The LED industry is developing rapidly, and segmented links are accelerating integration.

The Central Committee of the Communist Party of China and the State Council recently issued the "National New Urbanization Plan (2014-2020)" (hereinafter referred to as the "Plan"). As a macro, strategic and basic plan to guide the healthy development of urbanization across the country in the future, the "Plan" will have a positive effect on many industries, including the LED industry.
2013-2016 is the golden development period of LED lighting. The penetration rate will increase from 20% to about 45%. It is a rare industry with rapid growth and relatively high certainty.
Technological progress and industrial upgrading have accelerated, and costs have dropped significantly. The application scope of LED products has continued to expand, and the market scale has expanded. Within 3 to 5 years, the compound growth rate of LED lighting demand scale will reach 30% to 40%. Due to demand activation and policy promotion, the driving force of the LED industry has shifted from backlight applications to lighting applications. From 2013 to 2016, the penetration rate of LED lighting increased from more than 10% to about 50%, driving the entire LED lighting industry chain into a high boom cycle. Third, the competitive landscape has changed, and LED production capacity has gradually shifted from that of the United States and Japan.This and the EU are transferred to mainland China, Taiwan and South Korea. Fourth, the speed of industrial integration has accelerated significantly, industrial concentration has gradually increased, and industry leaders with core technology advantages, channel advantages, and scale advantages have grown rapidly.
Qilu Securities analyzed that in the long term, the lighting penetration rate will accelerate. It is expected that the LED lighting penetration rate will increase from more than 10% to about 50% from 2013 to 2016, driving the entire LED lighting industry chain into a high-prosperity cycle.
In addition, the upstream and downstream links of the mid- to long-term LED industry chain have the most investment value: From the perspective of the lighting industry value chain and development trends, LED epitaxial chips currently account for about 70% of profits, the packaging link is about 10~15%, and the application link is about 10~20%. The chip link at the front end of the value chain has extremely high added value. As the status of LED applications and brand services improves, the added value of downstream applications and brand services will gradually increase. We believe that chips and lighting applications at both ends of the LED industry chain have the most investment value in the medium and long term. In the short and medium term, both LED lighting industry chains have investment value.
From the perspective of industry development trends, the LED industry is accelerating integration, and the investment in segmented companies with advantages is rapidly growing.Opportunities: The integration of the LED industry has accelerated significantly, and industry concentration has gradually increased. Leaders in industry chain segments with core technology advantages, channel advantages, and scale advantages will rapidly grow through extensional expansion.