In 2021, China's LED industry has rebounded under the influence of the replacement transfer effect of the COVID, and the export of LED products hit a record high. From the perspective of industry links, the revenue of LED equipment and materials has increased greatly, but the profit of LED chip substrate, packaging, and application has been thinning, and it is still facing greater competitive pressure.

Looking forward to 2022, it is expected that China's LED industry will continue to maintain high-speed double-digit growth under the influence of the substitution shift effect, and hot application areas will gradually shift to emerging applications such as smart lighting, small-pitch displays, and deep ultraviolet disinfection.

Basic Judgment of the Situation in 2022

01 The substitution shift effect continues, and the demand for manufacturing in China is strong.

Affected by the new round of the COVID, the global LED industry demand recovery in 2021 will bring rebound growth. The effect of substitution and transfer of my country's LED industry continues, and exports in the first half of the year hit a record high.

On the one hand, countries such as Europe and the United States restarted their economies under easing monetary policies, and the import demand for LED products rebounded strongly. According to data from the China Lighting Association, in the first half of 2021, China's LED lighting product exports reached 20.988 billion U.S. dollars, an increase of 50.83% year-on-year, setting a new historical export record for the same period. Among them, exports to Europe and the United States accounted for 61.2%, an increase of 11.9% year-on-year.

On the other hand, large-scale infections have occurred in many Asian countries except China, and market demand has reversed from the strong growth in 2020 to a slight contraction. From the perspective of the global market share, Southeast Asia decreased from 11.7% in the first half of 2020 to 9.7% in the first half of 2021, West Asia decreased from 9.1% to 7.7%, and East Asia decreased from 8.9% to 6.0%. As the epidemic has further hit the LED manufacturing industry in Southeast Asia, countries have been forced to close multiple industrial parks, which has severely hampered the supply chain, and the effect of substitution and transfer of my country's LED industry has continued.

In the first half of 2021, China's LED industry effectively made up for the supply gap caused by the global epidemic, further highlighting the advantages of manufacturing centers and supply chain hubs.

Looking forward to 2022, the global LED industry is expected to further increase market demand under the influence of the "home economy", and China's LED industry is optimistic about the development of benefiting from the effect of substitution transfer.

On the one hand, under the influence of the global epidemic, the number of residents going out is decreasing, and the market demand for indoor lighting, LED display, etc. continues to increase, injecting new vitality into the LED industry.

On the other hand, Asian regions other than China are forced to abandon virus zeroing and adopt a virus coexistence policy due to large-scale infections, which may lead to repeated and worsening of the epidemic, and greater uncertainty about the resumption of work and production.

CCID think tank predicts that China's LED industry substitution transfer effect will continue in 2022, and LED manufacturing and export demand will remain strong.

02 Manufacturing profits continue to decline, and industry competition has become more intense.

In 2021, the profit margin of China's LED packaging and applications will shrink, and industry competition will become more intense; the production capacity of chip substrate manufacturing, equipment, and materials will increase significantly, and profitability is expected to improve.

In the LED chip and substrate link, the revenue of eight domestic listed companies is expected to reach 16.84 billion yuan in 2021, a year-on-year increase of 43.2%. Although the average net profit of some leading companies has dropped to 0.96% in 2020, thanks to the improved efficiency of large-scale production, it is expected that the net profit of LED chip and substrate companies will increase to a certain extent in 2021. Sanan Optoelectronics LED business gross profit margin is expected Turn positive.

In the LED packaging process, the revenue of 10 domestic listed companies is expected to reach 38.64 billion yuan in 2021, an increase of 11.0% year-on-year. The gross profit margin of LED packaging in 2021 is expected to continue the overall downward trend in 2020. However, thanks to the faster growth in output, it is expected that the net profit of domestic LED packaging companies in 2021 will show a slight increase of about 5%.

In the LED application segment, the revenue of 43 domestic listed companies (mainly LED lighting) is expected to reach 97.12 billion yuan in 2021, an increase of 18.5% year-on-year; 10 of them have negative net profits in 2020. As the growth of the LED lighting business cannot offset the cost increase, LED applications (especially lighting applications) will shrink significantly in 2021, and a greater number of companies will be forced to reduce or transform traditional businesses.

In the LED materials sector, the revenue of five domestic listed companies is expected to reach 4.91 billion yuan in 2021, a year-on-year increase of 46.7%. In the LED equipment segment, the revenue of six domestic listed companies is expected to reach 19.63 billion yuan in 2021, a year-on-year increase of 38.7%.

Looking forward to 2022, the rigid increase in manufacturing costs will squeeze the living space of most LED packaging and application companies in China, and there is a clear trend for some leading companies to shut down and revert. However, thanks to the increase in market demand, LED equipment and material companies have benefited significantly, and the status quo of LED chip substrate companies has remained basically unchanged.

According to CCID think tank statistics, in 2021, the revenue of listed LED companies in China will reach 177.132 billion yuan, an increase of 21.3% year-on-year; it is expected to maintain a double-digit high-speed growth in 2022, with a total output value of 214.84 billion yuan.

03 Investment in emerging applications has grown, and industrial investment enthusiasm is rising.

In 2021, many emerging areas of the LED industry will enter a stage of rapid industrialization, and product performance will continue to be optimized.

Among them, the photoelectric conversion efficiency of UVC LED has exceeded 5.6%, and it has entered the large-space air sterilization, dynamic water sterilization, and complex surface sterilization markets;

With the development of advanced technologies such as smart headlights, through-type taillights, HDR car displays, and ambient lights, the penetration rate of automotive LEDs continues to rise, and the automotive LED market growth is expected to exceed 10% in 2021;

The legalization of the cultivation of special economic crops in North America stimulates the popularization of LED plant lighting. The market expects that the annual growth rate of the LED plant lighting market will reach 30% in 2021.

At present, the small-pitch LED display technology has been recognized by mainstream complete machine manufacturers and has entered the rapid mass production development channel. On the one hand, Apple, Samsung, Huawei and other complete machine manufacturers have expanded their Mini LED backlight product lines, and TV manufacturers such as TCL, LG, Konka and others have intensively released high-end Mini LED backlight TVs.

On the other hand, active light-emitting Mini LED panels have also entered the mass production stage. In May 2021, BOE announced the mass production of a new generation of glass-based active Mini LED panels with ultra-high brightness, contrast, color gamut, and seamless splicing.

Looking forward to 2022, due to the decline in the profits of LED traditional lighting applications, it is expected that more companies will turn to LED displays, automotive LEDs, ultraviolet LEDs and other applications.

In 2022, the new investment in the LED industry is expected to maintain the current scale, but due to the initial formation of the competition pattern in the LED display field, it is expected that the new investment will decline to a certain extent.