(Author: Roger Chu, Director, Research, LEDinside// Translator and Editor: Judy Lin, Chief Editor, LEDinside)

Chinese LED chip maker San’an Opto kicked off 2017 with a new round of product price hikes.

Heading the LED chip pricing uptick trend this year, San’an Opto sent a letter to clients recently informing it would raise S-30MB and S-32BB LED products by 8%, due to escalating raw material costs. An additional reason behind the price increase was compensating for formerly underpriced products. The company stated the price hike will be effective starting from Jan. 10, 2017.

The two LEDs prices recently raised are respectively 1030 and 1032 LEDs that are applied in the manufacturing process of 0.2W LEDs. There is a large market demand for these low power LEDs, which caused intensive price competitions among manufacturers that resulted in low gross margins for these LEDs. This caused tightened supplies of 1030 and 1032 LEDs because only few manufacturers were willing to make the product. Hence, San’an Opto had to make the needed price adjustments to meet soaring raw material costs.

Back in 2016, Taiwanese LED chip maker Epistar was the first to raise blue LED chip prices. At the time the company cited higher raw material costs as the main reason, but industry insiders also believed Epistar’s reduced production of blue LED chips might have spurred the trend. Yet, in 2017 LEDinside’s research team noted raw material costs will become the main driver behind increased LED retail prices.

LEDinside anticipates once Donald Trump is inaugurated as the 45^th President of U.S., he will initiate large domestic infrastructure projects that will push up raw material prices. LEDinside observed prices of raw materials including copper, gold wires, aluminum and PCB surged in 2016, moreover the weaker Chinese Yuan also indirectly upped costs of imported raw material.

In 2016, the Chinese Yuan experienced its largest loss against the greenback since 1994, having downed nearly 7% trading at RMB 7 per U.S. dollar, reported South China Morning Post. HSBC’s outlook for the Chinese Yuan in 2017 is closer to RMB 7.2 per U.S. dollar.

Following San’an Opto’s lead in price adjustments, many LED chip manufacturers told LEDinside they are speculating future market trends and evaluating the market situation before joining the trend. LEDinside projects further raw material costs increase in the LED industry will spur a new round price upticks, during this time period uncompetitive small to mid-sized enterprises will eventually exit the market. In the future most orders in the industry will be concentrated San’an Opto LED Chip Prices Pushed up by Rising Raw Material Costs