According to its 2015 Chinese LED Industry Market Report, LEDinside, a division of TrendForce, finds the scale of the Chinese LED package market for 2014 reached US$8.6 billion and grew by 19% annually. The general lighting market has been the main driving force, and the rising market penetration rates of commercial and residential LED lighting products has been fueling China’s growing demands. On the other hand, demand in the medium- and large-size LED backlight sectors have fallen due to technological advances that has reduced LED usage. The downturn in medium- and large-size LED backlight sectors has also been attributed to the LED TV’s easing demand growth. The small-size LED backlight sector, however, has seen strong demands owing to Chinese smartphone brands, which have steadily gained market shares. Moreover, recent developments in the fine pitch LED display has become the newest technological breakthrough that will energize the small-size LED backlight sector. LEDinside therefore expects the demand growth of LEDs for fine pitch displays to accelerate in the next two years.
“China has become the target market for competing LED package companies around the world,” said LEDinside analyst Allen Yu, “In 2014, the global top 10 LED package enterprises took 45.6% of the Chinese package market, showing a yearly market share increase of 2%. The restructuring of the industry has been ongoing and its concentration ratio has also been gradually rising.”
Based on LEDinside’s ranking of LED package companies for 2014, Nichia and Everlight maintained their first and second positions. MLS climbed to No. 3 and was followed closely by Cree and Lumileds ranking respectively at No. 4 and 5.
In 2014, the international LED package companies (excluding those based in China and Taiwan) earned a combined revenue of US$2.35 billion from the Chinese package market. Their revenue from the Chinese market had a year-on-year growth of 17%, which significantly less than the 40% year-on-year growth in 2013. This comparison shows that the international manufacturers have experienced a noticeable slowdown in their businesses. The international companies supply products mainly to developed markets such as Europe and the U.S., where their technology, brand and patent advantages have helped them gain greater market shares in the high-end product markets. Recent developments in the industry, however, indicate that the international companies are losing these superiorities and ceded market shares in the U.S. and Europe to Chinese and Taiwanese competitors. Recent developments in the industry, however, indicate that these international companies are losing these advantages, and are losing market shares in U.S. and Europe to Chinese and Taiwanese competitors.
The annual revenue growth of all Taiwanese LED package companies in the Chinese market for 2014 was 16%, standing at US$740 million. This was a significant turnaround from the negative 1% growth for 2013. In the past, Taiwanese manufacturers were in a rather difficult position in the global LED market due to unapparent cost/performance (C/P) advantages of their products and impact from Chinese rivals. These unfavorable conditions forced some of them to turn to new strategies in 2014, such as launching high-quality, economical products with high C/P ratios. Everlight and Unity Opto, for example, are two Taiwan-based companies that have made these adjustments and consequently have done well in China’s LED backlight market.
Chinese LED package companies are quickly catching up to their competitors. Their annual revenue increased 21% to US$5.49 billion in 2014, outpacing Taiwanese and international competitors in revenue growth rate. First-tier Chinese manufacturers particularly benefitted from rapid growth in their home market, Southeast Asia and other emerging markets. Examples include MLS, Nationstar, Honglitronic, Jufei and Refond, which all reported over 30% year-on-year revenue increase for 2014.
“For Chinese LED companies, technologies and patent issues are presently the main barriers standing between them and the high-end product markets in the U.S. and Europe,” Yu noted. “These problems can be overcome by collaborating with major international manufacturers, as in the case of Refond and Jufei sealing an agreement with Toyoda Gosei this January to obtain the latter’s white-light LED patents.” With the goal of gaining market access in U.S. and Europe, more Chinese package enterprises will soon join forces with foreign counterparts in areas concerning technical expertise and IP assets.