Second price increase in April! BPSemi issues another price hike notice

It is reported that on April 1, 2021, BPS announced its fifth price increase since last October, stating that price adjustments of varying degrees would be made based on specific product models.

Following the price increase notice issued on April 1, BPSemi, an LED driver chip manufacturer, released another price adjustment notice on April 15. The company announced that due to the continuous rise in upstream raw material costs, tight production capacity at wafer fabs and packaging and testing facilities, and long production lead times, product prices will be adjusted to varying degrees based on specific product models.

Effective April 19, 2021, the adjusted new prices apply to all previously effective orders that have not yet been fully delivered, as well as to new orders. These adjusted prices are valid from April 19, 2021, until the effective date of the next price adjustment notice, and apply to all orders shipped within this validity period.

In addition, the company's newly released 2020 annual report also mentioned that the semiconductor industry is experiencing a wafer shortage. The net cash flow from operating activities decreased by 107.22% compared to the same period last year, mainly because the company actively purchased and stocked up in response to the increase in product sales during the reporting period, and at the same time made advance payments to suppliers to ensure sufficient production capacity in response to tight industry production capacity, resulting in a higher increase in procurement payments than the increase in collections due to sales growth.

BPSemi pointed out that in the fourth quarter of 2020, due to a surge in demand for automotive and consumer chips, the supply-demand balance of wafer production capacity was disrupted, leading to tight global wafer production capacity and causing shortages in other upstream supply chain capacities. Relying on its proprietary BCD-700V process platform, the company can coordinate among different suppliers based on overall production capacity requirements and the actual conditions of different foundries, without being constrained by any specific upstream manufacturer due to process issues. Meanwhile, supported by its proprietary platform technology, the company can onboard new wafer suppliers more quickly to meet the growing raw material needs driven by continuous business expansion.

It is reported that in 2020, the company completed the R&D of the fifth-generation BCD-700V process platform in production technology. The application of this platform will further reduce product costs while optimizing the effective utilization of wafer production capacity.

BPSemi stated that, due to systemic chip shortages in the industry, the company has systematically optimized its existing product portfolio based on future development needs. Delivery schedules are determined by product priority: high-priority products will be delivered on time, while delivery lead times for standard-priority products will be extended accordingly.

Based on the current situation, the supply shortage in the semiconductor industry will not ease in the short term. Therefore, the company will continue to strengthen supply chain management, ensure upstream production capacity, and improve product delivery capabilities.

Wang Pingyang of Soochow Securities pointed out that, relying on the vast and rapidly growing domestic market, Chinese LED driver IC companies such as Fullhan Microelectronics, Mingwei Microelectronics, and BPS have gradually caught up with international advanced levels in overall technical capabilities. The international competitiveness of their related products has significantly improved, especially with a strong competitive advantage in high cost-performance ratio.

Amid the current shortage and price surge, a report by Fang Jing's team at Cinda Securities on the 12th suggests that many small and medium-sized manufacturers unable to secure sufficient production capacity may be forced out of the market. This will improve supply-side conditions in the industry, and the gross margin for LED driver ICs is expected to recover toward the average level of the analog chip industry.

As the absolute industry leader, BPS holds nearly 30% market share, with sufficient production capacity and downstream pricing power, making it the biggest beneficiary of this price increase. BPS's gross margin in Q1 is expected to increase by more than 10 percentage points quarter-on-quarter. Mingwei Microelectronics and Fullhan Electronics are also expected to perform well in Q1.