Four changes in the LED display industry

Recently, experts said that the "LED Display Industry Quarterly Analysis Report for the First Quarter of 2026" was released, and the "2026 COB/MIP Display Research Report (Special Issue)" will also be launched soon.

In the process of sorting out the first quarter report and visiting and researching enterprises in the industry chain, experts said that Research found that several key issues were mentioned repeatedly, constituting the current "quadruple changes" in the industry:

First, the revenue data of chip factories. Revenue generally declined in the first quarter. Is this a signal of decline in the main business, or is it the result of adjustments to accounting standards?

The second is the transmission logic of price increases. After three rounds of price increases, the round starting in 2026 shows the characteristics of "full, high, uniform and fast". How is it different from the previous two rounds? What is the material impact on supply and demand?

The third is the actual impact of exchange rates. To what extent has the appreciation of the RMB in the first quarter affected the company's income statement?

Fourth, the pattern of COB/MIP changes. At what stage has COB production capacity expanded, and what will happen to the landscape in 2026?

With these four questions, this article is divided into four parts according to the logic of upstream chips, midstream and downstream price increase transmission, macro exchange rate variables, and COB structural variables.

Upstream chips - "data misunderstanding" of declining revenue and the true quality of the main business

In the first quarter, the financial reports of several major LED chip manufacturers attracted market attention. The revenue of Sanan Optoelectronics, Qianzhao Optoelectronics, and Jucan Optoelectronics fell by 32.59%, 47.27%, and 42.71% respectively year-on-year. Where does this decline mainly come from?

■ Scrap revenue: a piece of “hidden revenue” that once accounted for a huge proportion

There is an easily overlooked factor behind this: gold scrap revenue.

LED chips use high-purity gold during the production process and are attached to the circuit through an evaporation process. However, in actual production, only a small amount of gold is used, and most of it is mixed with other materials to form gold waste. In the past, chip factories would sell these scraps to precious metal recycling companies, forming a considerable amount of "scrap revenue" and included in the total revenue.

What proportion of this income is? According to the data disclosed in the 2025 annual reports of each company:

As shown in the table above, Sanan Optoelectronics’ total revenue is 17.949 billion yuan, of which materials and scrap sales revenue is 5.826 billion yuan, accounting for 32.46%; BOE Huacan Optoelectronics’ total revenue is 5.408 billion yuan, of which scrap revenue is 2.844 billion yuan. , scrap revenue accounted for 52.59%; Qianzhao Optoelectronics’ total revenue was 3.401 billion yuan, and scrap revenue accounted for approximately 47.92% according to the annual report; Jucan Optoelectronics’ total revenue was 3.127 billion yuan, and scrap revenue accounted for approximately 55.48% according to the annual report. (It is worth noting that BOE Huacan did not change its revenue caliber in the first quarter of 2026, and experts said that Research will continue to track it in the future)

In other words, one-third to more than half of the historical revenue of the above-mentioned chip manufacturers comes from scrap sales, not the main chip business.

■ Policy changes: Accounting adjustments brought about by the new gold tax policy

Starting from November 1, 2025, the "Announcement on Gold-related Tax Policies" will be implemented.

Under the new policy, when purchasing gold for production use through the Shanghai Gold Exchange, the input tax deduction rate is adjusted from 13% to 6%, and the applicable value-added tax rate for scrap sales is 13%. Therefore, the LED chip factory does not recognize revenue from gold scrap, and the disposal model is adjusted from external sales to outsourcing processing, purification and reuse, that is, the scrap is handed over to professional manufacturers for processing, and the purified gold is taken back for use without generating sales revenue.

This is a change in accounting treatment and has nothing to do with the actual operating conditions of the chip factory. But when the revenue that accounts for 30%-55% of the revenue is removed from the report, the total revenue declines by 30%-40% year-on-year is an inevitable mathematical result.

■ After eliminating interference, what is the true performance of the main chip industry?

Observe the first quarter situation of the above-mentioned chip factories:

Sanan Optoelectronics disclosed in its first quarter report that after deducting precious metal scrap, operating income increased by 2.85% year-on-year.

Jucan Optoelectronics’ main business revenue in the first quarter was 359 million yuan, a year-on-year increase of 12.97%. Among them, GaN-based blue and green light business increased by 3.37%, and GaAs-based red and yellow light business revenue was 31.4667 million yuan (new entry into the field, low base).

Although Qianzhao Optoelectronics did not directly disclose the year-on-year data after deducting scrap. However, considering that scrap revenue will account for about 48% in 2025, the year-on-year growth rate of chip main business revenue after deduction will be about 6%.

Taken together, the performance of the chip sector in the first quarter of 2026 is not declining, but stable and improving.

■ After the adjustment, the revenue figures can better reflect the quality of the main business

This accounting adjustment actually makes the revenue figures better reflect the true operating conditions of the main chip business. In the past, a large part of chip factory revenue came from scrap sales. This structure weakened the signal value of main business data and had positive significance for industry transparency and clarity of valuation logic.

Price hikes - three price increases, what’s different this time?

Looking over time, the LED display industry has experienced three rounds of concentrated price increases since 2023.

