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The LED chip and packaging industry will usher in a deterministic growth
Mar 06, 2017

This year the overall market fluctuations don't particularly large, systematic valuation of end market, advice from the segment of the industry to look for opportunities to determine. After analysis, we think it is sure to LED the industry investment opportunities. The following content mainly from the perspective of top-down analysis of the industry, overall we think that the industry will have an absolute return this year.

Climate change Angle that LED industry chain shares may have bottomed out. Industry change in recent years, the most typical example is the crystal of the Taiwan electrical and crystal electric's share price since 11 years for five consecutive years, shares all the way down, until after 16 years in the bottom of the industry chain stock bottomed slowly begin to rise. Crystal electric 15th and 16th year after two years of losses, also loss in the third quarter of this year to show, in fact, the crystal of electricity market has been largely three Ann preemption.

And three Ann's share price out 15, 16 years rise in bull market, also in the adjustment process as a whole. So at least from the point of view of market behavior, share price is already on the bottom of a region, due to the stock price to some extent represents the view of future trends, the stabilization of the opportunity, at the bottom of the industry is rising cycle. This opportunity is mainly from the following three aspects, respectively is the supply and demand, prices and the increase of concentration of industry.

First, the industry pattern of supply and demand.

First of all, for the chip area, from the Angle of supply at home and abroad and Taiwan region, the shrinkage is more noticeable in the industry.

Taiwan chip electric, for example, from 2015 to 2016, the cumulative yield decreased by 25%. Owned by MOCVD from 500 to less than 400 units, the obvious reduction. From the factory, the company announced the closure of Taiwan and the mainland each facility, capacity to contract. In addition, CREE, according to the announcement the company high power chip yield decreased by 25%.

Domestically, the enterprise's exit is more obvious. On the one hand, due to the price reduction and environmental protection storm, a large number of small and medium-sized enterprises to exit. According to LEDinside, at the end of 2016, LED a large number of enterprises in guangdong were shut down and rectification. On the other hand, the domestic leading enterprises to increase the capability of the mergers and acquisitions. Whether within or outside the industry chain, the whole of mergers and acquisitions in accelerating.

In addition, from the Angle of demand, is expected in 2017 LED chip 85 million pieces of effective capacity, and demand more than 93 million pieces, there are about 8 million pieces of supply gap, the whole chip with the demand.

Secondly, from the point of assembly field, the number on the contract. High, according to data in 2020, packaging companies will only 500 or so left. Packaging enterprise contraction will be more obvious than the chip companies, the number in these two areas contraction in the process of industry concentration in ascension.

In 10 chip chip companies, 2012 years ago the enterprise market share is about 60%, is now up to 78% of the share, the share of ascension is more noticeable, in the process, many small and medium-sized enterprises gradually withdraw from the market.

From the Angle of m&a, the industrial chain of internal mergers and acquisitions, such as three Ann, wood Tomlinson companies such as mergers and acquisitions activity, can be seen as industrial chain integration process, layout of the whole industry chain in accelerating.

From the Angle of demand, there is still room to improve permeability, from the point of niche, small spacing, automotive lighting fast. LED rose 29% last year, according to statistics, small spacing, LEDinside is expected, small spacing LED consumption quantity will with 46% compound annual growth rate. Automotive lighting field, because the high-end cars such as Benz, BMW headlights more and more use of LED lamps and lanterns, here there is still a good growth space.

In addition, much starker choices-and graver consequences-in LED industry needs to solve is the localization of equipment, materials, by 2020, basically can achieve the whole industry chain layout, LED products will enter homes, permeability can make a big range of ascension. The general lighting market scale forecast from China, the size of the market is still a certain degree of growth.

Second, the price war ended, price cycle become a driving force.

Rising prices may, on the one hand, the LED industry supply side contraction is a very important driving factor price increases. Actually the supply situation to improve the degree of impact on prices is very big, such as changes in the supply side would make the price of industrial goods last year had the very big degree of ascension.

On the other hand, the upstream materials rise in price. This year the PPI high. Because many LED needed materials belong to industrial metals, industrial metals prices rose by now, this can be concluded that the price will be rising.

In March 2016, after three companies such as Ann and wood Tomlinson dominated the four-wheel rise in price. In January, after three Ann chip prices once again. This price rise is noteworthy, may rise in prices is not over yet.

Third, the global LED industry chain pattern is changing, China is closer to the distance.

The environmental pressure is very big, prices could rise. In addition, there is another important reason is that the global industrial chain pattern is changed in a direction in China's interests, from the point of chip industry, the third echelon to the second tier rise, China is close to or has already entered into the second tier. In fact, the first tier and second-tier gap, also lies in the first echelon master patents occupy absolute advantage. From the point of packaging market, global top 2015 China has three seats. As you can see, China is gradually close the gap.

In terms of investment, the chip area, three Ann is chip market leader, absolutely HuaCan within the industrial chain and Macao ocean shun cheong also deserves attention. The head of the encapsulation field, wood Tomlinson is absolute.