In the short term, due to the impact of the new crown epidemic in 2022, the scale of the domestic LED market will decline. It is expected that with the recovery of economic activities, the LED market will also usher in recovery. In the mid-to-long term, new demands for XR virtual shooting and all-in-one conference machines are strong. Mini/Micro LED technology advances, coupled with the warm wind of the digital China construction environment, the LED market is expected to achieve continued growth.
1.1 LED industry chain introduction
LE D (Light Emitting Diode) is a device that uses the electroluminescence effect of semiconductor diodes to convert electrical energy into light energy, allowing the pixel unit to actively emit light. The electrons and holes of LED are combined into excitons through electrode injection and phase transfer, and the decay of excitons in specific materials can produce RGB three primary colors. Under the control of the drive circuit, the LED pixel matrix can realize color image display. LED industry chain: the upstream is LED chips (the substrate is mainly sapphire, and MOCVD is crystal growth equipment), the midstream is LED packaging (backlight packaging forms mainly include COB, POB, etc., and display packaging technologies mainly include SMD, COB, etc.), and the downstream is LED applications (according to different functions, LED applications can be divided into LED lighting, LED display, LED backlight, and other applications).
According to the CSA Research report, the total output value of China's LED industry in 2021 will be approximately 777.3 billion yuan, with a growth rate of approximately 10.8%. Among them, the upstream epitaxial wafer and chip scale is 30.5 billion yuan, the midstream packaging scale is 91.6 billion yuan, and the downstream application scale is 655.2 billion yuan. Therefore, the proportions of upstream, midstream and downstream are 4%, 12% and 84% respectively. Downstream application structure: General lighting is the largest application market, accounting for about 46%; display screens are the second largest application market, accounting for about 15%; backlight market accounts for about 8%; automotive lighting accounts for 2%, showing an upward trend.
1.2 Recovery is imminent in 2023
In 2022, domestic epidemics will occur frequently, economic activities will be hindered, and market demand for real estate and consumer electronics will be sluggish. The application market has had varying degrees of impact. We have collected statistics on the revenue and gross profit margin data of 18 representative A-share LED application product companies (7 lighting companies, 6 small-pitch companies, and 5 backlight companies) in the past few years. The analysis is as follows:
1) The growth rate is getting worse quarter by quarter. Affected by the epidemic in China in 2022, the revenue growth rate of LED companies will decline quarter by quarter, and the decline in the lighting market will be particularly obvious. Looking back at the early stages of the epidemic, domestic LED demand suffered a major impact in 2020, and the LED market recovered rapidly in 2021. We believe that in 2023, after the domestic policy focus returns to economic growth, the LED application market will also usher in recovery. 2) Gross profit margin stabilized and rebounded. Affected by the epidemic in 2021, the global supply chain has been frequently disrupted. For example, LED display driver ICs have been out of stock and prices have increased several times. At the same time, sea freight rates have risen sharply. These have adversely affected downstream gross profit margins. In 2022, the supply chain will gradually recover, sea freight will drop significantly, and gross profit margin will basically stabilize. It is expected that gross profit margin will stabilize and rebound in 2023 as demand recovers. 3) The small-pitch sector performed well. In contrast, small spacing is the fastest growing segment in LED applications. And the gross profit margin is higher. According to the prediction of Expert Research's "2022 Small Pitch and Micro Pitch Realistic Research White Paper", the LED display market will usher in a recovery starting in 2023. This is also one of our most promising LED application markets.
1.3 LED is expected to enter the starting point of mid- to long-term prosperity
The LED industry is accumulating innovation in different aspects, and quantitative changes lead to qualitative changes. We predict that the following links are undergoing or are about to undergo major changes, which also breed investment opportunities.
1) LED display: The XR virtual shooting market is growing rapidly, and the digital economy is expanding its mid- to long-term needs. According to TrendForce statistics, the global LED virtual shooting display market in 2022 Size is approximately $430 million, up approximately 52% from 2021. We estimate that the market is still expected to achieve 40% growth in the next two years. The government is vigorously promoting the development of the digital economy, and LED displays as a data display medium will eventually benefit.
