The recovery is expected to be strong
"Demand in the LED display industry has picked up recently, and backlighting is relatively obvious. It is expected to benefit from the full relaxation of epidemic control, and the degree of industry recovery is expected to exceed 2021." A person in charge of a leading company in the LED industry recently told reporters that in comparison, the lighting industry is greatly affected by the economic environment, and orders are not expected to pick up until the second half of the year.
According to the reporter's understanding, most LED industry companies are full of expectations for the industry's recovery this year, but they say they have not felt a significant recovery for the time being, and most of them have recently been in regular stocking demand.
Among the LED listed companies that have disclosed performance forecasts, the vast majority of them have predicted a decline in performance in 2022. However, capital market expectations have heated up. Since late December last year, the A-share Mini LED index has risen by nearly 14%. Since the beginning of this year, Absen, Alto Electronics, and Zhaochi have increased by more than 30%.
An LED industry analyst described the current status of the LED industry as "strong expectations, weak reality" to reporters, and predicted that the recovery progress of LED display will be faster than that of LED lighting. "After all, the lighting field is more affected by infrastructure and real estate, and the inventory pressure is relatively greater, while the emerging demand in the display field continues to drive, and the inventory pressure is smaller."
Looking back, during the 2021 COVID-19 epidemic, the demand for LED downstream lighting, display, etc. has recovered, but the supply of production capacity has been insufficient and the cost of raw materials has increased. The LED industry has taken the lead in raising prices for mid- to low-end categories, and a wave of cycle reversal is brewing in the country. In 2022, as overseas epidemic control is first relaxed, LED demand will recover, making up for the falling domestic demand.
"Overseas demand growth was relatively strong last year, and the prospects for overseas markets this year are unclear. In contrast, domestic demand recovery is expected to be stronger." The aforementioned analyst told reporters.
Liard executives recently pointed out in an institutional survey that the LED display industry will have relatively strong demand in 2021 because factors such as the recovery of the epidemic and the improvement of the cost performance of some new products have opened up market demand. Compared with 2022, due to some impacts of the external environment, travel is restricted, and many bidding projects and installation implementations cannot be carried out normally, so part of the demand has been suppressed. The market as a whole has been relatively stable this year, and demand will be gradually released
According to reports, the growth rate of overseas markets in the first three quarters of last year was relatively high, corresponding to overseas revenue growth of more than 40%, and the growth rate in Europe and the United States was higher, until it slowed down in the fourth quarter.
"One of the increases in the LED industry this year will come from the domestic sinking market. This area was also significantly affected by control policies last year, and it is expected that there will be an increase." Leyard executives said.
When accepting institutional research, Unilumin Technology executives also said that considering the diminishing marginal effect of the market and fierce competition, the company combined its own competitiveness in overseas markets, and the most likely development trend in overseas markets this year is steady growth. Affected by the macro environment, the company's capacity utilization rate was approximately 60% in the first three quarters of 2022, and the capacity utilization rate began to climb from the fourth quarter.
The performance forecast shows that with the recovery of overseas markets last year, Unilumin Technology's overseas operating income increased by approximately 40% year-on-year; its domestic business fell by approximately 30% year-on-year due to the impact of the COVID-19 epidemic. According to predictions, the company achieved net profit of 50.6988 million yuan to 65.316 million yuan last year, a year-on-year decrease of 64.16% to 72.18%.
Absen’s performance has benefited from more significant growth in overseas markets. Last year, the company's overseas market operating income increased by nearly 80% year-on-year. It is predicted that the company will achieve net profit attributable to shareholders of 180 million yuan to 230 million yuan, an increase of 501.16% to 668.15% over the same period last year.
Absen executives also predict that overseas markets are expected to grow steadily in the future, and the company will seize the opportunity of foreign market demand while continuing to increase strategic investment in key areas and markets and vigorously build localized channels to conduct business.
Virtual studio illuminates the new LED track
Even if overseas market demand is expected to drop, LED companies are still actively seizing overseas orders.
Hong Zhen, secretary-general of the LED Display Application Branch of the China Optics and Optoelectronics Industry Association, told reporters that at the European Audiovisual Equipment and Information System Integration Technology Exhibition (ISE) held in Spain in February this year, there were hundreds of Chinese LED exhibitors. "This time the exhibitors are said to have gained a lot. In the earlier European exhibition, only a few Chinese companies participated."
"With the recovery of the macro-economy and consumption, the LED industry engineering market and government procurement have gradually recovered. At present, the recovery of the cultural and tourism landscape market is relatively prominent. Driven by XR (extended reality technology), new energy vehicles, etc., the segmented LED market has grown relatively strongly. During the epidemic, LED markets such as commercial all-in-one machines and educational demonstrations also flourished." Hong Zhen told reporters that with the implementation of the national ultra-high-definition 5G/8K "100 cities, 1,000 screens" strategy, LED companies such as Lehman Optoelectronics and other domestic LED companies last year. TV giant screen lands on e-commerce platform
The above-mentioned LED industry analysts told reporters that compared with the LED lighting sector, LED display technology has made greater progress, and some emerging needs continue to develop, such as XR, photo studios, etc., and are relatively less affected by the fluctuations of the economic cycle.
In recent years, virtual shooting technology has developed rapidly, and LED display + XR technology is regarded as the new future of virtual production. According to Unilumin Technology, the company's sub-brand Radioo continues to make efforts in the field of virtual production. Its XR solutions and service capabilities have been recognized by well-known customers such as Hollywood, Disney, and Microsoft, and it ranks first in the global virtual scene production market share. At present, virtual shooting in China is in the exploratory period.
