Although it has become a consensus in the LED industry that the Mini LED market is promising, there are still uncertainties. Mini LED has a high barrier to entry due to technical barriers and customer demand differences, and market dividends will be further concentrated to leading companies.
After experiencing the downturn of the previous year and the impact of the epidemic last year, the LED industry has crossed the low point. With the stimulation of emerging businesses such as Mini LED, third-generation semiconductors, and plant lighting, it has ushered in a new round of business cycle. The domestic LED industry chain from upstream chips, midstream packaging, downstream lighting and semi-annual reports of listed companies shows that most of the performance in the first half of 2021 has increased significantly.
Upstream expansion of Mini LED and compound semiconductor production
HC Semi-Annual Report released on the evening of August 29 revealed that in the first half of this year, revenue was 1.594 billion yuan, a year-on-year increase of 49.2%; net profit loss attributable to the parent was 25.43 million yuan, a year-on-year increase of 77.13%. Another LED chip leader, Sanan Optoelectronics (600703.SH), had revenue of 6.114 billion yuan in the first half of the year, an increase of 71.38%; net profit was 884 million yuan, an increase of 39.18%.
Entering 2021, the LED industry has gradually crossed the low point and ushered in a new round of boom. According to statistics from the China Lighting Association, in the first quarter of 2021, the export value of LED lighting products was 9.825 billion US dollars, an increase of 102.66% over the same period last year.
From the perspective of demand, on the one hand, the prospects of high-end lighting such as plant lighting are optimistic; on the other hand, Mini LED brings new subdivision gold track. According to Arizton’s forecast, the global Mini LED market is expected to increase from US$150 million to US$150 million from 2021 to 2024. 2.32 billion US dollars, during which the year-on-year growth rate has reached more than 140%. In addition, the third-generation semiconductor industry has also become a new growth point for LED chip companies. It is estimated that the global gallium nitride power semiconductor market will exceed 750 million U.S. dollars in 2024.
Due to the substantial increase in LED chip sales revenue, HC Semitek has seen rapid growth in subdivided businesses such as high-efficiency lighting, plant lighting, automotive lighting, and Mini LED. In the first half of the year, its comprehensive gross profit margin increased by 6.99 percentage points to 8.64%, of which LED chip gross profit margin An increase of 9.12 percentage points to 13.47%. New consumer electronics products equipped with its Mini LED backlight products have been introduced to the market. In addition, HC Semitek has set foot in the gallium nitride power electronic device business and is optimistic about the entry opportunities in the consumer market such as mobile phone fast charging.
Sanan Optoelectronics said that due to strong demand in the first half of the year, the prices of some low-end LED chip products continued to rise. It is expected that the prices of some products will continue to rise in the future, and the inventory will effectively decline. In addition to the TV market, Mini/Micro LED chips are also widely used in display fields such as tablet computers, notebook computers and car screens. The shipment volume is increasing month by month. Part of the production capacity of the Mini/Micro LED display chip industrialization project in Hubei San’an has been Put into production and operation.
The third-generation semiconductor business is one of the highlights of Sanan Optoelectronics' semi-annual report. Sanan Integration mainly provides R&D and manufacturing services for radio frequency, optical technology, and power electronic compound semiconductors. In the first half of the year, it achieved sales revenue of 1.016 billion yuan (excluding Quanzhou San’an filter sales revenue of 12.426 million yuan), a year-on-year increase of 170.57%. With customer orders accumulated to next year, production capacity will be gradually released in the third quarter. Among them, the Hunan San'an Changsha project, which is mainly engaged in the silicon carbide industrial chain, was ignited in June this year.
Midstream and downstream benefit from new displays and smart lighting
In addition to upstream LED chip manufacturers, the performance of mid- and downstream LED packaging, LED lighting and LED display companies in the first half of the year also benefited from the recovery of the LED lighting market, the increase in the proportion of mid-to-high-end lighting products, and the opportunities for new Mini/Micro LED displays.
Mu Linsen (002745.SZ) had a revenue of 9.127 billion yuan in the first half of the year, a year-on-year increase of 28%; net profit attributable to the parent company was 646 million yuan, a year-on-year increase of 180.79%. Among them, Landvance brand lighting product revenue was 4.817 billion yuan, with a gross profit margin of 41.21%; Mulinsen brand lighting product revenue was 581 million yuan, with a gross profit margin of 23.82%; it also participated in an upstream LED chip company, focusing on the layout of Mini LED backlight and direct display, Plant lighting, deep ultraviolet LEDs, silicon-based yellow LEDs and other high value-added new application products.
TrendForce predicts that the global LED lighting market will be worth 38.199 billion U.S. dollars in 2021, with an annual growth rate of 9.5%. Mulinsen believes that in the next five years, the main growth momentum of the LED application market is estimated to come from the application of Mini/Micro LED, which is expected to become the second largest application market after general lighting. Gaogong Industrial Research predicts that the Mini LED backlight packaging market will reach 2.4 billion yuan by 2025, with a compound annual growth rate of 50.58%. Mulinsen's research and development direction is in the field of Mini LED flip chip packaging.
Another major packaging company Zhaochi Co., Ltd. (002429.SZ) is also opening up the LED upstream, midstream and downstream industry chain to expand the Mini LED business. In the first half of the year, Zhaochi’s LED business revenue was 2.589 billion yuan, a year-on-year increase of 89.51%, of which chip revenue was 934 million yuan and net profit was 170 million yuan; packaging revenue was 1.482 billion yuan and net profit was 123 million yuan. Mini LED backlight products have been mass-produced.
On the downstream side, Leyard (300296.SZ) and Unilumin Technology (300232.SZ), which are engaged in LED display, achieved good results in the first half of the year, which also benefited from the breakthrough of new Mini/Micro LED technology. Leyard's revenue in the first half of the year was 3.6 billion yuan, an increase of 24%, and its net profit attributable to its mother was 285 million yuan, an increase of 26.7%. It is building a Mini LED backlight mass production line, and Micro LED TV mass production orders have been launched in domestic and overseas markets at the same time. Unilumin's revenue in the first half of the year was 2.93 billion yuan, an increase of 57.57%; the net profit attributable to the parent was 90.9 million yuan, an increase of 14.38%. The expansion of 5 Mini LED production lines has begun production, and the Mini LED display industry base will be gradually put into production in the second half of the year.
Op Lighting (603515.SH), a lighting company, had a revenue of 3.96 billion yuan in the first half of the year, an increase of 31.68%; a net profit of 440 million yuan, an increase of 76.95%. The growth benefited from the sinking market and cooperation with package companies to provide smart lighting It also uses gallium nitride technology to launch small lamps. Foshan Lighting (000541.SZ) had revenue of 1.955 billion yuan in the first half of the year, an increase of 28.4%; net profit of 111 million yuan, a decrease of 25.75%, was mainly due to increased competition and rising raw material costs.
Although it has become a consensus in the LED industry that the Mini LED market is promising, there are still uncertainties. When talking about business risks, HC Semitek said that Mini LED has a high barrier to entry due to technical barriers and customer demand differences, and market dividends will be further concentrated to leading companies.
