Six factors that cause cyclical fluctuations in the LED lighting industry

Supply factors: Inventories, new production capacity, and industry reshuffle The first quarter inventory pressure continues. At present, the inventory levels of Taiwanese and mainland companies are at historically high levels. From the third quarter of last year, the inventory of LED companies on both banks exceeds or approaches single-quarter revenue. We therefore believe that the inventory process will continue for at least one quarter, that is, 2012. The supply of the industry in the first quarter will face greater pressure.

A new round of corporate financing will start, or a new round of production capacity will be stimulated. In order to meet the low point of the industry, domestic companies are seeking listing or refinancing. The first round of intensive listing period is from the third quarter of 2010 to the middle of 2011. More than 10 LED industry chain companies have IPOs or additional issuances; the current industry will usher in the first In the second round of intensive listing, as of now there are 6 companies that have met and several listed companies are ready to refinance. The new round of financing will lead to increased production capacity and supply. In the short term, it will worsen the supply and demand situation in the industry. In the long term, it may accelerate the industry reshuffle and small capacity withdrawal.

Since the 4th quarter of the 11th, LED industry financing has exemplified the reshuffle of the industry and the withdrawal of small factories will ease supply pressure. Since 2011, the financial conditions of mainland and Taiwanese companies have been severely deteriorating, and the steady increase in lighting demand rather than the explosion has determined that the industry will continue to overcapacity in the longer term. The domestic LED industry concentration is relatively low, and the overall market share of first-tier companies is relatively small. If the industry enters the consolidation phase, it will significantly reduce supply and ease production pressure.

Demand factors: Expectations of terminal manufacturers, input from channel manufacturers, and high uncertainty in short-term expectations of terminal manufacturers in European markets. At present, the downstream manufacturers of LED lighting are highly dispersed. A large number of terminal lighting manufacturers' expectations for the LED lighting market and its inventory adjustment directly affect the short-term demand of the industry. Since the end of 2011, it is the expectations of downstream manufacturers that have turned to optimism and have supported the prices of devices. Due to the decentralization of downstream terminal manufacturers and the rapid adjustment of their expectations, the 2012 industry's short-term fluctuations caused great uncertainty.

Traditional lighting first-tier manufacturers invested. Compared with highly dispersed terminal small plants, traditional lighting first-line manufacturers have a stronger role in driving demand, and the implementation of the strategy has strong consistency. At present, most of the first-tier manufacturers have entered the LED field. The input and time of these manufacturers in 2012 are still difficult to predict and have certain uncertainties.

European market conditions and export channels. The acceptance of LEDs in the European lighting market is already high. In 2012, the complete ban of incandescent lamps became the main catalyst for the full start of LED lighting. However, the negative impact of the European debt crisis on the economy has brought uncertainty to the market growth, and domestic companies have also had a relatively large number of export channels to Europe.

In the short-to-medium term: The major trend is clear and the six factors affect the short-term fluctuations. We have summarized the above factors that affect the supply and demand in the short-term and middle-term industries as the above six, in which we believe that the release of inventories will appear first with the highest certainty. Under the general trend of stable production capacity and steady improvement in demand in the medium term, the strength and duration of the six factors will affect the fluctuation of the profits in the short and medium-term industries.