In the short term, in 2022, a new coronavirus shocked, the domestic LED market scale declined.With the recovery of economic activity, the LED market is expected to recover. In the medium term, XR virtual shooting, conference integrated machine and other new demand is strong, Mini / Micro LED technology advances, overlap digital China construction of the great environment, LED market is expected to continued growth.
1.1 LED Manufacturing chain introduction
LED (Light Emitting Diode emitting diode) is the use of semiconductor diode lighting effect, converting electrical energy into light energy, so that the pixel unit to active lighting devices.The electron and hole of the LED by electrode injection and vertical transmission are combined into spectators, while spectator decay in specific materials can produce RGB triangle color, under the control of the drive circuit, the LED pixel matrix can color image display. LED industry chain: upstream is LED chip (the bottom is predominantly blue gemstone, MOCVD is long crystal equipment), the middle is LED packaging (backlight packaging form mainly COB, POB, etc., display packaging technology mainly SMD, COB and so on), downstream LED application (depending on the different functions of use, LED application can be divided into LED lighting, LED display, LED backlight, and other applications).
According to the CSAResearch report, the total output value of China's LED industry in 2021 will be approximately 7773 billion yuan, with a growth rate of about 10.8%, of which, the upstream output and chip scale will be 305 billion, the midstream packaging scale is 916 million yuan and the downstream application scope will be 6552 billion.Therefore, the share of upstream, middlestream and downstream is 4%, 12% and 84% respectively. Downstream application structure: general lighting is the largest application market, accounting for about 46%; display is the second largest market for use, the market accounts for about 15%; backlight market accounted for about 8%; automotive lighting account for 2%, has a rising trend.
1.2 Recovery in 2023
In 2022, domestic outbreaks increased, economic activity was blocked, and market demand, such as real estate and consumer electronics, declined, causing varying degrees of impact on the LED application market.We compiled 18 representative LED application product enterprises (seven lighting enterprises, six small-scale enterprises and five backlight enterprises) in the last few years' revenue and gross interest rate data, analyzing as follows:
The growth rate is worse from quarter to quarter.In 2022, the domestic epidemic affected, the revenue growth rate of LED enterprises decreased by quarter, and the fall in the lighting market was noticeable.Looking back at the early days of the epidemic, domestic LED demand was hit significantly in 2020, and the LED market will quickly recover in 2021.We believe that after the domestic policy focus returns to economic growth in 2023, the LED application market will also rebound. (2) The rate of interest is steadily rising.In 2021, impacted by the epidemic, global supply chain disruptions occurred frequently, such as LED display-driven ICs, and prices increased several times.At the same time, shipping costs have increased significantly.This has a negative impact on the downstream interest rates.In 2022, the supply chain was gradually restored, shipping charges dropped significantly, and gross interest rates were basically stable.It is expected that in 2023, with the recovery of demand, the marginal interest rate is expected to stabilize. 3) The small distance of the plate shows bright eyes.In contrast, small spaces are the fastest-growing segment in LED applications, with a higher margin rate.According to the research "2022 short range and micro range reality research white paper" predicts, the LED display market will begin to recover in 2023.It is also one of our best viewed LED application markets.
1.3 LED is expected to enter the starting point of the medium and long-term economy
Different sectors of the LED industry are accumulating innovation, and quantitative change causes quality change.We anticipate that the following links are undergoing or are about to undergo major changes, which also foster investment opportunities.
1) LED display: the XR virtual shooting market is growing rapidly, and the digital economy is expanding in medium-term demand.According to TrendForce, the global market for LED virtual shooting displays will reach about $4.3 billion in 2022, an increase of about 52 percent from 2021.We expect the market to continue to grow by 40% over the next two years.The government is vigorously driving the development of the digital economy, and LED displays as data display media will ultimately benefit.
2) Mini backlight: Whether it is a TV, car display, etc., the MiniLED backlight will significantly improve product performance, and the penetration rate of the Mini LED backlight is rapidly increasing.According to the prediction of the data, the market space for Mini LED backlight modules is expected to reach 125 billion yuan in 2026.
