TrendForce Expects Risks of Oversupply to Continue in Global LED Industry for 2019; Niche Applications Would Provide New Growth Momentum

LED companies have been keeping low stocking due to the sluggish demand in the end markets in 2018 and impacts of the China-US trade war, according to LEDinside, a division of TrendForce. Looking ahead to 2019, the overall industry still has risks of oversupply, but demands for niche applications, including fine-pitch LED digital display, Mini LED backlight, UV-C LED, automotive lighting and high-efficiency lighting LED, have a positive outlook and may drive the market growth in the future.

After the recent G20 summit, China and the U.S. have announced to halt new trade tariffs for 90 days, which were originally planned to take effect on January 1, 2019. For the LED industry, it is still uncertain whether the tariffs would be 25% or 10%, which may significantly influence manufacturers’ purchase plans and relocation of factories. However, as the trade war looms, LED manufacturers have to postpone their schedules of decision making. With all these uncertainties, the supply chain tends to wait and see how the situation plays out after three months. So the pending circumstance may slow down demands further.

Fine-pitch LED digital display

According to LEDinside, the revenue of fine-pitch display-used LED will grow by 31% YoY in 2018, with the increasing demand for LED displays from the rental market, retail industry and conference rooms, etc. Compared with other applications, fine-pitch LED displays have higher profit margins, and the fine-pitch technology would also enable more new applications. In addition, the falling prices of LED chips have made LED displays more cost-effective than other alternatives in the commercial sector. Therefore, many LCD panel manufacturers and branded display manufacturers would try to develop fine-pitch LED displays, including Epistar, San’an Optoelectronics, HC Semitek, Everlight, NationStar, Harvatek and Kinglight, etc. Driver IC makers like Macroblock and Chipone would also benefit from the development of fine-pitch LED displays.

Mini LED backlighting

Coupled with direct type LED backlight and local dimming, mini LED backlighting can be introduced into LCD display to enhance the contrast and brightness of LCD display. Mini LED applications can provide customers with an extra choice other than OLED displays. Taking 27-inch desktop gaming monitor as an example, it uses around 4,000~12,000 LEDs, providing better performance and visual experience for users in combination with multi-area independent backlight control. However, current mini LED applications are only found in premium models due to the high technical costs. Mini LED backlight technology is expected to be widely applied to other kinds of displays, if the costs are cut down and breakthroughs are made in the process of mass transfer, which will significantly boost the demand for chips in the LED industry. LEDinside notes that, companies with a solid foundation in backlight segment or in-house panel supply, such as Epistar, Lextar, Epileds, AOT and REFOND, etc., would be more likely to make the most of business opportunities related to Mini LED.

UV-C LED

The growth of UV-C LED market is mainly driven by three applications: static water sterilization, surface sterilization and flowing water sterilization. Static water sterilization and surface sterilization applications (such as air purifier and home appliances, etc.) do not have strict time requirements, but need to be cost-effective as much as possible as components of consumer home appliances. Therefore, it is hard to for UV-C LEDs to penetrate the market in the short term. On the other hand, running water sterilization requires high power of over 40-50mW. LEDinside notes that technological hurdles and yield rates are major challenges for UV-C LED market currently, which will be overcome in the future. However, UV-C LED remains a niche market, which requires long time for the technology to make breakthroughs. Therefore, only a small number of companies would benefit from this segment, including Seoul Semiconductor, LG Innotek, Qingdao Jason Electric, Epileds, High Power Lighting, Lite-On Technology, Everlight, and Violumas.

Automotive LED

With the price reduction and function enhancements of LEDs, the revenue and penetration rate of automotive LED lighting market have continued to grow. In 2018, the revenue of automotive LEDs would increase by 15% YoY. Particularly, the market has seen rapid growing demand from headlights and automotive panels. However, the OE market has high requirements for LED manufacturers, while more and more carmakers hope to integrate sensing components with lights, thus the current automotive original equipment (OE) market is still an oligopoly one, dominated by Osram, Nichia, and Lumileds, etc. Therefore, other LED manufacturers mainly cut into the aftermarket or performance market, or segments with lower barriers and higher LED penetration rates such as interior lighting and RCL market.

High- efficacy LED lighting

With increasingly strict regulations on energy saving and environmental protection worldwide, the LED lighting market would also prefer products with higher light efficacy. DLC regulations in the U.S. has improved light efficacy requirements for lighting products year by year; the European Union is also drafting a new energy standard, Ecodesign Working Plan 2020, requiring lighting products to have a light efficacy over 85 lm/W. Although the draft is still under public review, it has gradually attracted the attention of LED manufacturers for high-efficacy LEDs. Under this trend, major LED manufacturers such as Nichia, CREE, Lumileds, Osram, Everlight and Seoul Semiconductor, which own patents and technology for high-efficacy, will be benefited.