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In 2017, Sanan's LED chip production capacity accounted for 26.50% of the domestic. LED chip production is typical capital and technology-intensive industry. In the third quarter of 2018, the company's gross margin was 44.46%, which was 10 percentage points higher than its major competitors. A higher net profit ratio is achieved with lower management fees, sales expenses, and financial expenses. As the production capacity of LED chips is further concentrated in the hands of several leading LED lighting companies in the core, the industry will have a centralization pattern in the future. Technical advantage determines the price, and scale determines the cost. Compared with its competitors, Sanan Optoelectronics' technical advantage is the core factor to ensure the high gross profit. As a commercial lighting manufacturer, we are optimistic that Sanan maintains its leading position in the lighting industry.
The global LED chip market in 2017 basically reached a balance between supply and demand, and the price entered a stable period after a sharp fall in 2015 and 2016. In 2018, due to the sharp expansion of the industry's production capacity, prices have fallen. With the new round of production capacity expansion of lighting suppliers in 2019, it's expected that there will be a further price adjustment in the market.
The semi-annual report for 2018 shows that Sanan achieved a revenue scale of 67 million yuan, a year-on-year increase of more than 1.5 times compared to the full year of 2017. Sanan is one of our LED chip suppliers, its medium and low power chips are reliable in quality and good in light efficiency, applying in our rigid LED strips and flexible LED strips.
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