3) LED packaging: COB compared to SMD has many advantages, manufacturer COB direct transmittance rate is constantly improving, promoting the P1.0 display to a faster decrease, and the application scenario of small-distance LED is further expanded.
4)Mini/Micro LED: Mini/micro LEDs will drive LED displays into the consumer market.According to IHS data, the global display panel market will be $13.92 billion in 2021, with LCDs worth $973 billion and OLEDs worth $40 billion.In the future, if the Mini/Micro LED penetration rate in the display market is 10% higher, it will correspond to an additional market of approximately $14 billion.It will be the real prosperity of the LED industry.
5) LED chip: the chip as the upstream core device, the future Mini&mircoLED market release, the LED chip will be the core benefit link.In the past two years, the LED chip industry has undergone major changes, TV manufacturers / panel manufacturers have been laying up LED chips, which reflects the importance of LED chip links in the future display field.
2 LED Applications: Small spacing continues to grow, Mini/Micro LED quantity changes to quality
Small Range LEDs: Expanding Application Boundaries Drive Continuous High Growth
Small-range LEDs continuously expand the application boundaries.In general, the display with a point gap less than 2.5mm is called a small LED, which has the advantages of seamless stacking, high display brightness, high color saturation, and the display effect is better than other display products.As the point gap continues to shrink, the cost decreases, the application scenario of small LEDs is also continuously expanding, gradually replacing products such as liquid crystal stacking, DLP staging, conference projection, and even large-scale TVs.
In the early stages, small-range LEDs despite showing good effects, but the cost is relatively high, first applied in the military, security and other fields, these fields for use effect consideration priority over price.With the cost decreasing, small-range LEDs gradually entered the commercial application market, sports, stage rental, studio and so on became the leading use scene; in the past two years, the penetration rate in conference halls, educational and other scenes has rapidly increased, and derived XR virtual shooting and other new scenes; the future is expected to enter the cinema, even the home market. P1.0 below small space LED products gradually supplemented its pixel space large deficiency, in government applications, command scheduling center, smart city information center and other scenarios pursuing high performance rather than cost advantage, P1.0 space LED screen with seamless stacking, high brightness and other advantages, has gained the experience advantage.In the 150-250-inch conference large-screen app, small spacing below P1.0 also became the “high-end customer” preference and gradually entered the private home theater market.
The small-range LED market is strong in growth and continuity.In the past three years, despite the epidemic of some market demands, new demands such as remote conferencing and distance education have emerged, giving rise to the demand for LED conference integrators. At the same time, the two years of XR virtual photography have also been remarkable.The two emerging markets had 4 billion sales in 2022, representing more than 10 percent of the total gap.It is due to the continuous expansion of the application boundaries that the small-range LED market is very resilient.When the economic environment improves, the application fields will be more active in upgrading display equipment, and the small-range LED market will show better growth elasticity.Therefore, small-range LEDs are a market with a continuous growth. According to TrendForce Group Consulting, the global market for small-range LED displays will reach $4.2 billion in 2022, up 12% from 2021.Benefit from the marked recovery of demand in the European and American market, the growth of small-range LED display applications in enterprise conference and educational space, retail and exhibition, entertainment and theater applications is most obvious, with an expected growth of 14%, 13% and 41% respectively in 2022.XR virtual photography has become the most growing emerging application in the small-scale market in the past two years, with a market size of $400 million in 2022, an increase of more than 50 percent.
According to DISCIEN data, China's small-range LED market sales are expected to exceed 20 billion yuan in 2022, with a combined growth rate of about 15% in the next four years.Although domestic causes of the outbreak impacted the actual demand and the actual sales declined, the trend of growth in the market remained unchanged.
3 LED packaging: COB penetration is expected to increase rapidly
Mini-LED packaging currently has three technical routes: SMD, IMD and COB. SMD: the shelves, chips, conductors, oxide resins and other materials are packaged into different specifications of lamps, and the lamps are welded on the circuit board with high-temperature retractable welding using high-speed stickers to make different display units. The process process is solid crystal, welded line, seal, baking, cutting, dividing BIN, packaging. COB: Bind the LED chip directly to the PCB board with the drive circuit, then wrap it with the packaging glue for LED chips, combining the midstream packaging and downstream display applications together.Process Process For solid crystal machine solid crystals, reflow welding, point glue machine bottom filling, hardening, packaging. IMD combines the features of SMD and COB, it can cover up to P0.4~P0.9 on the point gap, strong collision resistance and reliability.
