It is expected that the penetration rate of mini-LED TVs will continue to increase, driving companies involved in the industry chain to continue to benefit.
The Zhitong Finance App learned that Huaxi Securities released a research report saying that in the context of active expansion of the supply chain, continuous cost reduction, and reasonable downstream price reduction, the bank expects the penetration rate of mini-LED TVs to continue to increase, driving companies involved in the industry chain to continue to benefit. Midstream packaging recommended attention: Xinruida (002983.SZ), benefiting targets are Zhaochi Co., Ltd. (002429.SZ) and Jufei Optoelectronics (300303.SZ); downstream brand discussion suggestions focus: Hisense Video (600060.SH), benefiting targets are Sichuan Changhong (600839.SH), TCL Electronics (01070), and Shenzhen Kangjia (000016.SZ)
Huaxi Securities's views are as follows:
Mini-LED has entered the phase of accelerated penetration, and the industrial chain continues to be integrated
Mini-LED TV market penetration is increasing at an accelerated pace. In '23, the price of new mini-LED TV products continued to drop as performance continued to improve, driving industry penetration to 3%. The overall shipment volume of mini-LED backlight products in '23 was about 12.59 million units, of which mini-LED backlight TVs increased by nearly 50% year-on-year.
The demand for vertical integration in the industrial chain is strong, and the backlight module is the core link. Mini-LED has a long supply chain, and upstream and downstream enterprises or vertical integration have strong demands to improve cost efficiency. Among them, the backlighting process has a great influence on high contrast and high brightness of display performance, has higher technical added value and output value, and has become the core part of the extended layout.
Upstream chips: New technologies such as mini-LED drive high output value, and the reduction in chip size raises the manufacturing threshold
Quantitatively, the size of mini-LED chips has decreased and usage has increased dramatically. The number of LED chips used in traditional backlighting solutions is calculated in 10-level units, while mini-LED backlights may be calculated in units of 10,000 levels or more.
In terms of price, the bank expects chip prices to continue to decline for a long time, but in terms of output value, mini/micro-LED chip output is expected to maintain a compound growth rate of 20% over the next 5 years. In terms of manufacturing process, Mini-LED places higher demands on manufacturing processes and equipment. Considering the stable industry pattern, leading manufacturers hope to benefit from product structure upgrades brought about by new technology.
Midstream packaging: COB technology continues to be popular, and high-value backlighting is the core part of cost reduction
Technically: 1) POB technology is more mature and has a cost advantage; COB technology shows performance advantages in both direct display and backlighting, and there is plenty of room for cost reduction; in the field of direct display, the COB panel's industrial chain position can match the position of LCD panels in the traditional LCD industry, and it is expected to enhance the voice of related enterprises in the industrial chain in future scale expansion.
In terms of value: The entire backlight module is the core link in the industrial chain. Its value accounts for more than half of the cost. In the future, we hope to reduce costs through technical optimization of chips, PCB boards, and lens.
Downstream machines: new technology leads product structure upgrading
Cost side: Domestic LCD panel manufacturers continue to increase their share of production capacity, and mainstream panel manufacturers actively control operating rates. The bank expects future panel price cycles to fluctuate or be more predictable.
Profit side: Domestic brands are actively promoting product structure upgrades with new display technologies such as mini-LED, and the share of large-size, small-pitch products continues to increase. The gross margin of Hisense home appliances increased from about 20% in Q1 2019 to 23.21% in Q3 2023, and TCL Electronics's gross sales margin increased from 16% in 2021 H1 to 18.6% in H1 in 23.
Risk warning: Risks such as downstream demand falling short of expectations, increased competition in the industry, falling short of expectations, fluctuations in upstream raw material costs, etc., the risk of untimely delivery of goods due to rising shipping costs and port blockages, the risk of iterative technology, deviations in industry space estimation, risk of third party data distortion, and the risk that public data used in research reports may be delayed or updated in a timely manner.