News Article

Suppliers’ Profits Cut, With Lighting LED Package Prices Slowing In Decline

According to the latest 2019 Chinese LED Chip and Package Industry Market by LEDinside, a division of TrendForce, growth in the global LED lighting market has slowed down noticeably due to the global economic recession and the US-China trade dispute. Revenues for lighting LED packages were affected as a result.

In 2018, China's LED packaging market scale for general lighting
applications stood at US$5.2 billion, with a visible slowdown glanced
from a CAGR of only 3% throughout the forecast period, 2018-2023.

Due to the limited decline experienced by LED chip prices of top-tier
brands, as well as the already-narrow profit potential in LED packaging,
we see many packaging suppliers unable to shrink costs, unwilling to
gain market share by pricing below the competition , and simultaneously
reducing operation ratio to ease inventory pressure. Thus price
fluctuations in China's packaging market overall were small in June, but
prices for some high- and mid-power LED package products dropped
slightly. The average price decline for high-power products in June was
1%. As for mid-power products, price changes were mainly seen in 5630
LEDs, with the 0.5W and 0.2W models dropping by 0.5% and 2.4%,
respectively,” says TrendForce Analyst Terri Wang.

Lighting LED Packaging Hardly Profitable; Suppliers Actively Turning to the Mini LED Display Market
Looking at profitability, we see suppliers' profit margins dropping noticeably
in the LED chip industry since 3Q18 until now. If subsidies from the
Chinese government are deducted, most LED chip companies are already in
the red and hence unwilling to lower prices any further. Profitability of global LED packaging suppliers are on the decline, although the extent of that decline isn't as disastrous as that of chip suppliers,
yet profit potential is narrowing all the same. From the latest
financial data revealed by China's packaging companies, the average
profit margin lies between 20% and 25%, with profit margins in lighting
LED packaging long being stuck at a lower 10-15% range, which shows that
profit potential of lighting LED market is lower than that of the industry's average.

Therefore for most packaging suppliers, lighting LED is no longer a main contributor to profits, and since the
market scale isn't growing as fast as it used to, low pricing strategies
aren't that effective at bringing in orders anymore, as competitors
will also follow suit to keep their share of the market. Most suppliers
are instead more willing to start new areas of business. The mini LED
display market, for example, is already seeing opportunistic entrants
such as Hongli Zhihui and Shenzhen MTC.





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