LED industry: 2023 is expected to be the starting point of medium- and long-term prosperity
Recovery is imminent in 2023
In 2022, the domestic epidemic was frequent, economic activities were blocked, and market demand for real estate and consumer electronics was sluggish, which caused varying degrees of impact on the LED application market. We have compiled the revenue and gross profit margin data of 18 representative LED application product companies (7 lighting companies, 6 small-pitch companies, and 5 backlight companies) in the past few years in the A-share market, and the analysis is as follows:
LED is expected to enter the starting point of medium- and long-term prosperity
Different links in the LED industry are accumulating innovation, and quantitative changes lead to qualitative changes. We expect that the following links are undergoing or about to undergo major changes, and they also breed investment opportunities.
- LED display: The XR virtual shooting market is growing rapidly, and the digital economy is expanding medium- and long-term demand. According to TrendForce statistics, the global LED virtual shooting display market size in 2022 is about US$430 million, an increase of about 52% over 2021. We expect that the market is still expected to achieve a 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.
- Mini backlight: Whether it is a TV, car display, etc., MiniLED backlight will significantly improve product performance, and the penetration rate of MiniLED backlight is increasing rapidly. According to the forecast of Yidu Data, the market space of Mini LED backlight module is expected to reach 125 billion yuan in 2026.
- LED packaging: COB has many advantages over SMD, and the COB pass-through yield of manufacturers continues to improve, which promotes the rapid cost reduction of display screens below P1.0, and further expands the application scenarios of small-pitch LED.
- Mini/Micro LED: Mini/Micro LED will drive LED display screens into the consumer market. According to IHS data, the global display panel market size in 2021 is 139.2 billion US dollars, of which LCD is 97.3 billion US dollars and OLED is nearly 40 billion US dollars. 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 about 14 billion US dollars. By then, it will be the real prosperity of the LED industry.
- LED chip: As an upstream core component, the chip will be the core beneficiary when the Mini&mircoLED market is released in the future. In the past two years, the LED chip industry has undergone major changes. TV manufacturers/panel manufacturers have deployed LED chips, reflecting the importance of LED chips in the future display field.
LED application: small pitch continues to grow, XR virtual shooting technology is more valued
Small pitch LED: the application boundary continues to expand and drive continued high growth
Small pitch LED continues to expand the application boundary. Generally speaking, display screens with a dot pitch of less than 2.5mm are called small pitch LEDs. They have the advantages of seamless splicing, high display brightness, high color saturation, and better display effects than other display products. As the dot pitch continues to shrink and the cost decreases, the application scenarios of small pitch LEDs are also expanding, gradually replacing products such as LCD splicing, DLP splicing, conference projection, and even large-size TVs.
According to DISCIEN data, it is estimated that the sales of China's small pitch LED market will exceed 20 billion yuan in 2022, with a compound growth rate of about 15% in the next four years. Although the domestic epidemic has impacted the actual demand for small pitch and actual sales have declined, the growth trend of the small pitch market has not changed.
We expect the XR virtual shooting market to achieve a compound growth of 35% from 2023 to 2025. According to TrendForce statistics, the global LED virtual shooting display market size in 2022 is about US$431 million, an increase of about 52% from 2021. We expect the global XR virtual shooting display market size to reach US$560 million, US$760 million, and US$980 million from 2023 to 25, respectively, an increase of 40%, 35%, and 30%, respectively, and will become one of the fastest growing tracks in the small pitch industry.
As an emerging technology, XR virtual shooting technology brings unlimited creativity to the production of film and television programs due to its immersiveness, interactivity, and unlimited creativity. It effectively improves the efficiency of film and television program production and is gradually being valued by film and television media. It is gradually being applied to film and television shooting, short video shooting, commercial advertising, variety show shooting, live broadcast platforms, rapid network content production, virtual IP creation, virtual idol live broadcast and other fields.