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Increasing Prices and Shortages May Become the Biggest "Difficulty" in the LED Display Industry This Year

2021-06-01 www.myddisplay.com

It is reported that several major wafer foundries, such as UMC, World Advanced, Power Semiconductor Manufacturing, SMIC, and GF will plan to increase their foundry quotations again to cope with the continued tight production capacity. In 2021, the price increase of raw materials led by driver ICs has not weakened at all, so that some factories cannot even guarantee order demand, and China's led display industry may fall into a "periodical shortage of goods."


In fact, the phased shortage of domestic chips has begun to affect the market cycle and sales process of high-end new products in the led display industry, including Micro/Mini LEDs. And small and medium-sized enterprises are also facing the dilemma of "do more and lose more" and "do not dare to take orders".


Upgrade and adjustment of product structure to accelerate the imbalance between supply and demand


In recent years, the consensus of the industry is that there is little profit margin in the low-end market. Only by increasing the proportion of high-margin products and forming differentiated competition can we maintain sustained profitability. Therefore, the led display industry continues to upgrade its product structure to reduce the production capacity of low-end products, and major chip manufacturers have also adjusted their production capacity accordingly. Following this, in addition to the improvement in the gross profit margin of manufacturers, there is also the price increase of low-end LED display chips due to short supply.


At the same time, the global shortage of raw materials such as chips and copper has not changed. The led display industry has also been greatly affected. In addition, Taiwanese chip manufacturers and foreign chip manufacturers have transformed high-end products. For example, Jingdian has shifted most of its production capacity to high-end areas such as Mini LED, indicating that the reduction in production capacity of low-end products has further aggravated the shortage of these products and led to price increases.


Inside and outside the attack, the industry is deep in the quagmire of shortages


Since the beginning of this year, the internal problem (Some factories have stopped production in stages, and hot-selling products are continuously out of stock) caused by external factors (the prices of bulk raw materials continue to rise sharply, and the shortage of key components such as chips, etc.) are continuing to deteriorate. It has brought a lot of resistance to the production, operation and product promotion of leading led display manufacturers, and it has also caused many small and medium-sized manufacturers to suffer from a deep sinking in the mud.


But at the same time, industry insiders also revealed: Many raw materials are out of stock now, which is not really "out of stock" in essence. It is that a large number of raw material suppliers are facing rising raw material costs and the purchase price determined by the company as early as the end of last year. Because the "purchase price is lower than the cost price", the full supply of components cannot be guaranteed. On the one hand, in order to maintain business and contracts, we can only supply a small amount appropriately, and then strive to negotiate with the downstream terminal led display manufacturers to increase the price; on the other hand, many raw material factories have started to retreat but are in a dilemma when they are not making money. In the current situation-continuing production will definitely lose money, and stop production and fear that production will resume indefinitely in the future.


Faced with this situation, many led screen manufacturers bluntly said that external factors such as rising prices of raw materials and shortage of chips have caused the problem of unsustainable production and operation. Recently, although relevant state ministries and commissions have begun to rectify the continuous skyrocketing of bulk raw materials, the high level of raw materials and the periodic shortage of raw materials such as chips have basically not found effective solutions within this year. Moreover, this series of problems, which cannot be effectively controlled in the short term, may be deduced to become an external resistance that plagues many manufacturers' market operations in the next stage.


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