In addition, in recent years, driven by product upgrade factors such as small-pitch displays, LED product growth has also continued to increase, showing a steady growth trend. On the whole, the total LED demand will continue to grow in the future, and related companies have medium and long-term investment value.
At present, China is gradually becoming a global LED industry base. Statistics show that in 2013, the total output value of China's lighting industry was 480 billion yuan. These include a $35 billion export market and a domestic market of more than $200 billion. Compared with the incremental market of more than 200 billion yuan, the industry believes that there will be trillions of yuan in market space for the lighting stock market formed during the 30 years of reform and opening up. It is expected that LED lighting will form a peak value of industry output in the next 3 to 5 years, and will maintain a 100% annual compound growth rate. The total output value of the industry is expected to reach one trillion yuan.
In addition, overseas emerging markets are bringing greater opportunities to domestic LED companies. In the first half of this year, the export value of LED lighting products in China was about 4.35 billion US dollars. Among them, the BRICS countries are about 440 million U.S. dollars, a year-on-year increase of 350%. The rapid growth of overseas emerging markets will continue to benefit domestic LED manufacturers.
Three angles to tap the LED industry chain
The LED industry chain can be divided into three parts: chip manufacturing, packaging and application. According to the degree of benefit, upstream chip manufacturing is undoubtedly the most beneficial link. From the perspective of the value structure of the lighting industry, the profit of the epitaxial chip accounts for about 70%, the package link is about 10%~15%, and the application link is about 10%~20%. LED epitaxial wafers and chip links at the front end of the value chain occupy extremely high added value. In the outbreak of the LED lighting industry, the upstream extension and chip segment performance are the most flexible. Due to the high technical content of chip manufacturing in the LED industry chain. Therefore, companies with R&D technology, patented technology, and scale advantages will benefit the most.
Xinhaiyi officially entered the field of LED chip manufacturing in 2011. Due to cooperation with the Institute of Nanotechnology of the Chinese Academy of Sciences, the company is in the leading position in the industry in terms of chip luminous efficiency and yield. In the third quarter, the company's 20 MOCVD equipment is expected to reach full production, and the growth rate of LED products in the second half will continue to accelerate. In addition, the company recently announced that it will expand the investment in new nanocrystalline LED epitaxy and chip capacity (second phase). Establish a new generation of epitaxial wafer, chip and packaging production lines. In this regard, Huatai Securities [-0.33% fund research report] analyst Kang Zhiyi expects that LED production capacity will double again next year, the company's MOCVD equipment production will reach 40 units by the end of the year.
Fujing Technology, as a listing platform of the Institute of Material Structure of the Chinese Academy of Sciences, undertakes the research results of major shareholders. Its Wanbang Optoelectronics Co., Ltd. is a comprehensive lighting company integrating LED chip design, LED packaging and sales. In addition, recently stimulated by the news of the restructuring of the Chinese Academy of Sciences, the company is sought after by the secondary market funds. With the opening of the reform curtain, the company is expected to receive asset injection from major shareholders in the future.
Due to the high degree of standardization of LED packaging equipment and manufacturing processes, the scale of investment by manufacturers is generally small and the technical requirements are low. Therefore, there are many manufacturers in the packaging field. As packaging technology continues to evolve, packaging technology has evolved from formal to vertical and flip. Flip-chip is extended from the chip to the package, so future chip manufacturers will directly complete the packaging process. The market space for the package will be compressed. Transformation will become the main point of view for packaging companies.
Rectangular lighting [-0.23% fund research report] is an LED packaging company. In recent years, the company has extended to the downstream lighting application field. It involves the research, development, production and sales of LED lighting source devices and LED lighting products. At present, the company has laid dealer channels in more than 30 provincial-level administrative regions across the country, and the sales network radiates across the country.
Zhongfa Technology [1.30% Fund Research Report] is a manufacturer engaged in semiconductor packaging molds and LED brackets. The operating income in the first half of this year was not good. Among them, LED bracket revenue decreased by 20.67% year-on-year. However, it is worth noting that the company's LED surface mount bracket development and industrialization project is expected to be completed in 2015. After completion, the estimated production capacity is 40 billion brackets/year. The annual average sales income is about 1.5 billion yuan, and the annual average total profit is expected to reach 150 million yuan.
With the outbreak of LED lighting applications and the status of brand services in China, the added value of downstream applications and brand services will gradually increase. Industry leaders with brand advantages, channel advantages and scale advantages will benefit the most.
Although the original business is EMS, in recent years, the company has made its own brand business such as LED lighting a key growth point. The recent progress of M&A has continued. After investing 10 million yuan in fireflies to save energy, the company also invested in the establishment of a subsidiary with fireflies. Cooperation with fireflies energy conservation will complement technology resources and complement brands and channels. In addition, the company also handed in Shenzhen Jiupai Capital Management Co., Ltd. to set up a special M&A fund. The company revealed that the future will focus on LED lighting for industrial integration and mergers and acquisitions.
Three quarterly earnings continued to improve
Previously, due to technological advancement and the fierce competition in the industry, the gross profit margin of LED products has been declining. The gross profit margin is only 15% to 20%, which is lower than the gross profit margin of 20% to 30% of traditional lighting such as incandescent lamps. In the case of gross profit margins continue to decline, LED manufacturers have produced brilliant transcripts this year. Among the LED manufacturers that have disclosed the results of the three quarterly reports, the profit-making double-income has become the general status of the industry. And recently, Taiwan's LED manufacturers announced that the revenue situation in August is still outstanding.
“There are three main reasons for the continued good performance,†an anonymous analyst told reporters. First, the downstream demand is growing rapidly. The era of small profits and low sales in the LED industry is coming, and the inventory is better. As a result, the price of LED products has also stabilized. The data shows that in August China's LED bulbs equivalent to traditional 60W products rose slightly by 1%. Second, large-scale production also reduced costs for enterprises, increased capacity utilization, and improved profitability of LED manufacturers. Third, with the improvement of the technical capabilities of domestic chip manufacturers, LED products gradually adopt chips from domestic manufacturers. According to LEDinside statistics, from the sales point of view, it is expected that the market share of chips produced by mainland manufacturers has reached 80%.
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