The first round took place from May 2023 to mid-2024, lasting about a year, with more than 40 price adjustments, involving 22 companies. The core driver is that the cost pressure caused by demand recovery coupled with long-term low price involution needs to be alleviated urgently. However, due to the fierce game of supply and demand, price increases are not the consensus of the entire industry, and corporate strategies have diverged. After lasting for about a year, the first round of price increases ended as leading companies began to cut prices.

The second round occurred from March to August 2025 and lasted for about 5 months. The intensity has slowed down and the sustainability is limited. The core driver is that gold, silver, copper and other raw materials have increased by 25%-35%, and the superimposed policy signals have strengthened the industry's demand for reasonable profits. The price adjustment range is between 5% and 10%, mainly concentrated in the packaging process. However, due to sufficient supply elasticity (the utilization rate dropped to 50%-60%), the price increase is not a reversal of supply and demand. Some companies chose not to follow up, and ultimately did not change the industry trend.

The third round started in early December 2025 and continues to this day. Compared with the previous two rounds, this round presents a significantly different trend - it has a wider impact, a greater magnitude, and companies are more consistent in their pace. So far, more than 80 companies have issued price adjustment letters, covering core links in the entire industry chain such as chips, packaging, power supplies, ICs and displays. For a detailed review of the three rounds of price increases and a comparison of the timeline and magnitude of price adjustments by each company, please refer to the quarterly report of Expert Research.

■ The root cause of this round of price increases: unprecedented surge in raw materials

Different from the previous two rounds, the direct driver of this round of price increases is the unprecedented increase in the prices of core raw materials. Gold prices will increase by more than 70% throughout 2025, silver prices will increase by approximately 170%, and copper prices will increase by 36%. Gold and silver are used in core processes such as crystal bonding and bonding, and copper is widely used in PCB substrates and wires. These materials are the cost cornerstone that the LED industry chain cannot avoid.

The transmission path is very clear: rising prices of upstream materials such as precious metals, PCBs, and wafers have pushed up the cost of key materials such as chips and lamp beads, ultimately leading to a significant increase in production costs. Many companies clearly mentioned in their price adjustment letters that "the original pricing has exceeded the cost digestion limit" and "serious cost inversion has occurred."

■ Characteristics of this round of price increases: full, high, uniform, fast

Compared with the two rounds in 2023 and 2025, this round of price increases presents four distinctive features:

First, the scope of the impact is "full". From upstream materials (chips, ICs) to midstream packaging (lamp beads, modules) to downstream terminals (display screens), it covers the core links of the entire industry chain and links with more than 80 companies.

The second is that the price adjustment range is "high". The overall increase range has expanded to 3%-25%, and some companies have increased by more than 30%, far exceeding the previous two rounds.

Third, the pace of enterprises is "aligned". Many companies issued price adjustment letters intensively at the same time. Some companies have raised prices for the second or even third time this year, and the synchronicity of the industry has reached its peak.

Fourth, the conduction path is "fast". It was launched in early December 2025 and has fully penetrated all links of the industrial chain by March 2026, forming a resonance situation throughout the chain.

■ The consequences of price increases

Price increases triggered a series of chain reactions.

The first is the change in inventory strategy. For some downstream manufacturers, the original inventory level of lamp beads was only a few units per week, and they were harvested as needed, but now they have actively increased it to a few months. Many downstream companies are increasing safety stocks of core materials to varying degrees. The industry mentality has shifted from "buy as you use" to "appropriate stocking up."

Secondly, there is the emergence of structural shortages. Taking the circulation type 1515 lamp beads as an example, midstream companies have adopted differentiated price adjustments for different customers: the price for small and medium-sized customers has increased from 4.5-5.0 yuan/K to 5.2 yuan/K, and for large customers has increased from 3.8 yuan/K to 4.5 yuan/K. This price difference shows that in the context of general industry growth, the supply chain advantages of large manufacturers are still obvious, but cost pressure has been transmitted to every transaction.

At the same time, a phenomenon is occurring: the supply of midstream devices is tight due to both price and strategic factors. Several large packaging manufacturers have deployed modules, and they are more inclined to provide module products to downstream rather than simple lamp beads, resulting in a "shortage of lamp beads, but no shortage of modules" in the market. However, with the price increase of PCB and IC in early May, the profits of modules will also be compressed, and this phenomenon still needs to be observed.

In addition, some small and medium-sized display screen manufacturers have begun to adjust their order-taking strategies: they do not dare to accept long-term, low-margin orders, and give priority to orders with short delivery times and flexible prices.

From the perspective of the industry structure, the three price increases continue to strengthen the Matthew effect. Leading companies rely on supply chain bargaining power, scale advantages and technical barriers to absorb cost pressures, and even take the opportunity to expand market share; small and medium-sized enterprises lack the ability to pass on costs and may lose market share if they follow the rise. If they do not follow the rise, they will face continued pressure on profits and further squeeze their market space.

