LEDinside: Despite Inventory Pressure on LED Makers, LED Backlight Demand Expected to Pick Up in March

13 January 2012 LED

According to LEDinside, a research division of TrendForce, the revenues of Taiwanese listed LED manufacturers totaled NT$ 6.54 billion (MoM-11.99%, YoY-19.6%). In retrospect, the under performing peak season in 2011 and the dull demand made the LED chip and package manufacturers fail to reproduce the booming 1H11 revenue growth in 2H11. At present, given the inventory pressure, many LED makers are actively seeking joint ventures and improving their product quality to create greater product differentiation. LEDinside believes that the gloomy economic climate will set the strong apart from fellow competitors. Despite the dreary outlook, certain companies are still optimistic about the future of the LED lighting market, so much so that a few new manufacturers consider entering the market. Hence, due to the great prospects of the energy-saving market, some companies are not worried about the downturn and see it as an opportunity for them to improve themselves and for the industry to weed out the weak.

In terms of the revenues in December, the upstream players’ revenues plunged by 30% YoY while the downstream package makers’ dipped by 10% YoY. The difference is attributed to LED chip makers’ higher base year value of December 2011. In December 2010, products such as tablet PCs and LCD TVs underpinned the backlight demand, while currently the LED chip market is slightly oversupplied with the price plummeting quickly. On the other hand, due to that the LED package manufacturers supply the end market, the upstream oversupply has less impact on them, not to mention the recent demand surge in the backlight market they benefit from.

Revenues of LED Chip Makers Dipped 30% YoY
Supported by the end-market demand surge and the increasing rush orders, revenues of Taiwanese listed LED chip foundries reached NT$2.64 billion in December (-16.5%MoM, -30.2%YoY). In 2011, the revenues of LED chip makers amounted to NT$45.4 billion, representing a 7% decrease compared to 2010.

Epistar’s 2011 revenue decreased 10% compared to 2010. Epistar has foreseen the slowdown of backlight market’s growth after 2013, and the demand from the lighting market will have to fill the vacancy. For this reason, Epistar has been actively seeking joint efforts with downstream lighting companies, increasing overseas market share through reinvestment. In addition, the company also cooperates with global lighting big names in terms of technology to secure its position in the light market.

Forepi’s 2011 revenue fell by 10% compared to 2010. With respect to chip development, the luminous efficacies of Forepi’s chips reach 120lm/W in 3Q11, whose production will increase considerably in 2012. Moreover, the Japanese big brand Mitsui & Co. brings Forepi a list of clients. LEDinside believes that in 2012, Forepi will be able to use the cooperation with Mitsui to its advantage in regard to backlight and lighting products.

Benefiting from the growth momentum in the lighting and backlight markets and the success in the Japanese market, Genesis Photonics’2011 revenue increased 50% compared to 2010. Genesis Photonics joined forces with JFE Enginnering, targeting at the Japanese market. Although the lighting products merely account 10-15% of the total production at present, the portion is expected to increase in 2012.

Revenues of Package Makers
The revenues of Taiwanese LED package makers in December hit NT$3.9 billion (MoM-8.66%, YoY-10.3%). In 2011, revenues of LED package makers totaled NT$54.92 billion, representing a 3% decrease compared to 2010. Helped by its vertical integration model, Lextar successfully made way into the supply chain of global major makers, which canceled out the slump in the backlight market. According to Lite-On Technology, the company has signed strategic alliance agreements with six lighting companies and will manufacture LED light source and LED light modules in the future. Epicrystal Cooperation (Changzhou), a subsidiary company of Epistar, began its production in September, 2011.

According to LEDinside, the value of China’s lighting market will reach US$7.6 billion in 2015. With China’s comprehensive production bases and supply chains together with the high domestic demand and market prospects, many manufacturers have been placing more emphasis on the Chinese market. Epistar cooperates with Sunny Technology Lighting and NVC Lighting, Everlight with Yaming Lighting, and Forepi with NVC Lighting. Philips recently announced that it will set up a LED lighting product plant in Chengdu, which marks Philips’ second large-scale investment in China. Furthermore, LED makers including Liteon and Lextar are taking more aggressive actions to gain a place in the supply chain of global big names. The common goal for the companies is to continue increasing the portion of lighting product in their revenues and preempt an advantageous position in the lighting market.