According to industry sources, due to oversupply and falling prices, the second quarter net profit of Sanan Optoelectronics, a Chinese manufacturer of LED epitaxies and chips, fell 75.1% to 197 million yuan ($28.9 million) from a year earlier.

In the first half of 2019, the net profit of Sanan Optoelectronic Company was 883 million yuan, down 52.34% from the same period last year. Sources pointed out that the stock value of Sanan Optoelectronics has increased from 2.68 billion yuan at the end of 2018 to 2.958 billion yuan at the end of the first quarter of 2019, and reached 3.238 billion yuan at the end of the second quarter. At the end of the second quarter, manufactured goods accounted for 73.2% of the inventory. If these products could not be sold, they would be completely scrapped.

Sources said that at the end of the second quarter of 2019, inventory market prices fell by 6.72%, 1.20 percentage points higher than the beginning of the year, and inventory turnover increased to 243 days.

At the same time, in order to cope with the situation of oversupply, our colleague, Shunchang, Australia, has reduced the output of LED chips by 200,000 epi-chips per month, while Huacan Electronics has reduced its capacity utilization rate to about 60% in the first half of 2019. The LED packaging service provider De Horun decided to stop the production of internal chips and abandon 92 MOCVD suites and chip inventories.

In addition, as Chinese manufacturers of TFT-LCD panels have begun to reduce the production of TV panels, it is expected that the decline in demand for LED backlights will aggravate the trend of LED oversupply, resulting in a sustained increase in LED inventory.