In an environment of intense price wars, nothing can grab LED manufacturers attention more than “price hikes.”
Chinese LED manufacturers MLS, Kinglight and other manufacturers all raised their product prices in March 2016. Another wave of price hikes occurred in May, when San’an Opto and Taiwanese LED manufacturer Epistar increased prices. Recent market rumors point towards another round of price upticks.
Many manufacturers raise LED chip prices
Some manufacturers released a signed letter from San’an Opto on China’s social media platform Weixin, stating it will be raising product prices by 10%, due to price hikes in raw materials, and increased employee costs.
According to the San’an Opto statement, gold prices soared more than 27% to US $1,316.80 at the start of the year, and sapphire substrate prices were also up 30% compared to June. Miniaturization of small to mid-sized LED chip sizes, also increased the number of employed workers to sort and test products in later stages of the manufacturing process. These combined with other factors were the driving decision behind the company’s increased chip retail prices.
HC Semitek also adjusted prices of products with low gross margin, said the company’s marketing director Songgang Si.
A top tier LED chip manufacturer also noted the company raised chip prices by 5% to 10%.
Another secondary LED chip manufacturers also claimed some LED chip manufacturers have raised prices several times in 2016.
Worth noting, several LED chip manufacturers raised small to mid-sized LED chip prices. “Small to mid-sized LED chips have very high manufacturing costs, and intensifying competition among LED chip manufacturers since 2015 resulted in low base costs,” said Si. “Recent, LED price upticks also led to reasonable rebounds.”
The same source from the secondary LED chip manufacturer analyzed price raises in small to mid-sized LED chips was mainly caused by LED package manufacturers’ procurement of LED chips in August that led to tightening supplies, moreover MLS’s expanded production capacity tightened LED chip manufacturers production capacity. Chip manufacturers usually will prioritize allocating production capacity to more profitable mid to large-sized LED chips, while small sized chips are usually customized manufacturing, and offered in limited supply.
“Under this situation, small to mid-sized LED package manufacturing will become increasingly difficult,” said a source from a top chip manufacturer. “However, chip manufactures expanding production capacity had not installed the new equipment yet, nor started production, but once these machines entered production there might be a new oversupply situation. Hence, the current supply shortage of small to mid-sized LED chips is just temporary.”
The same source from the first-tier LED manufacturer noted, rising LED chip prices is partially caused by rising raw material costs, while there has been a shortage in the LED package market, due to insufficient chip supply. LED chip production has lagged behind packaging capacity and expansion rate, and the extent of the impact covers all LED chip sizes from small to mid-sized LEDs to other chip products.
Certain LED package manufacturers raise prices
Even LED package manufacturers, such as leading Chinese LED packager MLS raised prices. Another MLS statement circulating in LEDinside’s network, stated RGB LED prices will be raised by 5% as of Sept. 1, 2016, due to changes in rising raw material costs.
MLS General Manager Lawrence Lin confirmed the price uptick, during a telephone interview with LEDinside. The company raised product prices for LEDs used in display backlight, mainly due to soaring raw material costs, he added.
Other Chinese manufacturers specializing in LED package for displays, also reflected certain product prices were adjusted. However, package manufacturers specializing in lighting applications did not announce price hikes yet.
Responding to whether there will be any hikes in company product prices, Gaoyang Wang, vice president of Honglizhihui said: “The company’s LED chip supply are from past orders, and there haven’t been any price raise notifications.”
Despite incremental price increases in LED chip prices, it has been difficult for package manufacturers to raise prices. “Overall, LED package prices are more stable,” said Gaoyang Wang, vice president of Honglizhihui.
TongYiFang Optoelectronic Vice President Wen Liu is mainly focused on high power light sources and CoB LEDs, but they were not notified about raised prices. “Overall, LED package prices are stabilizing.”
Fine pitch LED displays are entering the market growth phase, and quickly expanding, said LEDinside Senior Analyst Figo Wang. High market demands in the downstream sector, and technology advancements have spurred fine pitch LED package and LED chip display demands, resulting in certain price adjustments.
“Lighting package manufacturers (product prices) are being compressed by upstream and downstream manufacturers,” said Wang. The package industry is classified as part of the midstream sector of the LED supply chain.
LED chip and package prices were raised in 2016, and mostly has to do with the trending display market, he added. The display market’s soaring demands impacted the LED chip and package sectors of the display industry, and tightening supplies impacted products for lighting and displays. The difference in LED display chips and lighting chips is the EPI-wafer technology, where the EPI-wafer equipment and chip manufacturer are direct competitors. As display market conditions improve, chip manufacturers will transfer some if its production capacity to chips for display manufacturing, causing supply shortages in LED chips for lighting applications.
“Overall, without notable improvements in lighting demands, cost adjustments were the primary cause behind LED price hikes in lighting applications, but the price uptick will be limited,” said Wang. “LED packages for lighting are now facing increased material costs in the upstream sector, the higher costs has been difficult to transfer to downstream clients.”
Escalating LED display demands are reflected in LED display manufacturers revenues for first half of 2016, where Absen Opto’s revenue was up 11.69% YoY to RMB 509 million (US $76.21 million) .
During first half of 2016, Unilumin revenue increased 7.6% to RMB 672 million, while its net profits climbed up 14.82% to RMB 65.52 million. The company’s fine pitch LED display revenue rose 63.98% YoY to RMB 275 million, and contributed to about 40.97% of revenue shares.The value of orders also soared 76.78% to RMB 426 million.
Leyard’s revenue for first half of 2016 soared 188.44% to RMB 1.73 billion, while net profits soared 125.67% to reach RMB 184 million.The company’s fine pitch LED display orders also grew exponentially by more than 100% to RMB 1.1 billion.