COB compared to SMD has two advantages: one is the product performance advantage, and the other is the cost advantage.
First, the product performance advantages: the LED display of the COB scheme, the display effect is better, the stability is good, the maintenance cost is low. COB is low.SMD in the reflow welding process due to different material expansion coefficients, resulting in high temperature damage, and the rate of dead light is higher.COB does not have a backflow welding loop, avoiding this problem, and COB displays products with a low after-sales maintenance cost that is usually only 1/10 of SMD. COB has better stability and reliability.The SMD packaging device between the welded foot and the PCB plate is naked, and the protection is poor; while the COB scheme is to put the LED chip on the pcb circuit board, and then with optical resin cover fixed to form a protective shell, with higher stability, reliability and adaptability.
Secondly, the cost advantage.The process links of the COB scheme are less, the use of consumables is less, and the overall reduction space is larger.Especially with the increase of pixel density, the difficulty of SMD sticker increases rapidly, and the cost increases significantly, the advantages of COB will be highlighted. However, SMD products currently account for 90 percent of the small-scale market, and COB accounts for only 10 percent.This is mainly due to: 1) Previously, the COB direct transmittance rate has been relatively low (less than 30%), and in the P1.2 above LED display manufacturing, the SMD positive rate is more than 90%, which leads to the SDM actual production result is lower than COB. The SMD line of production has large fixed assets and is not compatible with COB.If the packaging enterprise adopts the COB route, it will need to purchase new equipment, resulting in the loss of the original fixed assets and increased depreciation.
Two changes are currently occurring or are about to occur: 1) A significant increase in the COB direct transmittance rate.According to the company, Display understands that the manufacturing equipment has been significantly improved and customized, through the solution of huge transfer technology difficulties, its direct transmission rate and good rate leading in the industry, the COB's low-cost potential is fully exploited, resulting in a significant decline in production. 2) P1.0 The market below begins to depreciate.Based on the COB scheme, the cost advantage is fully reflected.When the SMT method is used, the patch rate decreases by more than 50% when the stickers patch on Mini LED packaging devices below P1.0, resulting in a significant increase in the SMD cost.
4 LED Chip: Strong upstream and downstream combination for opportunities in the Mini & Micro era
According to CSA Research data, since 2017, the total production capacity of LED chips in China has shown a trend of upward and downward change.After the LED chip industry passed the clearance, the low-end production capacity was eliminated.In 2021, China's LED chip production capacity reached 15.98 million pieces / month, and the output value scale reached 30.5 billion yuan, an increase of 38%.According to the statistics of Display, the decline in market demand caused by the outbreak in 2022 has caused the price to decline. With the elimination of backward production capacity, the technical barriers of high-end LED applications, and the scale advantages of leading enterprises, the industry position of leading companies is further solidified.In 2021, the three enterprises of Shenzhen Optoelectronics, Huawei Photovoltaics, and Mercedes-Benz shares accounted for 31.7% of China's LED chip production capacity, 14.3% and 12.4%, a total of 60% respectively.
The major change that has occurred in the LED chip industry in the last few years is the strong combination of downstream application giants and upstream chip enterprises.
Summary
The LED industry converts electricity into light energy using semiconductor diodes. It includes LED chips, packaging, and applications. China's LED industry output value in 2021 was around 777.3 billion yuan, with downstream applications accounting for 84%. Lighting is the largest application market, followed by display screens and backlighting. Due to the COVID-19 pandemic, LED company growth rates declined in 2022, but the gross profit margin stabilized and improved as the supply chain recovered. The small-pitch market has a higher gross profit margin and is expected to be a promising LED application market. The LED industry is expected to prosper in the medium to long term due to the growth of the XR virtual shooting market, the digital economy, the increasing penetration rate of Mini LED backlight, and the advantages of COB over SMD packaging.
