Demand for LEDs has increased along with demand for displays generally during the COVID-19 pandemic. A number of LED suppliers have converted some of their standard LED production capacity to higher margin mini-LEDs, which has given producers the opportunity to raise prices for non-core customers. Core customers can negotiate more favorable pricing, but if they choose to do so, they face an extended lead time of up to 60 days as opposed to the 14-15 day norm. Now buyer psychology takes hold and seeing higher prices, buyers worry that increases will continue and leave them with progressively higher cost inventory heading into Chinese New Year in February and beyond. This incites them to begin to stockpile inventory to ‘avoid the upcoming price increases’, which increases demand and gives producers the opportunity to continue raising prices, essentially a self-fulfilling prophecy.
Epistar/Ennostar (3714.TT) was one LEE chip supplier who began converting generic LED capacity to higher margin mini-LEDs, which pushed some of their secondary customers to Sanan (600703.CH) and HC Semitek (300323.CH), who are seeing increased generic demand from Epistar’s former non-core customers. This coupled with an accident that limited production of patterned sapphire wafers used in the LED process have caused a ‘telephone-like’ chain of events that will likely drive LED prices higher over the next month, or until buyers realize that they have enough supply to satisfy 1Q demand.
Epistar/Ennostar (3714.TT) was one LEE chip supplier who began converting generic LED capacity to higher margin mini-LEDs, which pushed some of their secondary customers to Sanan (600703.CH) and HC Semitek (300323.CH), who are seeing increased generic demand from Epistar’s former non-core customers. This coupled with an accident that limited production of patterned sapphire wafers used in the LED process have caused a ‘telephone-like’ chain of events that will likely drive LED prices higher over the next month, or until buyers realize that they have enough supply to satisfy 1Q demand.
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