Small-Pitch LED Unleashes Its Power: A New Commercial Ecosystem Growing at an Explosive Pace
The demand in the LED display market in 2016 will continue to grow compared with previous years, but price wars remain an inescapable "destiny." Companies will face an even more brutal elimination contest, and in the end only the "survivors" will reign as kings in this industry. As market competition drives natural selection, the battle among LED display companies will no longer remain at the price level, but will shift to a contest of comprehensive software and hardware strength.
Survivor Takes All
Small-Pitch LED Powers New Commercial Models
Although the small-pitch market capacity continues to grow. From doubling in 2014 to 87% in 2015, and about 60% currently, the growth rate is declining. However, in terms of absolute increase in scale, the application of small-pitch LED screens is still in an "explosive period." In fact, as long as the industry growth rate remains above 41.5%, small-pitch LED screens can maintain "doubling of absolute increment." This pace can be sustained for at least another 2 years.
In the first half of 2016, some small-pitch LED companies had a bumper harvest, while others fell into an awkward dilemma. Why is it that some small-pitch products sell well, yet the overall market penetration is not ideal? The moment we think about this issue, we have already turned our attention to research on the business model of small-pitch.
In the first half of 2016 display screen market, small-pitch HD large screens are undoubtedly the mainstream of the market. Several large-scale leading enterprises in the industry are competing in real time to seize this blue ocean market. All along, an important reason why LED display screens have been unable to compete with commercial large-screen products represented by LCD is the gap in display effect. With the launch of high-density small-pitch LED products, this shortcoming has been largely compensated for. Precisely because of this, LED display screens have begun to gain high-profile confidence.
Although the ranks of manufacturers involved in small-pitch LED displays are rapidly expanding and product upgrades are constantly accelerating, from the application perspective, the market scale is still very limited. It is foreseeable that once production scale reaches a certain level, the expansion of the application market will become the main focus of industry development. Then, where exactly are the potential application markets of this industry favored by so many companies?
Target Positioning: Indoor Large-Screen Commercial Display
From its inception, small-pitch LED displays have been regarded by traditional LED companies as a magic weapon to break through the limitations of outdoor LED display applications, with the hope of gaining a share of the indoor commercial display market—a market that has never been ventured into but holds broad prospects. It is undeniable that, compared with traditional indoor large-screen splicing, small-pitch LED displays do have certain advantages (for example, compared with LCD splicing screens, they offer an incomparable seamless advantage; compared with DLP splicing screens, their application forms are more flexible, and they can incorporate trendy technologies such as touch, glasses-free 3D, and 4K according to application requirements). However, as an emerging technology, small-pitch LED displays also have certain shortcomings (for example, they cannot compete with the cost advantages of LCD splicing, they still cannot match DLP splicing screens in terms of picture delicacy, and there are also high-cost issues). This situation where advantages and shortcomings coexist has destined that the indoor commercial display application path of small-pitch LED is one where opportunities and challenges go hand in hand.
In the indoor large-screen commercial display market, the applications of LCD splicing and DLP splicing have already become very mature, comprehensively covering the mid-to-high-end segments. Therefore, for the "newcomer" small-pitch LED displays, there are only blank markets, but almost no blank applications. To gain market share, they can only "snatch food from the tiger's mouth" and engage in direct confrontation with LCD splicing and DLP splicing—the difficulties are self-evident.
Entering the civilian market, high-end TV displays
"Don't put all your eggs in one basket"—this is clearly the mindset of traditional LED display companies when expanding the small-pitch LED application market. Therefore, although it is an indoor application, while making efforts in commercial applications, they have not overlooked the civilian market with its broad audience. However, in actual practice, opinions vary—there are active actors and also cautious onlookers holding reserved attitudes.
Strong supporters, such as Leyard, have clearly stated that the company will gradually push small-pitch LED TVs into the high-end civilian market, while Unilumin Technology, also a traditional LED display company, takes a reserved attitude on this matter, believing that at the current stage, the cost of small-pitch LED TVs is too high and there are shortcomings such as unsuitability for prolonged viewing, making entry into the civilian market not yet entirely certain.
From the very different attitudes of manufacturers, it is not hard to see that small-pitch LED TVs entering the consumer market are still in the trial stage — having scale but no market, and their future development remains a big question mark.
Cost is the biggest obstacle to the popularization of small-pitch LED
From the above analysis, it is not difficult to see that, whether in the commercial display field or in the consumer market, the sticking point for the popularization of small-pitch LED displays always comes back to high costs. This is also an unavoidable problem in current small-pitch LED applications. For example, VTRON, which has taken small-pitch as an emerging business of the company and has launched multiple small-pitch LED products, has clearly stated that before any major innovation in current LED process technology, no matter how small the pitch — such as P1.2 — the commercial cost is too high, users still cannot afford it, and the actual development value remains open to question. This obviously runs counter to the application philosophy of the end market, which pursues ultimate display performance.
In any industry, as technology matures and the camp of manufacturers continues to grow, economies of scale are generated, leading to continuous cost reductions — and the small-pitch LED industry is naturally no exception. In the component composition of small-pitch LED displays, the cost of lamp beads accounts for 60% to 80%, and as the order scale of small-pitch LED displays continues to expand, the cost of lamp beads will decrease due to economies of scale, thereby driving down the cost of small-pitch LED displays. Based on this, Projection Era Network analyzes that, in the popularization and promotion of small-pitch LED displays, high cost will not be a permanent obstacle. From a long-term development perspective, the application scale of small-pitch LED and the application cost are even mutually reinforcing — when the two reach a state of balance, small-pitch LED will usher in a true period of explosive application growth.
The development of small-pitch products requires a process of upgrade and replacement; the market cannot suddenly switch entirely to the small-pitch era. Europe, America and Japan have a large demand for high-end displays, but compared with some regions in Southeast Asia, the demand is weaker. Companies therefore need to provide diverse product series and platforms, adopting a tailored approach — matching product types to each specific market according to its different platform demand.
Give 3 examples
1. Price decline
First, against the backdrop of intensified market competition and declining prices, the net profits of leading enterprises in the industry roughly doubled in the first half of 2016. Price decline has been the main development trend for small-pitch LED screens over the past three years. It is precisely the reduction in prices that has driven the continued expansion of product application scale. Nevertheless, LED screen enterprises can still maintain a development pattern in which "profit growth" exceeds "scale growth" by developing products with even smaller pitches, expanding market size, extending the service industry chain, and other means.
2. The gap between Chinese and foreign markets widens
Secondly, the gap between Chinese and foreign markets and enterprises has further widened. If before 2012 the domestic small-pitch LED screen industry was still following the development of the international market, the entire situation has now completely reversed. Currently, the domestic market is mainly promoting the popularization of P1.2-level products. Such products also represent the "threshold resolution" that enables emerging fields such as VR to maintain optimal performance. By contrast, traditional LED display giants in Europe, America, and Japan are still seeking a way out in the product market above P1.5.
3. Upstream Share Expansion
Third, the local share of the upstream industry chain has expanded. This includes the localization of 1010 LED beads and the localization of some key equipment, which has become a key driving force behind the cost reduction, scale expansion, and profit improvement of small-pitch LED products. Small-pitch LED screens place higher demands on LED beads, substrate materials, packaging processes, and other aspects. Against the backdrop of an overall sluggish LED manufacturing market, this has created a space for differentiated growth and has attracted widespread attention from the domestic LED chip industry chain.
Of course, nothing is perfect. The development of small-pitch LED screens also brings some unwelcome news. Besides the price decline mentioned above, the deterioration of the competitive landscape has become a major trend in industry development.