LED upstream profit accounted for 70% misleading domestically less than 10%

[Text / Gaogong LED Industry Research Institute (GLII) ]

LED upstream sector accounts for 70% of the entire industry chain of profits? Not also! This data and opinions have become unfounded in the face of theoretical and factual data. When the output value of domestic LED chips accounts for less than 10% of the industry's output value, how to make a 70% profit in the LED industry chain? How does the upstream and downstream enterprises survive when the upstream accounts for 70% of the profits? How is it able to support several times the upstream package and dozens of upstream applications? Only in the case of LED chips in dozens of upstream companies with 70% profit in the whole industry, why is it not good in 2011, and the corresponding mid-stream and downstream companies still maintain a gross margin of nearly 20%?

Source of opinion on LED upstream occupying 70% of the industry's profits
Since the first half of 2009, some well-known authoritative research institutions at home and abroad have released “the core technologies and manufacturing companies that master epitaxial wafers and chips, which account for 70% of the entire chain. Even in the remaining 30% of profits, there are 20 % was taken by the chip packaging company, leaving only the remaining 10% for the terminal application.

Subsequently, relevant personnel of some famous research institutions, government agencies, enterprises, securities companies and other related institutions in China also cited and published in the public places on the profit distribution of LED industry chain, upstream epitaxial chips accounted for 70%, and midstream packaging accounted for 20%. %, downstream applications accounted for 10% of the point of view, while the industry media also reported on this. This view once became the industry consensus on the distribution of profit structure in the LED industry.

As a result of this view, domestic reports on "LED upstream profits", "domestic enterprises lack core technology", "foreign capital misappropriation of 70% profit" and other related topics have made the domestic LED enterprises face a technical embarrassing situation, while the company's profitability And ability has become a topic of concern in the industry.

Undoubtedly, from a theoretical point of view, the gross profit margin of the LED upstream field is indeed much higher than that of the middle and lower reaches, which is also a key area of ​​corporate investment. However, the view that “upstream accounts for 70% of profits” has led many local governments to attract investment and large-scale enterprises to focus on the upstream when they enter the LED field, which has greatly affected the direction of enterprises' investment in LED funds. Regarding the logical error of profit, the Gaogong LED Industry Research Institute has pointed out in the December 2010 magazine that it is a pity that many people still have such a wrong view.

Analysis of the actual profit distribution of the domestic LED industry chain
So, what is the actual situation of the profit distribution of the domestic LED industry chain? Below, we will analyze the relevant data through the establishment of the model, the actual situation and so on.

1. Model analysis
First, let's take a look at the ratio of upstream chip, midstream package, and downstream applications to the output value of the entire industry chain. In this regard, we are building a reasonable model under ideal conditions.

Firstly, according to the cost ratio of the LED chip in the LED lamp bead and the lamp bead in the application product, the output value of each link of the LED industry chain is evaluated. Assuming that the output value of the LED chip is 1, the output value of the packaged chip will be about 3, and the cost ratio of the LED lamp bead in the fields of illumination, display and the like is only about 30%, thereby obtaining the scale of application value. At around 9.

As can be seen from Table 1, the upstream chip industry accounts for only 7.69% of the total industrial chain output value, even if the upstream substrate (mainly sapphire) is counted as upstream, because the substrate only accounts for about 10% of the chip cost. We can conclude that the upstream sector accounts for 10% of the output value of the entire industrial chain. The downstream applications account for nearly 70% of the output value, and in some applications the proportion is even higher.

Note: This model is self-sufficient in the domestic upper and middle reaches, and the product demand in the downstream application field is also provided by domestic upstream and midstream enterprises.

Below we give an example of the distribution of profit in the LED industry chain:

It can be seen from Table 2 that with the changes in the development of the LED industry, the gross profit margin of all links in the industry chain also fluctuates. However, the final profit distribution did not show large fluctuations, but it was still relatively stable.

Note: The above assumptions are based on the reasonable average gross profit margin of the industry performance in the middle and lower reaches of domestic LEDs in recent years.

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