In addition, at the ISE exhibition, Absen’s new product PR series specially developed for film and television virtual production scenes won the Best of Show award. Company executives stated in institutional research that virtual production is profoundly changing the way movies and TV are produced. A series of technological changes centered on LED virtual production are promoting the rapid development of film production, advertising shooting, digital exhibition and other industries, and the market demand is strong.
LED displays can significantly reduce post-production time and video production costs, increase the immersive experience of on-site participants, and continue to grow in the field of virtual shooting applications.
According to statistics, the global LED display market size for virtual shooting applications in 2021 will be approximately US$283 million, a year-on-year increase of 136%. Although affected by inflation and the global economic downturn last year, benefiting from more studios adopting virtual shooting technology, it is estimated that the market value of LED display screens for virtual shooting will grow steadily to US$431 million in 2022. Currently, the virtual shooting display screen manufacturer ranks first in terms of market share with Rado, followed by Shijue Guangxu and SONY. Other manufacturers include Alto Electronics, Leyard/Planar, Absen, Samsung, LG, etc.
Leading companies are preparing for Mini/Micro LED
As the direction of high-end LED development, Mini/Micro LED is a new product and new technology that has upgraded LED display technology after LED indoor and outdoor displays and LED small pitch. It has the advantages of "thin film, miniaturization, and array", attracting upstream and downstream enterprises in the LED industry chain to invest.
According to statistics, new investment in Mini/Micro LED and other fields will be approximately 43 billion yuan in 2020, and 75 billion yuan in 2021. In 2022, investment in this field has grown to nearly 70 billion yuan.
The commercialization of Mini LED is gradually advancing and has been implemented in the automotive field.
Shenzhen Tianma recently stated in response to investors' questions that in the field of vehicle display, the company has already implemented Mini LED technology solutions to ship to major overseas vehicle customers. The company has developed PM and AM drive mode solutions for different application architectures, and independently developed drive algorithms for different architectures. It will continue to provide customers with diversified Mini LED display solutions and actively promote project cooperation with customers.
Longli Technology also introduced that the company's traditional businesses such as mobile phone backlighting have been affected by domestic and foreign macroeconomic and industry factors, and profitability has declined. However, the company's Mini LED automotive, VR, industrial control and other businesses have maintained a growth trend. In terms of automotive display and VR, it has obtained orders from well-known domestic and foreign leading customers and achieved mass production.
Zhaochi Co., Ltd. introduced that in the field of display applications, the company has launched Mini COB displays using full flip-chips. Currently, there are 600 COB display module production lines, of which 500 newly expanded production lines will be officially put into operation at the end of 2022. The pass-through rate and yield rate of product mass production have achieved industry leadership.
Leading LED companies have also raised funds to deploy production capacity in the Mini/Micro LED field.
As the leader in the LED chip industry, Sanan Optoelectronics completed a private capital raising of 7.9 billion yuan in December last year, investing in the Mini/Micro display industrialization of Hubei Sanan Optoelectronics Co., Ltd. and to supplement working capital. After the project reaches full production, it will have an additional production capacity of 1.61 million gallium nitride Mini/Micro LED chips/year, 750,000 gallium arsenide Mini/Micro LED chips/year, and 84,000 units/year of packaging products for 4K display screens.
In March last year, Sanan Optoelectronics disclosed that the company continued to receive Mini LED chip purchase orders from a single important international customer, with an amount exceeding 170 million yuan.
According to the latest news from a reporter from the Securities Times, Hubei Sanan Optoelectronics Co., Ltd. is mainly engaged in the business of Mini/Micro LED epitaxial wafers and chips and chip deep processing. Its technology and products have been widely recognized, and its related production capacity is about hundreds of thousands of pieces per month. This year, the company has further consolidated Mini LED orders from major customers, and the scale is expected to further increase.
In addition, Huacan Optoelectronics planned a private placement in November last year and issued shares to BOE Group to raise 2.084 billion yuan, which will also be used for Micro LED wafer manufacturing and packaging and testing base projects.
Jucan Optoelectronics raised 1.2 billion yuan in additional capital last year, all of which was used for Mini/Micro LED chip research and development and manufacturing expansion projects. On January 31 this year, Jucan Optoelectronics’ fixed increase was approved by the China Securities Regulatory Commission.
In a recent institutional survey, Jucan Optoelectronics executives said that the company is steadily expanding production based on customer demand. Among them, the production capacity planning of the Huizhou subsidiary is about five times that of the Shenzhen company. In order to meet the needs of customers in North China and East China, the Wuhu production base has also expanded its Mini LED production line. The expanded product lines are mainly focused on automotive products, Mini LED products, etc.
According to the above-mentioned LED industry analysts, the cost of Mini LED usually decreases by about 15% every year. In the context of gradual increase in production capacity, it still needs to be seen whether demand can further grow. Some manufacturers would rather take orders at a loss to increase market share.
Compared with Mini LED, Micro LED progress is slow and the cost remains high. The industry generally believes that Micro LED will still be difficult to mass produce in the short term. According to reports, although technically the mass transfer yield rate of Micro LED has exceeded 99%, the efficiency is relatively low. Regardless of whether the substrate uses PCB or glass, the current cost is relatively high.
"The industry will pay close attention to whether Apple watch can adopt the Micro LED solution in 2024. This is regarded as the critical point of Micro LED industrialization and further expanded to more fields." According to the above-mentioned LED industry analysts, however, in the field of Micro LED, there is a large technological gap between domestic and overseas. The main suppliers are Osram, LG, etc., and Aixtron remains the leader in the equipment field.
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