Overheated Mini-LEDs
Mini-LEDs continue to be a hot topic in the tech press, and while we have been talking about the technology since 2018, just the mention of Mini-LEDs seems to generate enthusiasm the likes of which we have rarely seen, and while mobile retail trading platforms and stock ‘news’ on Instagram (FB) have given us a new level of stock volatility in the US, it pales when compared to Chinese markets, particularly the relatively new Sci-tech Innovation Board. 1H y/y comparisons are still relatively easy to make given the very weak results from many technology companies in 1Q ’20 and a slow start to a recovery in 2Q, so looking strictly at the comps individual investors might get the impression that we are living in a new ultra-high growth environment.
In China there are many companies associated with the production of LEDs or applications surrounding their use. Some are large and some are small, and all have different performance characteristics according to their customer base and expertise, yet profit hungry investors seem to see little differentiation, jumping in at even the slightest hint that a company might be associated with mini-LEDs. Take Longli Technology (300752.CH), a company that produces backlight modules. The company’s stock dropped from 18.35 RMB to 13.35 RMB after it announced that its 6 month interim earnings would result in a loss as material costs rose and LED prices declined, a relatively typical reaction to a disappointing report, but only days later the stock jumped to 33 RMB and is up over 77% in the past month.
What caused this massive change in sentiment? The company had mentioned on an interactive board that it had ‘achieved a breakthrough in R&D for Mini-LED automotive backlight technology’ and was delivering ‘partial small batches to customers’. Even with little detail about the ‘breakthrough’, the idea that the company might have discovered something and could eventually be supplying its customer base, which to their credit encompasses a number of large Chinese panel manufacturers, was enough to add the name to the list of LED ‘concept’ stocks that had been on a tear on Chinese exchanges. Jufei Optoelectronics (300303.CH) happen to mention that it’s automotive LED business had performed ‘outstandingly’ in the 2nd quarter, and a ‘breakthrough has been achieved among customers’ and the stock is up over 60% thus far this month.
There are many Chinese LED companies that did well in the quarter or 1st half, despite the relatively easy comparisons, but it seems that even the slightest mention of mini-LEDs is enough to instill blind faith into Chinese investors and drive stocks to emotional highs. Much of what we read on such Chinese boards is very basic in nature and there seems to be only a smattering of understanding among individual investors as to the real prospects for mini-LEDs. Given that they are public forums, the companies’ responses are carefully worded so as to titillate but reveal little, which seems to only encourage others to speculate further, although conjecture might be a better word.
con·jec·ture an opinion or conclusion formed on the basis of incomplete information, an unproven mathematical or scientific theorem, or the suggestion or reconstruction of a reading of a text not present in the original source.
In China there are many companies associated with the production of LEDs or applications surrounding their use. Some are large and some are small, and all have different performance characteristics according to their customer base and expertise, yet profit hungry investors seem to see little differentiation, jumping in at even the slightest hint that a company might be associated with mini-LEDs. Take Longli Technology (300752.CH), a company that produces backlight modules. The company’s stock dropped from 18.35 RMB to 13.35 RMB after it announced that its 6 month interim earnings would result in a loss as material costs rose and LED prices declined, a relatively typical reaction to a disappointing report, but only days later the stock jumped to 33 RMB and is up over 77% in the past month.
What caused this massive change in sentiment? The company had mentioned on an interactive board that it had ‘achieved a breakthrough in R&D for Mini-LED automotive backlight technology’ and was delivering ‘partial small batches to customers’. Even with little detail about the ‘breakthrough’, the idea that the company might have discovered something and could eventually be supplying its customer base, which to their credit encompasses a number of large Chinese panel manufacturers, was enough to add the name to the list of LED ‘concept’ stocks that had been on a tear on Chinese exchanges. Jufei Optoelectronics (300303.CH) happen to mention that it’s automotive LED business had performed ‘outstandingly’ in the 2nd quarter, and a ‘breakthrough has been achieved among customers’ and the stock is up over 60% thus far this month.
There are many Chinese LED companies that did well in the quarter or 1st half, despite the relatively easy comparisons, but it seems that even the slightest mention of mini-LEDs is enough to instill blind faith into Chinese investors and drive stocks to emotional highs. Much of what we read on such Chinese boards is very basic in nature and there seems to be only a smattering of understanding among individual investors as to the real prospects for mini-LEDs. Given that they are public forums, the companies’ responses are carefully worded so as to titillate but reveal little, which seems to only encourage others to speculate further, although conjecture might be a better word.
con·jec·ture an opinion or conclusion formed on the basis of incomplete information, an unproven mathematical or scientific theorem, or the suggestion or reconstruction of a reading of a text not present in the original source.
RSS Feed