How did the LED population in Taiwan reverse the recent drop in gross margins?

Taiwan's LED group has recently suffered a sharp decline in gross profit margin due to a sharp fall in the share price. Although LED demand has gradually recovered, the first quarter results of upstream and downstream packaging plants have also risen month by month. However, in the first quarter of the wafer factories, Jingdian Power, Yuyuan, and Taigu are still experiencing a decline in capacity utilisation and LED backlight specification changes leading to lower yields, the gross margin will be broken, and orders will be returned after the second quarter. Although Wen will improve the product mix and drive the recovery of gross profit margin, but for the high-end performance that can return to 40% of the gross profit margin, the industry is not rumored that the price of sapphire substrate has only decreased slowly, while the grain price has continued to fall. LED market gradually matures, the possibility is not high.

Last year, Jingdian’s gross profit margin was 36%, which had plummeted to 26% in the fourth quarter from 40% in the third quarter. The gross profit margin of the company has dropped sharply from 46.6% in the third quarter of last year to 20.9% in the fourth quarter. The gross profit margin for the first quarter is expected to fall below 20%; the gross profit rate of downstream packaging giant Everlight in the third quarter of last year will exceed 30%, and it will decline to the bottom of 20% in the fourth quarter, and will rise back to 25%. The meeting also estimated that this year's gross margin level will be 26% to 29%, and there is little chance of breaking the previous high point.

From the perspective of the epitaxial plant, the price of sapphire substrates last year hurt the gross performance. Although the production of sapphire substrates has been gradually released from production this year, the price has gradually declined quarter by quarter, but compared to the low prices of last year. There is still room for some crystal grain factories. The price decline of sapphire substrates cannot keep up with the decline in the price of crystal grains. It is also a factor that the gross profit margin will not be able to return more than 40% of high-grade products. For the mature LED market, The drop in gross margin is an inevitable fate.

Industry experts pointed out that LED backlighting products continue to increase in volume this year. Under the specs, the market is gradually moving towards a mature market. The grain factories are under great pressure to reduce prices. In order to maintain the performance of gross profit margin, the industry actively develops new market products such as lighting and grasps specifications. In the early stage of unanimous market development, the time for the product to have a good profit margin is to strive for a better gross margin performance in the event that the product mix changes.