In 2020, the impact of the epidemic has brought great fluctuations and shocks to the LED display industry. In the second half of 2020, prices have skyrocketed all the way. After many years, everyone has been on the sidelines of the project. After the beginning of the year, they will continue to skyrocket. This is a state that has never been seen in the past ten years. So why did this state arise? Let me listen to the editor one by one!
First, let us look at the situation at the RGB light-emitting chip side. Affected by the epidemic, the utilization rate of RGB chip manufacturers in the first half of last year fell sharply and output decreased; in the second half of the year, affected by the shortage of global markets and the strong recovery of the domestic market, due to a blessing in disguise, inventories were basically cleared, ending the second consecutive year of negative growth.
However, due to the continued price decline, the gross profit of chip manufacturers RGB chip sales is minimal, and manufacturers have insufficient power to expand the production of RGB chips. The main expansion directions are positioned in emerging markets such as deep ultraviolet, sensor chips, GaN, and Min/Micro chips. direction. In addition, the cost of chip raw materials has continued to rise in the next six months, and chip manufacturers are facing huge cost pressures. Therefore, in the short term, RGB chips will face the possibility of a slight price increase and tighter supply.
Lamp beads
First of all, packaging equipment manufacturers such as die-bonding machines, wire bonding machines, and spectroscopic tapes are faced with insufficient supply of raw materials, continuous price increases, and the impact of large-scale expansion of other semiconductor packaging on equipment demand. The delivery capacity and delivery cycle of packaging equipment have been greatly affected. Due to restrictions, packaging manufacturers’ expansion plans are blocked, and it is difficult to achieve large-scale expansion in the first half of this year. Therefore, the equipment production capacity of RGB packaging in the first half of the year is expected to be basically the same as that at the end of last year, and will not increase much.
The impact of the epidemic on labor returning home and reluctance to go out to work is long-term. It is still difficult to recruit workers on the production line, and the utilization rate of packaging manufacturers will not increase much from the end of last year. With the further popularization of small pitches in the terminal market and the further conversion of dot pitches to smaller pitches, the demand for lamp beads will increase. In the short term, the supply of RGB packaged lamp beads may still remain tight.
On the other hand, the prices of non-ferrous metals, PCB substrates, chips and other raw materials have continued to rise, leading to the continuous increase in product costs of packaging plants, and packaging manufacturers are facing huge cost pressures. Under the dual factors of limited capacity constraints and rising raw material costs, packaging manufacturers will adjust the production capacity allocation of product categories according to changes in market demand and changes in their own cost structure. While the overall production capacity remains unchanged, increase the production capacity of high-margin products while reducing the production capacity of products with low gross profit. This will lead to a phased imbalance between the supply and demand of different categories of products, that is, some categories are out of stock in a certain period of time, and some categories are not out of stock. The phased imbalance of supply and demand will bring about price fluctuations, with varying fluctuations and ranges. Therefore, in the short term, the price of RGB lamp beads varies according to different manufacturers, categories, and models, and the price trend will also be different. However, subject to production capacity and cost factors, overall, the price trend of RGB lamp beads is unlikely to have a full downturn, and individual specifications may even continue to rise slightly. The panic mentality of “buying short of not buying more, buying rising and not buying falling” will further aggravate shortages and expectations of price increases. Downstream display manufacturers will raise the level of “safety inventory” and increase raw material inventory purchases, which will further aggravate the stage Sexual supply is tight.
Obviously, this is a “centralized advance purchase” of raw material inventory. The increase of downstream display manufacturers, increased raw material inventory, semi-cost, and finished product inventory, needs to be digested and cleared by the terminal market. If the subsequent terminal market is less than expected, encounters weakness or slow growth, it will affect the subsequent raw material procurement scale and procurement rhythm of display manufacturers, and will have new impacts on the competitive environment and trend of subsequent packaging manufacturers. From the perspective of packaging manufacturers’ current equipment production capacity and subsequent expansion plans, in the long run, the overall situation of overcapacity has not changed, and the current shortage is only a phased imbalance of supply and demand.
Driver IC, control system, PCB
The global shortage of wafers and the squeeze of semiconductor packaging foundry capacity by other industries not only lead to tight supply of display driver ICs and price increases, but also lead to FPGA chips, memory chips, video processing chips, communication chips, power management chips, etc. The all-round supply of semiconductor chips is tight and prices are rising. This will bring pressure on the supply of raw materials and rising costs to drive IC and control system manufacturers. The price of PCB raw materials has risen and production capacity has been squeezed by other industries, resulting in tight PCB supply and rising prices, which will also affect the LED display industry in a relatively long period of time.
It is worth noting that the shortage and price increase of driver ICs and PCBs are different from the shortage of RGB chips, packaged lamp beads, and the source and controllability of the price increase. The former is affected by the changes in the global market environment and the production capacity is squeezed by other industries. The LED display industry’s own regulation and controllability are relatively weak. However, because the demand for LED display driver ICs or PCBs is placed in the vast ocean of the global semiconductor industry, the scale is really “too small and too small”, and a few drops of water are enough. As long as the relevant manufacturers plan well, deal with supplier relations, diversify supplier risks, and control the stocking cycle and safety stock of key raw materials, the shortage is temporary, and the gap will not be too large. The latter is mainly caused by the LED display industry’s own phased supply and demand imbalance and panic stockpiling. Although it is also affected by the large market environment (such as the shortage of non-ferrous metals and other bulk commodities, price increases, etc.), the industry’s supply and demand relationship Eventually it will self-regulate.