2) Mini backlight: Whether it is TV, car display, etc., MiniLED backlight will significantly improve product performance, and the penetration rate of MiniLED backlight is increasing rapidly. According to forecasts from Yidu Data, the Mini LED backlight module market is expected to reach 125 billion yuan in 2026.
3) LED packaging: COB has many advantages over SMD. Manufacturers’ COB pass-through yield continues to improve, which promotes rapid cost reduction for displays below P1.0 and further expands the application scenarios of small-pitch LEDs.
4) Mini/Micro LED: Mini/Micro LED will drive LED displays into the consumer market. According to IHS data, the global display panel market size will be US$139.2 billion in 2021, of which LCD will be US$97.3 billion and OLED will be nearly US$40 billion. In the future, if the penetration rate of Mini/Micro LED in the display market increases by 10%, it will correspond to an additional market of approximately US$14 billion. By then there will be a real boom for the LED industry.
5) LED chip: As an upstream core device, LED chips will be the core beneficiary link when the Mini&mircoLED market is released in the future. In the past two years, the LED chip industry has undergone major changes, and TV manufacturers/panel manufacturers have made arrangements LED chips reflect the importance of the LED chip link in the future display field.
2.1 Small spacing LED: The application boundaries continue to expand, driving continued high growth
Fine spacing LEDs continue to expand the application boundaries. Generally speaking, a display screen with a pixel pitch less than 2.5mm is called a small-pitch LED. It has the advantages of seamless splicing, high display brightness, and high color saturation. The display effect is better than other display products. As the dot pitch continues to shrink and costs drop, the application scenarios of small-pitch LEDs continue to expand, gradually replacing products such as LCD splicing, DLP splicing, conference projection, and even large-size TVs. < div class="_213jB lg-fl ">
In the early stage, although small-pitch LEDs have good display effects, their costs are relatively high. They were first used in fields such as the military and security, where the effects of use are given priority over price. As costs drop, small-pitch LEDs gradually enter the commercial application market, with sports, stage rentals, studios, etc. becoming the first to be used. In the past two years, the penetration rate of small-pitch LEDs in conference halls, education and other scenes has increased rapidly, and new scenes such as XR virtual shooting have been derived. In the future, they are expected to enter movie theaters and even the home market. Small-pitch LED products below P1.0 have gradually made up for the shortcomings of their large pixel pitch. In government applications, command and dispatch centers, smart city information centers and other scenarios that pursue high performance rather than cost advantages, P1.0-pitch LED screens have achieved experience advantages by virtue of their seamless splicing and high brightness. In the application of large conference screens of 150-250 inches, small pitches below P1.0 have also become the first choice for "high-end customers" and have gradually entered the private home theater market.
The small-pitch LED market has strong growth resilience and sustainability. In the past three years, although some market demand has been affected by the epidemic, new demands such as remote conferencing and distance education have emerged, creating demand for LED conference all-in-one machines. At the same time, XR virtual photography has become popular in the past two years. The sales of these two emerging markets will be close to 4 billion in 2022, accounting for more than 10% of the total size of small spacing. It is precisely because of the continuous broadening of application boundaries that the small-pitch LED market has strong growth resilience. When the economic environment improves, various application fields will be more active in upgrading display equipment, and the small-pitch LED market will also show better growth elasticity. Therefore, small-pitch LEDs are a market with continued growth. According to TrendForce research, the global small-pitch LED display market size will be US$4.2 billion in 2022, an increase of 12% from 2021. Benefiting from the significant recovery in demand in the European and American markets, small-pitch LED displays Among applications, corporate conference and education space, retail and exhibition, entertainment and theater applications have the most obvious growth, with year-on-year growth expected in 2022 of 14%, 13% and 41% respectively. XR virtual photography has become the most growing emerging application in the small-pitch market in the past two years. The market size will reach US$400 million in 2022, a year-on-year increase of more than 50%.
