The increasing cost of LED screens is a question that worries not only customers, but also manufacturers. Manufacturers are forced to recalculate prices for the same projects literally every few days. Agreements with clients, reached a few months ago, are bursting at the seams. Both parties have claims to each other. Government purchases remain unfulfilled. Stanislav Khlynovsky, Commercial Director of the Russian manufacturer of LED screens and media facades of the company GT Light, will help us to understand what is happening on the LED market and what to do in this situation for buyers of LED screens.
- Stanislav Olegovich, when we talk about the increase in prices for LED screens, what numbers are we talking about? How significant is the rise in price?
- The rise in prices for different components of LED screens is not uniform. The rise in prices for individual items reaches 40%. On average, the cost of a screen today is 15% higher than at the end of last year. Considering that the price of a display can reach several million (depending on size, pixel pitch and other parameters), the rise in price is quite significant. In addition, the situation is complicated by the fact that prices rise almost every few days. When calculating the project on Monday, we cannot be sure that the price will remain the same by Friday. This causes customer dissatisfaction. But we, as manufacturers, are not at all happy with this state of affairs.
- What caused the rise in price? Is it the semiconductor crisis?
- The first signs of the crisis, and, consequently, the rise in the cost of LED equipment appeared in the fall of 2020. Prices for control chips, printed circuit boards and some raw materials rose in October. In January of this year, individual component manufacturers increased the cost of budget models of chips, and some even blocked large volumes of supplies. Manufacturers of printed circuit boards are also raising prices, citing a significant rise in the cost of materials: tin, copper, etc. I believe that there are several reasons why we now have what we have. First, a pandemic, the peak of which also coincided in time with the period of replacement of outdated technological processes with more modern ones. Second, there is a significant rise in the price of metal used for LED cabinets and substructures. In this area, the rise in price is not calculated in percent. The cost of raw materials has increased by about 2.5 times in six months! Third, the prices of electronic components. Here the growth reaches 80%.
- Are all these foreign-made components?
- Yes. We keep the cost of our own production at the same level. We introduce new technologies, automate processes. But, unfortunately, individual components have to be purchased, since there are simply no analogues in our country. And here we find ourselves dependent on the prices of Chinese manufacturers. Transport companies also add fuel to the fire, since there are now serious problems with transportation from the Middle Kingdom, the reasons for which partially overlap with the reasons for the rise in the cost of components. In particular, this is the trade "war" between China and the United States. The aggravation of the situation was also provoked by the delays of cargo in Chinese ports. The blocking of the Suez Canal was only the "first sign". Interruptions in the operation of the 3 largest Chinese ports have already led to delays in the transportation of electronic components for more than half a month.
- In your opinion, how will the situation develop in the near future?
- The specialists of our logistics service give disappointing forecasts. According to experts, the problems in ports associated with an exacerbation of the pandemic will last at least until the end of June. And you also need to take into account that it will take another month, or even more, to send all the goods that have accumulated in May-June. That is, it will be possible to guarantee the previous delivery times no earlier than by the end of the summer. And this estimate could be wrong if the spread of the virus in China continues.
- It turns out that LED screens will definitely not get cheaper in the near future? What do you recommend to potential buyers?
- Indeed, our products have been steadily increasing in price in recent months, and we, as a Russian manufacturer, do not benefit from this. It is important for customers to understand that costing calculations are losing their relevance within a week, so now is the time for quick decisions. Delaying the purchase in the hope of winning in value will definitely not work. On the contrary, too low a price should alert you. The fact is that now a lot of low quality products have appeared on the market. Before the semiconductor crisis, such components were not in demand. Now, in conditions of shortage, many screen assembly companies are ready to buy low-quality components. For the buyer, such savings do not bode well. The screen can fail literally within a couple of months. And it is difficult to repair such equipment because of obsolete components.
- How do your customers react to such rapid price changes?
- Differently. We have been working with many companies for more than one year, and we have already established partnerships. A significant part of our clients are large federal holdings, for which quality is the decisive purchase condition. But in the public procurement sector there are certain difficulties associated with the fact that some government customers are rather inert when initiating tenders, and their calculations of the initial maximum contract price are very far from reality.
- To what extent is your company ready to overcome the current situation?
- We have been producing screens for 17 years, and during this time we have overcome many economic crises. In addition, we are constantly developing and improving technical solutions to minimize dependence on third-party suppliers. However, it is simply impossible to completely abandon the Chinese components. We try to use alternative options - products of European manufacturers, our own developments. The logistics service constantly monitors the transportation situation. The main task of the foreign economic activity department today is to conclude long-term contracts with manufacturers of chips and electronic boards, as well as to create warehouse stocks. This strategy helps to partially cope with the consequences of the crisis. We are unable to restrain the rise in prices, but we do our best to keep the quality of our products at their best. The projected period for overcoming the crisis is 2022-2023. Therefore, we need to be ready to work in difficult conditions. And we are confident that we will cope with this and maintain our leading position among Russian manufacturers.
More information about prices for LED screens on the website of the system integrator in the field of LED and digital technologies of the company GIT Light - www.gtlamp.ru