Display screen
The impact of shortages and price increases of raw materials such as chips, packaged lamp beads, driver ICs, and PCBs on the competitive landscape of display manufacturers is not limited to “shortage” and “increasing.” Another important factor that affects the competitive relationship is: “out of sync, different ratios.” If you are out of sync, you will be increased in price first, not necessarily others will be increased at the same time; if your supplier has increased the price, it may not necessarily be the price increase of other people’s suppliers; if you are out of stock first, it may not necessarily be the case that others are also at the same time Out of stock; your supplier is out of stock, not necessarily others’ suppliers are also out of stock. In different ratios, if you are increased by 20%, others may only increase by 5%; if you are out of stock by 60%, others may only be short by 10%. The “time difference” and “quantity difference” have widened the comparison of competitiveness.
More importantly, for display manufacturers, it is not just cost that determines the price of a display. Although upstream suppliers have raised prices on a large scale and increased the BOM cost of the display, the final price of the display in the market is determined by demand and competition. In particular, the expected increase in supply chain shortages has raised the level of safety stocks of enterprises, which also put a lot of pressure on market sales. If the market sales volume does not meet the company’s expectations and a large amount of inventory is backlogged, the result may be reduced profits (or even a loss), low price impulse, digestion of inventory, and withdrawal of funds. Therefore, the impact of material shortage and price increase on the screen factory does not necessarily bring about the inevitable result of price increase. In a period of time, the price of the display screen is likely to fluctuate up and down according to different specifications and models, and different manufacturers.
Another issue worthy of attention is quality. Due to the phased imbalance of supply and demand, coupled with panic hoarding, things will not worry about selling, which will cause individual companies to relax control of incoming materials and quality, leading to quality risks.
The complex and fierce competition situation has put forward higher and higher requirements for the operation and management capabilities of display companies. Reasonable suppliers will give priority to guaranteeing the supply of key customers and core customers, and supply chain resources will be concentrated on leading companies. Among enterprises, in such an extraordinary period, the more and more tests are the comprehensive operation and management capabilities of enterprises such as supply chain resource integration capabilities, marketing capabilities, and quality control capabilities. Therefore, we believe that the industry reshuffle will further intensify.
Distributors, contractors and integrators
For local distributors, engineering companies, and integrators, facing such a complex and changeable market environment, they need to be more cautious in choosing partner vendors. Manufacturers with larger scales, larger purchase volumes, and more reputable payment for purchases will be supported by better upstream supply chains and will be more competitive in the market. At the same time, because of the tight supply of the entire industry chain, whether the cooperative manufacturers can deliver on time will also become an important indicator for examining the capabilities of the cooperative manufacturers.
In summary, first, we must prevent the risk that the promised delivery date cannot be fulfilled; second, we must prevent the risk that the promised price cannot be fulfilled; third, we must prevent blind hoarding of goods and the risk of market price fluctuations; fourth, we must prevent quality risks. Those manufacturers that have a complete price system and price management, price adjustment protection, quality control, and delivery commitments will receive more support and reliance from dealers, engineers and integrators.
Display terminal market
The domestic epidemic prevention has once again withstood the “Spring Festival” test. It is expected that the domestic display terminal market will soon enter a normal market cycle, but there is still a certain degree of uncertainty about its growth. The two sessions have not been convened, and the government’s budget for this year has not been determined. The impact of the macro policy orientation on the industry still needs to be observed.
From the perspective of the industry application and product innovation of the display itself, it seems that there is no huge new incremental market. What is certain is that small pitches will accelerate the popularization, dot pitches will shift to smaller pitches, and the market with pitches above P1.25 (inclusive) will turn to the channel market in an all-round way. The market growth rate below P1.0 will not be too high in the short term. quick. Price wars are bound to be fought. The core of a price war is not necessarily to cut prices, but to “open enough spreads” and generally increase prices. If I do not increase, it is also a price war.
In overseas markets, the first half of the year was basically out of play, and it will not improve much from the end of last year. There is no need to expect too much from relying on vaccines to control the spread of the global epidemic in the short term. The book “The Essence of Poverty” talks about the years of hardship and difficulties encountered in popularizing children’s chickenpox vaccination globally, reaching 70%. The vaccination rate of the above population is by no means an easy task (as of this writing, domestic vaccination has only reached 31 million doses). What’s more, so far, there is no authoritative information telling us how long the vaccine can be effective. If the display terminal market suffers from weakness and slow growth in the first half of the year, the upstream shortage will be alleviated, price increases will be suppressed, and price wars will intensify.
In addition to the above-mentioned basic pattern, trends, and trends of the main sectors of the industry chain, there are many friends who are concerned about more segmented markets, such as COB, N in 1, conference all-in-one, outdoor small spacing, etc., due to limited space , Not detailed one by one, and friends who are interested are welcome to contact and discuss separately.
In short, the market in 2021 will face greater uncertainty and volatility compared with previous years. Wandaping 52DP.COM will continue to pay attention to the development and changes of the entire industry chain and market, and provide you with market information, industry analysis and trend prospects.
Post time: Jul-23-2021