Macro variables - the "invisible erosion" of exchange rate fluctuations on profits

In the first quarter of 2026, the spot exchange rate of RMB against the US dollar rose from 6.9890 to 6.9081, a cumulative appreciation of 809 basis points, an increase of more than 1.1%. For LED companies with a high proportion of overseas business, book exchange losses directly erode profits and become a common pain point in the first quarter reports of many companies.

The exchange rate-related disclosures in the first quarter reports of major companies are as follows. The impact covers the entire industry chain from chips, packaging to displays:

For example, Sanan Optoelectronics’ profit changes were caused by the superposition of two factors. The company mentioned in its financial report that interest income from bank deposits in the current period decreased year-on-year, and exchange losses increased year-on-year, leading to an increase in financial expenses and further compressing net profit margins.

Hikvision’s exchange loss was about 525 million yuan, and the growth of its main business offset the impact of exchange rate. Hikvision stated at the performance briefing that the 36.42% growth rate of net profit attributable to the parent company in the first quarter was achieved under unfavorable conditions such as exchange gains and losses turning from gains to losses, resulting in a negative impact of approximately 525 million yuan. Despite this, the company's gross profit margin in the first quarter was 49.09%. Despite exchange losses, it still achieved growth in net profit attributable to the parent company, and plans to carry out foreign exchange hedging business of no more than US$562 million.

Of course, exchange rates are cyclical, and what we should pay more attention to is whether the quality of operations after excluding the impact of exchange rates has improved.

▋ Industry Commonalities and Trends

Based on the data of the above-mentioned companies, the impact of exchange rate fluctuations in the first quarter shows several commonalities:

First, the impact covers multiple links in the industry chain. From upstream chips, midstream packaging to downstream displays, the impact of exchange losses on profits or expenses is mentioned in the first quarter report. This shows that exchange rate fluctuations are not an occasional problem for individual companies, but an external factor in the industry that is universal.

Second, the ability to absorb exchange rate shocks is closely related to the foundation of the business structure. When a company has a relatively high proportion of domestic business and conducts corresponding hedging, the exchange rate impact is more easily digested. Actively managing exchange rate risks is becoming a choice for some companies. Hikvision announced in April 2026 that it planned to carry out foreign exchange hedging business of no more than US$562 million. Under the expectation of two-way fluctuations in the RMB, establishing or improving an exchange rate risk management mechanism is a response direction that export-oriented enterprises can consider. But when a company's profit base is thin, the same exchange rate fluctuations may directly lead to losses or a sharp reduction in profits. After all, improving the profitability of the main business is the basis for coping with external uncertainties.

Third, deducting non-net profits can better reflect the true extent of exchange rate shocks than net profits attributable to the parent company. Non-recurring gains and losses (such as government subsidies, income from asset disposal, etc.) smooth the impact of exchange rates to a certain extent. Therefore, paying attention to changes in non-net profits may better reflect the actual situation of the company's main business being affected by exchange rates.

For comparison of financial data of more companies, experts say that the "LED Display Industry Quarterly Analysis Report" for the first quarter of 2026 has a complete summary.

Structural variables - changes in the pattern of COB production capacity expansion and technical routes

After talking about the short-term macro variable of exchange rate, we turn our perspective back to the industry and take a look at the ongoing structural changes - COB/MIP.

MIP is a new technology highlight, which experts say has been described in detail in Display’s new product reports at two major exhibitions this year. Here, we return the focus of observation to COB, which is currently experiencing large-scale growth.

In the past two years, COB has moved from "technical verification" to "large-scale mass production" and has become one of the most watched routes in the LED display field. In the first quarter of 2026, there will be several developments worthy of attention on this track.

■ Review in 2025: Output value is 3.8 billion, volume increases and price decreases

Let’s first review the overall situation in 2025. According to the "2026 COB/MIP Display Research Report (Special Issue)" we completed, the output value of COB modules in 2025 will be approximately 3.8 billion yuan, a year-on-year increase of 11%. In terms of growth rate, it has slowed down compared to 2024.

The reason for the slowdown is not that there is a problem with demand, but that prices are going down. In 2025, the COB industry as a whole will show the characteristics of "increasing volume and decreasing price" - that is, shipment volume is increasing, but the prices of products at various intervals have generally declined, which to a certain extent offsets the boosting effect of shipment growth on output value.

In terms of production capacity, experts say that Research data shows that the total COB production capacity will reach 79,000 square meters/month in 2025, and the net increase in production capacity throughout the year will be approximately 28,000 square meters/month. From the perspective of production expansion entities, in addition to professional COB module factories continuing to expand production, panel manufacturers will become an important new force in 2025.

A noteworthy change is: with the entry of new players and the continued expansion of production by original manufacturers, according to data from the "2026 COB/MIP Display Research Report (Special Issue)", the production capacity of the top three COB manufacturers will account for approximately 79% in 2023; this will drop to approximately 70% in 2024; and further drop to approximately 52% in 2025.

■ New trends in Q1 2026: production expansion continues, application expansion

Entering the first quarter of 2026, there are several new developments in the COB market worthy of attention.

The first is the production capacity side. Judging from the situation tracked by Experts Research, the production expansion of leading manufacturers will continue in 2026.