In 2017, the LED industry experienced a significant recovery, bringing renewed hope and increased activity. The year marked major transformations in the sector, with heightened competition between Chinese and international companies, as well as growing disputes among manufacturers of different sizes.
The supply chain also underwent notable changes. LED manufacturers extended their reach upstream and downstream to achieve greater self-sufficiency, while upstream and downstream enterprises formed strategic alliances. Additionally, rising raw material prices posed challenges for mid-to-lower level LED businesses, creating pressure across the industry.
At the end of 2017, Gaogong LED summarized the key developments of the year using seven keywords, highlighting various trends and events that shaped the industry.
**Price Increase**
Throughout 2017, rising costs of raw materials such as PCB sheets led to widespread price hikes across the supply chain. While upstream LED companies raised prices due to increased costs, midstream companies struggled to maintain stability, and downstream lighting and display firms faced difficulties absorbing these increases.
Sanan Optoelectronics was one of the first to announce a price increase in early 2017, raising the price of its S-30MB/S-32BB series by 8%. This move came as smaller manufacturers exited the market, consolidating power among larger players.
Mulinsen also raised the price of some of its lighting lamp beads by 15% in February to offset rising raw material costs. The company explained that the price adjustments were based on market conditions and aimed at maintaining sustainable operations.
PCB manufacturers also saw significant price hikes, with copper foil and laminates increasing by up to 2000 yuan per ton. These increases had a strong impact on downstream applications, where margins were already thin.
**Increase in Revenue and Profits**
Despite the challenges, the overall recovery of the LED industry in 2017 led to improved financial performance for many listed companies. With higher penetration rates and better market prospects, most companies reported increased revenue and profits.
Huacan Optoelectronics reported revenue of 1.87 billion yuan in the first three quarters, with a net profit of 370 million yuan. Mulinsen achieved revenue of 5.86 billion yuan, with a net profit of 440 million yuan. Hongli Zhihui recorded revenue of 2.58 billion yuan, and Guoxing Optoelectronics saw revenue of 2.582 billion yuan, reflecting strong growth across the sector.
**Expansion and Capital Increases**
With a more stable market, many large LED companies invested heavily in expansion, aiming to capture more market share through scale advantages.
Ganzhao Optoelectronics invested 736.59 million yuan to expand its red and yellow LED chip production. Huacan Optoelectronics allocated 1 billion yuan to expand its LED substrate project, while Zhaochi invested over 1.5 billion yuan in an LED epitaxial wafer project in Nanchang.
Mulinsen also established a joint venture in North America to strengthen its presence in the international market, further expanding its global reach.
**Listing**
The IPO review process accelerated in 2017, offering new opportunities for LED companies. Several companies, including Sanxiong Aurora, Debang Lighting, Jucan Optoelectronics, and Igor Electric, successfully listed on various exchanges, marking a milestone for the industry.
**Vertical Integration**
The trend of vertical integration became more prominent in 2017. Companies like Zhaochi and Guoxing Optoelectronics expanded their operations to control more parts of the supply chain, improving efficiency and reducing dependency on external suppliers.
**Chinese Characteristics**
As Chinese companies expanded globally, international players returned to China, leading to a more competitive and dynamic market. Mulinsen acquired LEDVANCE, enhancing its overseas presence, while Feile Audio gained full control of Xi Wannian, strengthening its position in the global lighting market.
**Shuffle**
Not all companies thrived in 2017. Some faced challenges, including shutdowns and financial difficulties. Qinshang Shares divested its semiconductor lighting business, while Qihao Optoelectronics and Kaisheng Shares faced operational issues. Guangdong Ganhua also decided to sell Deli Photoelectric, signaling a shift away from the LED sector.
Overall, 2017 was a transformative year for the LED industry, marked by both growth and challenges. As the sector continues to evolve, the focus on innovation, integration, and global expansion will remain critical for long-term success.
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