Return Sino-US trade war shocks LED lighting companies' performance growth slows

In 2018, the global LED lighting market's growth momentum is weak, affected by exchange rates and uncertainties, and many emerging economies are facing recession. The Sino-US trade war has intensified and weakened the growth performance of the mainland domestic demand market. Under the uncertainty of the overall economic chaos, the lighting market, which is the demand for people's livelihood, also shows the phenomenon of terminal pull-down.

Affected by the trade war, the price of American lighting products

The United States itself has a good manufacturing base for lighting products. Under the background of the Trump administration's return to industrial manufacturing, the entire lighting industry will have a certain degree of development with its advanced equipment level and relatively complete industrial chain system.微信图片_20190108085706.jpg

However, the demand in the US market is too large, and relying on its own manufacturing capabilities can not meet the needs of the country. In particular, light source products require a large amount of imports from China, so the United States itself does not have the capacity to be self-sufficient in general lighting products.

On September 24, 2018, the US government began to impose a 10% import tariff on more than 30 LED lighting products produced in China, and plans to increase it to 25% from January 1, 2019. Affected by the high tariffs imposed by the Sino-US trade war, brand manufacturers have begun to increase the price of their products and pass on the tariff burden to consumers.

Acuity Brands, the US lighting supplier, has raised retail prices in the US market due to a 10% tariff, while Easton, a US-based lighting supplier, has increased the price of LED products by 10%. For tariffs to rise to 25%, the retail price of Acuity Brands and Easton products will increase by 15% from January 2019. The current retail price level and OEM shipment price will remain until the end of 2018.

And due to oversupply, the price of LED lighting equipment has dropped by 20-30% since the beginning of 2018. At the same time, in order to mitigate the impact of retail price growth, US LED lighting suppliers may require upstream OEM partners to share import taxes, which is equivalent to forcing them to lower their prices. 

Industry recession slowed down performance growth

The Sino-US trade war and the depreciation of exchange rates in emerging markets, LED manufacturers' exports to North America and other emerging markets have been significantly affected, resulting in many foreign brand factories reducing OEM orders for China, seeking other filings as long-term alternative manufacturing, so Applications in China, including LED packaging and downstream lighting, will be affected to varying degrees, leading to a sharp drop in demand for upstream LED chips.

In addition, the growth of the global LED market is slowing down, and the growth momentum of enterprises is insufficient. At the same time as raw material prices and labor costs continue to rise, the price of LED products has been declining, resulting in the compression of profit margins, which affects the performance of LED companies.

According to statistics, in the first three quarters of 2018, there were 25 companies with a positive growth in the net profit of LED companies, accounting for 57%. In the current situation of internal and external difficulties, compared with the performance of the same period last year and the mid-year report, the overall performance of A-share listed companies in the third quarter fell slightly, and the performance of lighting manufacturers was less prominent.

International giants turn to high-profit areas

The rise of Chinese LED companies has intensified competition in the lighting market in China and Asia, forcing some international manufacturers to withdraw from the highly competitive general lighting market and gradually shift to the high-profit segmentation lighting market to find new profit growth points.