In the development process of LED industry for more than ten years, the market structure and competition pattern of the industry are constantly changing. Up to now, due to the dual factors of internal and external environment, the growth rate of the overall output value of the industry is gradually slowing down, the technologies in all links of the industry chain are mature, the market tends to be intensive, the competition is gradually stable, and the industry is gradually entering the mature period. Under this background, innovation will become the key to the future growth of the industry.

The growth rate of the industry‘s overall output value declined significantly.

The overall market size of China‘s LED industry reached 755.5 billion yuan (2018), of which the output values of LED upstream chips, middle-stream packaging and downstream applications were 20 billion yuan, 100 billion yuan and 635.5 billion yuan respectively, up 4.3%, 14.3% and 15.6% year on year respectively. From 2014 to 2018, the overall market size of LED industry increased from 338.5 billion yuan to 755.5 billion yuan, with an average annual compound growth rate of 22.2%. Compared with the growth rate of more than 20% in previous years, the growth rate of LED downstream applications slowed down obviously in 2018. The main reasons for the slowdown are as follows: from the domestic environment, China‘s economy is facing downward pressure, residents‘ consumption capacity is reduced, domestic demand is insufficient, and market demand in LED downstream applications such as real estate and automobiles is weak. Judging from the international environment, the uncertainty of Sino-US trade war policy continues to affect the export of industrial products. From the perspective of the industry itself, the LED industry has a production capacity of escape sequence, and the industry has entered a downward cycle, while LED lighting replacement is close to the peak value.

Chip and packaging industries tend to be intensive

In the chip sector, China‘s LED chip market has reached a high market concentration. Judging from the distribution of production capacity, the top five domestic LED chip manufacturers will account for more than 70% of the market share in 2018. It is expected that the industry concentration will further increase in the next year or two, with the top five market shares reaching 80%. In the packaging sector, the giant Jason Wood is far ahead of other manufacturers. Behind him are the big packaging factories such as Guoxingguang Electric, Dongshan Precision, HongNina Li Huihui, Jufei Optoelectronics, Zhaochi Shares, Ruifeng Optoelectronics, etc. With their competitive advantages in large-scale production, production efficiency, yield control, supply chain control, etc., large enterprises will continue to develop and grow in the future. The market space of small enterprises will be compressed, and the concentration of the industry will continue to increase.

Downstream demand is weak, and general lighting is still the largest application area.

In 2018, the largest application field of LED in China is still general lighting, accounting for 47%, followed by landscape lighting, display screen, backlight and other fields. The penetration rate of LED general lighting is close to the peak and the market growth is weak. Under the government‘s regulation of PPP mode, the popularity of landscape lighting projects has decreased, up 14.3% year on year. The LED display market is increasingly saturated and the competition is fierce. However, driven by the strong demand for small-space displays, it still achieved a year-on-year growth of 12.3%.

New Technologies and New Applications Drive Rapid Industrial Growth

The industry is gradually entering a mature period. Enterprises in the LED industry will not be able to maintain their competitive advantages solely on price and scale. Some powerful enterprises will acquire the market by introducing new applications and new products. In the future, the LED industry will accelerate the emergence of more new applications and new technologies. The scale and commercial application of new technologies will drive the LED industry to enter high-speed growth, such as Mini／Micro LED. The industry regards 2018 as the first year of Mini LED, and unanimously values the growth potential of Mini LED application. At present, major manufacturers in the industrial chain have basically completed the layout of Mini LED and formally entered the mass production stage, which is expected to greatly promote the growth of the industry.

For more detailed information on the entire LED industry chain, please consult the 2019 China LED Industry Market Analysis Report released by OFweek Industry Research Institute.