Automotive Lighting Industry Chain Analysis LED, PC development is different

The headlights are regarded as the eyes of a car. It is one of the key components of a car that integrates functions such as lighting, information exchange, and beautification, and has an important influence on the practicability, safety, and appearance of the car. The headlights are not standard components, and usually every car model is to be developed or replaced with a new one.
The raw materials for the production of automobile headlights are mainly light sources and plastics. Therefore, the upper reaches of the automotive headlamp industry are light sources and plastic raw materials. The downstream applications of the automotive headlamps industry are mainly the new car accessories and auto repair modification market.
At present, halogen headlights, xenon headlamps, and LED headlights are the most common types on the market. Although xenon headlamps are still the most popular car headlamp configuration today, LED headlights have begun to enter more and more. People's vision. And it is worth noting that the application of LED headlamps is very fast, and it has long been not the exclusive configuration of high-end models.
Chart 1: Comparative Analysis of Car Lights

LED Lamps Overcapacity Prices Decrease LED's penetration rate has been increasing due to long life, low energy consumption, relatively economical cost (laser lamp costs are too high), and is expected to replace halogen lamps to become mainstream.
In recent years, under the dual stimulation of market environment and government subsidies, LED upstream enterprises have continuously expanded production capacity and the industry has become increasingly fierce. Most companies dilute production costs by expanding their production scale, and lower their prices in exchange for market share, leading to a continuous decline in the price of LED chips. In particular, some LED manufacturers rushed to complete machine purchases before the completion of the subsidy policy in the mainland, which accelerated the release of new production capacity in the mainland, which led to a further deterioration of global LED production capacity.
In 2015, the cumulative output was 39.182 billion, an increase of 26.45% year-on-year, mainly concentrated in Guangdong, Fujian, Jiangsu, Zhejiang, and Anhui. Among them, the cumulative output of Guangdong Province was 273.944 billion, accounting for 69.92% of the country's total output, an increase of 43.26% year-on-year. In 2016, the total number of light-emitting diodes (LEDs) nationwide was approximately 470.185 billion, an increase of 19.99% year-on-year. With China's LED excess capacity, forward-looking estimates in 2017 China's LED output growth will continue to decline.
Exhibit 2: Changes in LED output from 2012 to 2017 (unit: 100 million)

As LED lighting is facing overcapacity problems and the homogenization of products is serious, fierce competition has caused businesses to compete in price warfare. In addition, as LED bottle patent bottlenecks are broken, product technology continues to increase, and material costs drop rapidly, all leading to LED lighting. Product prices continue to decline.
The overcapacity and price decline in the upstream LED industry is undoubtedly good news for the automotive headlight industry. It is not only the safety and stability of the LED lamp supply, but also the manufacturing cost of the lamp. Therefore, in recent years, the sales of LED lights have continuously increased. In 2016, the sales volume of LED lamp assembly in China was 5.736 million sets. Forward-looking estimation of 2017 China's LED lamp assembly sales of about 68.89 million units.
Exhibit 3: Changes in LED Lights Sales in 2011-2017 (Unit: 10,000 units)

Slower PC output growth Price rise Polycarbonate (PC) is a thermoplastic engineering plastic with excellent overall performance. Its excellent electrical properties, low water absorption, good light transmission, and visible light transmission rate of more than 90% are five major The only variety of general engineering plastics with good transparency is widely used in electronic appliances, data carriers, automotive parts, medical equipment, construction, textiles and packaging.
Driven by the rapid development of industries such as automotive, construction, and electronics, the world's polycarbonate consumer market has developed rapidly in recent years, and the shortage of market supply has occurred from time to time. Polycarbonate has become the fastest growing general engineering plastic among the five engineering plastics. . China is the country with the fastest growth in demand for polycarbonate, which grew at a compound annual growth rate of 18.7% from 2010 to 2015. In 2016, China's PC output was approximately 578,000 tons, an increase of 14.91% over the same period of last year, which is far from meeting the demand for polycarbonate in China.
Exhibit 4: Changes in China's PC Production from 2005 to 2017 (Unit: 10,000 tons, %)

In 2017, due to the combined influence of factors such as tight supply, upstream support, environmental protection storms, and the “ban on expulsion”, the price of polycarbonate in our country has been rising all the way, which is extremely unfavorable to the manufacturing of downstream lights.
Steady Growth in Steady Growth in Automotive Market Development Steady Growth in Auto Lamps The automotive headlights are mainly used in the two major markets for new vehicle support and maintenance and modification. The demand for the new car market is directly related to the output of new vehicles, and the new car market dominates the entire automotive market. Part of the share.
In 2013, China’s auto sales exceeded 20 million vehicles, reaching 2199.3, an increase of 15.6% year-on-year, far higher than the economic growth rate over the same period and becoming one of the drivers of China’s economic growth. In 2016, the overall manufacturing industry in China's automobile industry developed rapidly. The overall automobile sales volume was 280.28 million, ranking first in the world. In 2017, China’s auto sales were 29.015 million vehicles, nearly 30 million vehicles.
The prosperity of the automotive market has driven the rapid development of the auto parts market. Forward-looking that the future of China's auto market will remain relatively stable development trend, the demand for automotive lights will also increase simultaneously.
Exhibit 5: Changes in Vehicle Sales in 2010-2017 (Units: 10,000 vehicles, %)