In the past year of 2020, the epidemic situation has ravaged the world, which has not only dealt a heavy blow to the global economy but also brought great fluctuation and impact to our LED industry. In 2021, the impact of the epidemic still exists, which brings great uncertainty to the development trend of the industry. However, we can still go deep into each link of the industrial chain to see their current situation, especially what problems will they encounter. Through the analysis of these problems and situations, maybe we can have a relatively clear prediction of the trend of the follow-up industry.
First, let’s take a look at the RGB light-emitting chip. Affected by the epidemic, the growth rate of RGB chip manufacturers dropped sharply in the first half of last year, and the output decreased. In the second half of last year, affected by the shortage of the global market and the strong recovery of the domestic market, the inventory was basically cleared, ending two consecutive years of negative growth.
However, due to the continuous price decline, the gross profit of RGB chip sales of chip manufacturers is very small, and the manufacturers lack the power to expand the production of RGB chips. The main expansion directions are in emerging markets such as deep UV, sensor chips, Gan, microchips, etc. With the rising cost of chip raw materials in the past six months, chip manufacturers are facing huge cost pressure. Therefore, in the short term, RGB chips will face the possibility of small price increases and tight supply.
First of all, packaging equipment manufacturers, such as crystal bonders, wire bonders, and optical tape splitters, are faced with an insufficient supply of raw materials, rising prices, and the impact of large-scale expansion of another semiconductor packaging on equipment demand. The delivery capacity and lead time of packaging equipment are greatly limited, and the expansion plan of packaging manufacturers is blocked. It is difficult to achieve large-scale expansion in the first half of this year. Therefore, it is estimated that the equipment capacity of RGB packaging in the first half of the year will be basically the same as that at the end of last year, and will not increase much.
The impact of the epidemic on the labor force returning home and unwillingness to go out to work is long-term. It is still difficult to recruit workers for the production line, and the grain turnover rate of packaging manufacturers will not be much higher than that at the end of last year. With the further popularization of small spacing in the terminal market and the further transformation from point spacing to smaller spacing, the demand for lamp beads will increase. In the short term, the supply of RGB-packaged lamp beads is still likely to remain tight.
On the other hand, the prices of non-ferrous metals, PCB substrate, chips, and other raw materials continue to rise, leading to the continuous rise of production costs of packaging plants, and packaging manufacturers are facing huge cost pressure. Under the influence of limited capacity constraints and rising raw material costs, packaging manufacturers will adjust the capacity allocation of product categories according to the changes of market demand and their own cost structure.
With the overall capacity unchanged, increase the capacity of high-margin products and reduce the capacity of low-margin products. This will lead to the periodic imbalance of supply and demand of different categories of products, that is, in a certain period of time, some categories are out of stock, and some categories are not out of stock. The periodic imbalance of supply and demand will bring about price fluctuation, with different fluctuations and ranges.
Therefore, in the short term, the price trend of RGB lamp beads will be different according to different manufacturers, categories, and models. However, constrained by the factors of production capacity and cost, generally speaking, the price trend of RGB lamp beads is not likely to be comprehensively reduced, and individual specifications may even continue to rise slightly.
The panic mentality of “buy short but not by much, buy up but not buy down” will further aggravate the shortage and price expectations, and the downstream display screen manufacturers will raise the level of “safety stock” and increase the inventory of raw materials, which will further aggravate the periodic supply tension.
Obviously, this is a “centralized advance purchase” of raw material inventory. The increased raw material inventory, half cost, and finished product inventory of downstream display screen manufacturers need to be digested and cleared by the terminal market. If the subsequent terminal market is not as good as expected and suffers from weakness or slow growth, it will affect the subsequent raw material procurement scale and pace of display manufacturers and will have a new impact on the competitive environment and trend of subsequent packaging manufacturers. From the current equipment capacity and subsequent expansion planning of packaging manufacturers, in the long run, the overall situation of overcapacity has not changed, and the current shortage is only a periodic imbalance between supply and demand.
Drive IC, control system, PCB
The global shortage of wafers and the occupation of semiconductor packaging foundry capacity by other industries not only lead to the shortage of supply and price rise of display driver IC, but also lead to the shortage of supply and price rise of FPGA chip, memory chip, video processing chip, communication chip, power management chip, and other semiconductor chips. This will bring the pressure of a tight supply of raw materials and rising costs to drive IC and control system manufacturers. PCB raw material prices rise, and production capacity is occupied by other industries, resulting in PCB supply tension, and price rise, which will also affect the LED display industry for a relatively long time.
It is worth noting that the shortage and price increase of driver IC and PCB are different from the shortage and price increase of RGB chip and packaged lamp bead. The former is affected by the changes in the global market environment and the production capacity is occupied by other industries. The regulation and controllability of the LED display industry itself are relatively weak. However, due to the demand for LED display driver IC or PCB in the global semiconductor industry, the scale is “too small, too small”. A few drops of water is enough. As long as the relevant manufacturers do a good job in planning, dealing with the supplier relationship, dispersing the supplier risk, and controlling the preparation 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 periodic imbalance of supply and demand and panic hoarding of the LED display industry. Although it is also affected by the large market environment (such as the shortage and price rise of non-ferrous metals and other bulk commodities), the supply and demand relationship of the industry will eventually self-regulate.
