TrendForce: LED Manufacturers will Uplift the Technology Entry Level and Find New Applications in Hopes to Raise Profitability in 2015

For many LED manufacturers, 2014 has been a challenging year. A lot of manufacturers’ performance in first and second half of the year was very polarized. Lighting market demands were stronger than expected in the first half of 2014, leading to a period of LED supply shortages, said Roger Chu, Research Director of LEDinside, a research division of TrendForce. Despite the positive development, the industry was impacted by clients double booking and distributors rising inventory levels during second half of the year. Many manufacturers were impacted by the markets cooling demands, and price competition as a result. Worth noting, the emergence of Chinese LED manufacturers led to sliding LED product prices. Hence, LED manufacturers will raise technology entry levels and find new applications in hopes to raise profitability in 2015. 

Below are top five industry trends LEDinside has highlighted to watch out for in 2015. 

(1) Chinese LED manufacturers market shares grow, big manufacturers become even larger 

LEDinside estimates globally 239 new MOCVDs were installed in 2014. Some local governments will continue to issue subsidies in China throughout 2015, therefore, more than 170 MOCVDs are expected to be newly installed in China. Overall, LED manufacturers expansion projects depends on local governments subsidies, hence LED chip manufacturers will grow. 

As Chinese LED chip manufacturers improve their technology and scale up production capacity, China’s LED chip production capacity has increased from 27% in 2013 to 36% in 2014. In the past, Chinese LED backlight and lighting applications largely relied on Taiwanese or international LED manufacturers, but this is no longer the case. Due to Chinese package manufacturers increasing usage of domestic LED chips, prices are increasingly competitive, leading to Chinese manufacturers growing market share in the global LED industry. 

(2) LED lighting clients continue to seek low cost solutions 

Spurred by falling product prices, high LED lighting market demands have emerged. LED bulbs remain the main growth drivers for LED lighting products in 2015, including LED bulbs, tubes and other light source products, said Chu. Therefore, LEDs retail price and costs are often the main factors taken into consideration. 

Standard and mid-power LEDs with good C/P ratio often meet these LED lighting products lower price demands, for instance 3030 and 2835 LEDs have become mainstream on the market. Future LED manufacturers will continue to find better heat dissipation material, and use high driving currents to reduce the number of LEDs. Even COB LED has gradually attracted attention from lighting manufacturers. Besides lower LED prices, LED lighting manufacturers have also turned their focus to drivers and other components, in hopes of designing total solutions to lower costs. 

(3) Finding special niche applications to raise profitability 

Due to intense LED price competitions, LED manufacturers hope to find new applications to raise profitability. For instance, invisible LED lights including UV or IR LEDs are gradually valued by LED manufacturers. Invisible LED light market remains a niche market, and cannot compare with LED lighting or backlighting application volumes. The market sector has a much higher entry level, due to technology difficulties, customized demands, and close cooperation with system manufacturers. Therefore, invisible LED products gross margin is markedly better than white LED. 

(4) Growing automotive LED market value, exterior automotive lighting market showing highest growth 

Automotive LED market grew steadily, with automotive Daylight Running Lamps (DRL) and high/low beam lights showing most significant growth. This is mainly due to automotive LED affected by LED technology advancement and the drop in LED price, has gradually shifted from high class car models to middle class models, which has spurred automotive lighting demands in the next few years. Additionally, car panels remain the largest LED backlight application in cars. Accompanying the spread of multimedia and image sensors, traditional panels have all been changed to LCD panels to spur automotive backlight demands. 

(5) Mobile phones become thinner, smartphone backlight LED specs turn towards 0.4t 

Many manufacturers are trying to upgrade backlight LED specs to come out of price competition. In the case of handheld devices, high-end smart phones are becoming thinner, with increasingly higher panel resolutions. This challenges LED manufacturers to make thinner and brighter LEDs in 2015. Currently, high-end smartphones are using 0.4t LED as major backlight specs with brightness between 2,500-2,700 mcd. In 4.7”iPhone 6, 10-12 LEDs are used in the backlight modules, since 0.4t and 0.6t LEDs have become thinner, and are the slimmest LEDs in the mass produced backlight market. Package technology on the other hand has a much higher technology entry level. Korean and Japanese LED manufacturers, such as Nichia, have been the main suppliers for this technology. Furthermore, the 0.4t LED has been introduced into iPhone 6 backlight, and will even shift towards the thinner 0.3t LED in the future. 

As for TV LED backlight specs, raising LED brightness to satisfy 4K2K panel demands, and the introduction of NTSC 100 highly color gamut will also become a development focus for LED manufacturers. All in all LED manufacturers will have to figure out ways to upgrade the entry level to have an upper hand in the price war.