Due to inventory adjustments at lighting makers and weak demand for TV backlighting applications, LED chip makers are expected to suffer significant on-quarter decreases in shipments in the fourth quarter of 2014, according to LED supply chain makers.
In view of strong demand in the first half of 2014, clients took delivery of large volumes of LED chips in the second quarter, only to find that inventories were building up too fast. They then drastically reduced orders in the third quarter, the sources said.
Demand from the backlighting segment has become weak because the average number of LED chips used in TV backlight units (BLUs) has dropped due to increasing brightness of the chips, the sources indicated.
Epistar, the largest Taiwan-based LED epitaxial wafer and chip maker, is expected to see utilization of production capacity for blue-light LED chips drop below 60% in the fourth quarter and fourth-quarter consolidated revenues will slip 20-30% sequentially, the sources said.
However, Epistar's capacity utilization for AlGaInP LED chips will remain at 80-90% in the fourth quarter due to strong demand from China-based LED display vendors, the sources indicated.
