▍Manufacturer data:
The traditional LED boom is gradually recovering. Domestic LED orders have picked up in June 2023. At the same time, the overall overseas LED shipment growth rate has converged slightly in 23Q2. All links in the LED industry chain have gradually raised prices to improve profitability. Most manufacturers' performance in June has been basically stable month-on-month, and the year-on-year decline has converged. Relevant manufacturers have stated that LED business demand is picking up month by month, and they are optimistic about market development in the second half of the year; Mini LED continues to contribute growth momentum.
Specifically: In June 2023, the revenue of midstream packaging factory Everlight was -19.07% year-on-year and -7.90% month-on-month. The company expects Q3 revenue to hit a new high in a year; Taiwan Meter Technology's revenue is -28.93% year-on-year, a decrease It has narrowed, +0.99% month-on-month. The company expects full-year revenue to maintain low single-digit growth; Fucai's revenue is -13.16% year-on-year and -2.49% month-on-month. The company expects 23H2 performance to be better than 23H1; Micro LED leader Neptunium’s revenue was +161.79% year-on-year and -28.00% month-on-month, mainly due to benefiting from Micro LED downstream demand is expanding, and the future growth trend is expected to continue, and the profit target may be achieved early; Lianjia Optoelectronics, which is mainly engaged in LED car lighting, has a year-on-year revenue of -12.55%, mainly due to the reduced momentum of North American automotive customers to attract goods. Liqing, which is mainly engaged in LED car lighting modules, has a year-on-year revenue of +100.39%, mainly benefiting from the increase in the scale of Tier1 customer orders and the mass production of new model orders. The company is optimistic about the future increase in market share. At present, industry inventories have improved, domestic downstream orders are gradually picking up, and upstream raw material supply pressure has eased. At the same time, all links in the industry chain have begun to raise prices under pressure on profits. In the future, market competition is expected to gradually become benign.
The profit side of some downstream manufacturers has taken the lead in improving in 23Q1. We expect that the profitability recovery will gradually be transmitted to the middle and upstream of the industry chain starting from 23Q2; in the future, leading manufacturers are expected to benefit from the development opportunities brought by the Mini/Micro LED field in the long term. We are optimistic about the growth opportunities brought by the subsequent large-scale commercialization of Mini LED.
▍Upstream and downstream market dynamics:
Upstream, in June Huacan Optoelectronics stated that the company is currently developing 0.12-inch Micro LED micro display samples, and its Micro LED products are expected to be used in AR/VR and other fields in the future;
Downstream, the high-tech Huaye COB new display project has started a factory cleaning project in June and is expected to be completed in September. By then, the monthly production capacity will reach 10,000 square meters, and the annual output value is expected to reach 3 billion yuan.
▍Investment conclusion:
From the perspective of traditional LED, it is expected to improve year-on-year in 2023, domestic orders are picking up, and overseas growth has converged. According to Trendforce, global LED chips/packages will be -20%/-19% year-on-year respectively in 2022, and global LED display chips/packages will be -17%/-16% year-on-year respectively. Looking forward to 2023, we expect the LED industry prosperity to bottom out. Trendforce predicts that in 2023, global LED chips/packages will be +10%/+5% year-on-year, respectively, and global LED display chips/packages will be +10%/+8% year-on-year. Looking at the second half of the year, we expect domestic orders to pick up month-on-month in 23H2, and overseas growth will slow down overall. Among them, the growth rate of the European and American markets has converged, and emerging markets such as Asia, Africa and Latin America have maintained high growth.
Looking at Mini LED, we expect it to continue to penetrate in 2023 as supply chain costs are reduced and demand in the display industry bottoms out. Direct displays will meet the demand for small-pitch upgrades, and backlights will penetrate the high-end medium and large-sized markets. Direct displays will increase in volume faster than backlights. In terms of direct display, in recent years Mini The average annual cost of the LED industry chain exceeds 20% (according to Unilumin Technology’s investor relations activity record sheet). Trendforce predicts that domestic COB production capacity will reach 28,000 square meters by the end of 2023, +87% year-on-year. We predict that costs are expected to drop significantly due to high supply growth, opening up market space , Mini direct display is expected to continue to penetrate under the economic recovery in 2023. We predict that the domestic COB display corresponding market space is expected to increase to 10.4 billion yuan in 2025, with a CAGR of 81% from 2022 to 2025; in terms of backlight, Qunzhi Consulting Statistics 2021/2022 Global Mini LED TV shipments are approximately 2.1/3.2 million units, and 4 million units are expected to be shipped in 2023; DSCC predicts that Mini LED panel shipments for tablets/laptops will reach 9.7 million units/5 million units respectively in 2022, +80%/+150% year-on-year, and it is expected that notebook penetration rates will increase from 3.4% in 2023rose to 4.7%. However, 2022 is the first year of automotive Mini LED backlight. According to Trendforce forecast, shipments from 2022 to 2024 will be approximately 14/45/1 million units. In the medium to long term, Mini LED is expected to benefit from mature processes and falling costs, continue to penetrate into mid-to-high-end TVs/laptops/Pads/vehicles/e-sports displays, and usher in a period of accelerated development. We predict that the global Mini LED backlight chip/module market will reach 4.5/39.2 billion yuan in 2025, with a CAGR of 47% from 2022 to 2025; at the same time, Micro LED is also expected to emerge in the wearable field. We are optimistic about the development opportunities of manufacturers in Taiwan and Mainland China in the Mini/Micro LED field. Mini/Micro LED technology has brought revolutionary changes to the display field and the growth opportunities it has brought to the Mini LED industry chain.
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