The shortage and price rise of raw materials such as chips, package lamp beads, driver IC, PCB, etc. have no limited influence on the competitive pattern of display screen manufacturers. Another important factor affecting the competitive relationship is “out of sync and different ratio”. If you are out of sync, you will be out of stock first, and others will not be out of stock at the same time; if your supplier is out of stock, others will not be out of stock at the same time; if your supplier is out of stock, others will not be out of stock at the same time. In different ratios, you are increased by 20%, others may only increase by 5%; you are out of stock by 60%, and others may only lack 10%. “Time difference” and “quantity difference” enlarge the contrast of competitive power.
More importantly, for display screen manufacturers, it is not only the cost that determines the price of the display screen. Although the price increase of upstream suppliers increases the BOM cost of the display screen, the final price of the display screen in the market is determined by demand and competition. In particular, the expected increase of supply chain shortage increases the safety stock level of enterprises, which increases the pressure on market sales. If the market sales do not meet the enterprise’s expectations, a large number of inventory overstock, the result may be reduced profits (or even losses), low price impulse, digestion of inventory, and withdrawal of funds. Therefore, the lack of materials and price increases in the screen factory does not necessarily bring the inevitable result of price increases. In a period of time, the price of the display screen will fluctuate up and down according to different specifications, models, and manufacturers.
Another concern is quality. Due to the imbalance of supply and demand at different stages and panic hoarding, there is no worry about selling things, which will lead to individual enterprises relaxing the control of incoming materials and quality, leading to quality risk.
The complex and fierce competition situation puts forward higher and higher requirements for the operation and management ability of display enterprises. Rational suppliers will give priority to ensure the supply of key customers and core customers, and supply chain resources will be concentrated on the head enterprises. And between enterprises, in such an extraordinary period, the more tests the supply chain resource integration ability, marketing ability, quality control ability, and other enterprises’ comprehensive operation and management ability. Therefore, we believe that the industry reshuffle will further intensify.
Distributors, engineers, and integrators
Faced with such a complex and changeable market environment, dealers, engineers, and integrators need to be more careful in choosing partners. Manufacturers with larger scale, larger purchasing volume, and more reputation in payment for purchase will get better support from the upstream supply chain and will be more competitive in the market. At the same time, because of the tight supply of the whole industrial chain, whether the cooperative manufacturer can deliver the goods on time will also become an important index to evaluate the cooperative manufacturer’s ability.
To sum up, first, we should prevent the risk that the promised delivery date can not be fulfilled; second, we should prevent the risk that the promised price can not be fulfilled; third, we should prevent the risk of blind hoarding and market price fluctuation; fourth, we should prevent the risk of quality. Those manufacturers with perfect price systems and price management, price adjustment protection and quality control, and delivery commitment will get more support and dependence from distributors, engineers, and integrators.
Display terminal market
It is expected that the domestic display terminal market will soon enter the normal market cycle, but its growth is still uncertain. The two sessions have not yet been held, the government budget for this year has not been determined, and the impact of macro policy orientation on the industry needs to be observed.
From the perspective of display industry application and product innovation, it seems that there is no huge new incremental market. What can be determined is that small spacing will accelerate the popularization, point spacing will transform to smaller spacing, markets with spacing above p1.25 (inclusive) will turn to channel markets in an all-round way, and markets with spacing below P1.0 will not grow too fast in the short term. A price war is inevitable. The core of a price war is not necessary to reduce prices, but to “spread enough prices” and generally increase prices. If we do not increase prices, it is also a price war.
The overseas market is basically out of business in the first half of the year and will not be much better than at the end of last year. There is no need to expect that relying on vaccines can control the spread of the global epidemic in a short time. The book “the essence of poverty” has described the arduous course and difficulties in popularizing children’s varicella vaccine in the world for several years.
It is not easy to reach the vaccination rate of more than 70% of the population (at the time of publication, only 31 million doses of domestic vaccine have been inoculated). What’s more, so far, there are still many problems No authoritative information tells us how long the vaccine will be effective. If the display terminal market suffers from weakness and slow growth in the first half of the year, the shortage in the upstream will be alleviated, the price rise will be restrained, and the price war will intensify.
In addition to the basic pattern, trend, and trend of the main sectors of the industrial chain mentioned above, there are many friends who will care about more subdivided markets, such as cob, n-in-1, all-in-one conference machine, outdoor small space, etc. due to the limited space, they will not elaborate one by one. You are welcome to contact and discuss with interested friends individually.
In short, compared with previous years, the market in 2021 will face greater uncertainty and volatility. The performance list will continue to focus on the development and changes of the whole industry chain and market, and provide you with market information, industry analysis, and Trend Outlook. We are a commercial Led Display Solution Provider which focuses on the oversea market, especially Europe and America. The company was founded in 2014 and is located in Shenzhen, China. We devoted ourselves to designing and manufacturing LED displays for commercial fields such as Chain stores, shopping malls, theaters, museums, exhibition walls, immersive experience halls, hotels, transport hubs, meeting rooms, etc.
Meanwhile, we have a lot of experience to do ODM and OEM according to the requirement. 100% of iDisplay screens were exported to the oversea market while 90% were shipped to Europe. iDisplay’s products are mainly designed for the retail application, the regular product is including outdoor standee OOHposter, Outdoor front service lightweight screen OOHmedia, outdoor traffic sign VMS, indoor standee iPoster, indoor fixed screen Gshelf, conference screen iConference, soft screen iFlex, etc.
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