LEDinside:LED Makers’ Revenues Dropped 20% due to Weak Demand for Large-Size Backlight; Sales Product Focus Shifting to Lighting Applications in 2H11

According to LEDinside, the LED research division of TrendForce, the total monthly revenue of Taiwanese LED companies listed on TWSE reached NTD 8.648 billion in July, 2011 (MoM-6.35%, YoY-18.8%). The LED chip manufacturers’ monthly revenue has decreased by 20.5% to NTD 3.95 billion, compared to that of last year (MoM-8.9%; YoY-20.5%). Furthermore, the LED package manufacturers’ monthly revenue has dropped sharply by 17.4% to NTD 4.695 billion, compared to that of last year (MoM-4.1%，YoY-17.4%). The weak demand for end-market applications has compromised the revenues of LED package and chip manufacturers. In addition, affected by the decreases of subsidies from local governments in China, LED chip makers have delayed their equipment installment plans, whose fulfillment will be the key to equipment makers’ revenues in 2H11.

Taiwanese Chip Manufacturers’ Performance

The Japan earthquake, Greek debt crisis, oil price surges and global inflation haveplaced a dent in the worldwide demand for LCD TV and greatly damaged consumer confidence. In addition, the rising popularity of tablets has resulted in declines in other products’ market shares. WitsView, another research division of TrendForce, estimates that the annual demand for LCD TV will drop to 201 to 203 million units. Due to the weakening demand for end-market applications, the average utilization rates of both Taiwanese and South Korean panel makers in 3Q11 are expected to reach 70%~75% and 80%~85%, respectively.

Currently, LED manufacturers are mainly underpinned by the demand for large backlights. Influenced by inventory digestions of TV brand vendors, weak demand in slow season and the underperformance in peak season, the revenues and utilization rates of LED chip makers have suffered major setbacks. Moreover, no rebound is in sight for the gross profit rates in3Q11. Taking into account that the first and fourth quarter are the conventional slow seasons for the electronics industry, the downturn is expected to continue until the end of 1Q12.

With respect to LED manufacturers that have made their ways into the supply chains of the tablet PCs and Japanese LED lighting supply chains, they are expected to see less decline in their revenues in 3Q11 due to steady overseas shipments. The July revenue of Genesis Photonics remained stable compared to June, whose joint efforts with JFE Engineering Corporation is expected to pay off in 2H11.

Moreover, even though the Japanese government has ceased imposing electricity rationing, the LED price trend, the consumer acceptance, and the possibility of re-imposing electricity rationing should still be considered.


 
Taiwanese Package Manufacturers’ Performance

In regard to July revenues of Taiwanese package manufacturers, despite the weak demand for backlight applications and chip price drop, manufacturers that have already invested in the lighting market, such as Lextar and Edison Opt, suffer less severe downturns compared to other manufacturers that solely focus on backlight applications. Benefited from the orders for invisible light and backlight applications, Liteon’s revenue hit NTD 1.254 billion. On the other hand, the purchase orders from Excellence Opto. Inc. for vehicle lighting and street lighting have boosted HIGH POWER OPTO.INC’s revenue by 65% in July. According to current LED market conditions, the weak backlight demand has caused the product focus to shift to the lighting applications. Taiwanese and South Korean LED makers stated that LED products for lighting applications are expected to account for 25%~35% of the total product line in 2H11.