According to DISCIEN data, China's small-pitch LED market sales are expected to exceed 20 billion yuan in 2022, with a compound growth rate of around 15% in the next four years. Although the domestic epidemic has impacted the actual demand for small spacing and actual sales have declined, the growth trend of the small spacing market has not changed.
2.1.1 The epidemic accelerates the application of small-pitch LEDs in conference scenarios
Due to the epidemic, the demand for online office and remote meetings has surged. LED conference all-in-one machines have become a major incremental market. According to GGII research data, China's LED conference all-in-one machine market shipments will be more than 4,100 units in 2022, an increase of 15% from 2021, with sales of approximately 950 million yuan. GGII predicts that with the rapid decline in product costs, the LED conference all-in-one machine market will maintain rapid growth in the next few years, and the sales of all-in-one machines are expected to exceed 10,000 units in 2024. According to statistics from Luotu Technology, there are more than 20 million large conference rooms with an area of more than 200 square meters and a capacity of more than 150 people in the world, and there are more than 3 million in China. If 10% of the world’s If a large-size LED all-in-one machine is installed in a large conference room, each device costs 50,000 yuan, which corresponds to a market size of 100 billion yuan. Currently, major manufacturers of LED conference all-in-one machines include MaxHub, Leyard, Absen, Unilumin, and Hikvision. According to DISCIEN statistics, Leyard will obtain a 13% market share in the domestic all-in-one machine market in 2022, ranking second.
2.1.2. New scene: XR virtual shooting is in the high growth stage
XR virtual shooting technology is an emerging technology because of its immersion, interactivity, unlimited creativity and other characteristics. It brings unlimited creativity to film and television program production and effectively improves the efficiency of film and television program production. It has gradually attracted the attention of film and television media and is gradually being used in film and television shooting, short video shooting, commercial advertising, variety show shooting, live broadcast platforms, rapid network content production, and virtual IP. creation, virtual idol live broadcast and other fields. Small-pitch LEDs are the main hardware for XR virtual shooting. According to the research of Gaogong LED, the current entire XR virtual shooting system includes LED display system, camera tracking and capture system, virtual scene rendering system, virtual production system, lighting technology and machinery, etc. The LED display system is a crucial link of the entire XR virtual shooting system, which is generally composed of LED sky screen, LED vertical screen and ground reality. According to the shooting scene and budget requirements, high-end virtual shooting background display products require high brightness (>1500nits), high resolution (P1.2-P1.6), high grayscale (16bits), high refresh rate (3840/7680Hz), and a screen update rate of 60Hz. The resolution of full-surface splicing can be as high as 8k (76804320).
The main advantages of XR virtual shooting: 1) Save real-life shooting costs Use: XR virtual shooting can realize rapid switching of virtual scenes without being limited by time and space. It can modify and adjust scene content in real time, greatly improve the efficiency of scene changing and scene changing, reduce shooting costs, and reduce environmental pollution of real-scene shooting. 2) Shorten the shooting and production cycle: This technology can shorten the post-editing workload and time, greatly shorten the shooting cycle, effectively shorten the shooting and production cycle and improve shooting efficiency. 3) Improve the quality of film shooting: This technology enables an on-site immersive shooting experience. What the director and actors see is what they get, making the performance more realistic and improving the quality of the film.
The market for global XR virtual shooting studios is expected
1) Large-scale XR virtual shooting studios: usually with an area of more than 1,000 square meters and a floor height of more than 15 meters. The LED display screen usually has a vertical screen (600 above square meters), sky screen (600 square meters), ground communication Real scenes are often arranged. This product is suitable for shooting large-scale film and television. The investment amount is estimated to be more than 20 million. Assume that the global market space for large-scale XR virtual shooting studios is 1,000, and the investment in LED displays is 10 million yuan, corresponding to a market space of 10 billion yuan. 2) Medium-sized XR virtual shooting studio: usually with an area of several hundred square meters and a floor height of 10-15 meters. The LED display screens used usually include vertical screens (200 square meters), illuminated screens/sky screens (200 square meters), etc., and the ground is usually arranged as a real scene. Suitable for filming web dramas, medium-sized programs, events, film and television, etc. The investment amount is between 8 million and 10 million
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