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Raw materials have skyrocketed in the beginning of the year, are LED display application companies still calm?

Raw materials have skyrocketed in the beginning of the year, are LED display application companies still calm?

2021-03-04

At the beginning of 2021, as the situation of epidemic prevention and control is getting better, all regions have ushered in a good start. However, what many led display practitioners unexpected is that the "supply shortage" has not yet dissipated, and the "supply shortage" has become the first "blocker" they face after the Spring Festival.

According to reports, due to “supply shortages”, the prices of raw materials such as copper, iron, aluminum, and plastics have continued to rise. On Monday, LME Copper (a copper futures trading product on the London Futures Exchange) exceeded US$9,000 for the first time since 2011. At the beginning of the trading session, it rose by more than 4%. LME Aluminum (aluminum futures trading product of the London Futures Exchange) futures set a new high since 2018, and iron ore futures are approaching the 10-year high set in January.

 

The Price Hike Did Not Happen Suddenly

 

During the last year, the price increase of raw materials occurred frequently, which is not uncommon in the entire society. Affected by the epidemic, politics, and the relationship between supply and demand, raw material price increases have occurred in various industries, including the furniture industry, the home appliance industry, and the electronic product industry. Earlier, all industries announced the impact of rising raw material prices on themselves.

As one of the many electronic products, LED display screens were stuck in mud during last year's "price increase", making it difficult to stay out. In October last year, the prices of RGB packaging devices, LED display driver IC, PCB sheets, and even steel, plastic, glue and other upstream raw materials continued to rise. In November, copper clad laminate manufacturers launched another "price increase letter attack" with an increase of approximately At about 10%, this has an extraordinary impact on LED display products.

During last year, some senior people in the LED display industry made predictions, saying that this wave of "price increases" in 2020 will not easily dissipate, and will continue into 2021. Now, at the beginning of the new year, this wave of price increases for raw materials such as copper, iron, aluminum, and plastics has confirmed last year’s forecast and is a continuation of last year’s “price increase”.

 

The Price Hike Will Not End In A Short Time, And The Crisis Should Be Resolved Actively

 

At the beginning of the new year, this wave of rising raw material prices affected the entire industry and cast a haze on a new year that should have been joyous. How to resolve this "crisis" of price increases has become the top priority for companies at the beginning of the year. There are including two methods of active attack and passive waiting.

Some scholars have analyzed that there are two main reasons for the formation of this wave of "price increases". One is the "global central banks releasing water" in 2020; the other is the recovery of demand, and the global manufacturing industry is gradually approaching the level before the epidemic. The interweaving of these two reasons has led to the rapid growth of today's production and manufacturing raw materials at the beginning of the year.

In the global environment of “opening the gates and releasing water”, It is inevitable that stock prices and item prices will rise. As of February 18, 2021, the US stocks, European stocks, Japanese stocks, and UK stocks are still showing an upward trend. At the same time, the market environment is further recovering

At present, if we want to resolve this crisis, we cannot wait passively, just feeling in hopes of the macro adjustment of the market. We should also take the initiative to attack and actively seek opportunities in order to truly "seeking opportunities in crisis".

 

The Crisis Has Come, How Do LED Display Companies Face?

 

Raw materials and related supporting companies from the "upstream" have followed up the price increase. Although this has resolved their own business crisis, it is miserable for terminal LED display application companies, because LED displays belong to High-end application products are not necessities of life. Therefore, the attributes of their products determine that LED display companies cannot "do it rashly" in price. Wait and see whether the price increases or not is what should be done.

So in the face of this crisis of rising prices of raw materials, how should LED display companies respond? First of all, as far as price increases are concerned, it is easy to increase, but the follow-up impact and how to deal with it is a difficult problem. Therefore, considering the development of the entire industry, whether a company raises prices or not requires companies to judge whether the price increase is a big advantage or a big disadvantage based on their own operating conditions.

Generally speaking, in the face of this situation, small and medium-sized enterprises generally do not dare to raise prices, and brand enterprises will not rise. Because for small and medium-sized enterprises, brands and channels do not have an advantage. Only price is their biggest reliance. If prices increase rashly, there are bound to be two results. One is that the customer directly cancels the order, terminates or delays Cooperation; Second, customers directly place orders and cooperate with competitors who have not raised prices. If this continues, the survival of small and medium-sized enterprises will be a problem.

 

For brand companies, they have advantages in channels, brands, and capital turnover. Facing the crisis of rising prices of "upstream" products, they can ensure the stable supply of your own raw materials by signing long-term supply contracts with suppliers, establishing your own raw material base; it can also improve brand competitiveness and enhance the ability to resist price increases. In addition, it can also rely on advanced technology or high-end manufacturing processes to master the mid-to-high-end market and win profit guarantee.

Therefore, in addition to rising prices, the current more feasible way for LED display companies to resolve the crisis is to increase the added value of their products, that is on the basis of the original LED display enhancing the resolution, improving the display effect and continuously enriching the product content, which is making it more intelligent and standardized, etc.; only in this way, the LED display can be more competitive and better integrate into the market; In addition, the increased value-added LED display is also conducive to the development of emerging markets, and the vast blue ocean of emerging markets can alleviate the business crisis of enterprises.

 

The “price increase tide” has come, and no matter how scared you are, you cannot change the fact that the pressure brought by the price increase of raw materials., so instead of blindly complaining about the price increase, it is better to find a way to resolve the crisis. In the case of extremely fierce market competition and rising operating costs, looking for new market growth points is still a good way for display screen companies to escape the crisis.


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