Of 46 Chinese LED chip projects planned in 2009-2010, just 20 put into production
Reportlinker has made available a new market research report ‘Global and China LED Industry Report, 2011-2012’ from China Research and Intelligence Co Ltd (CRI) that covers the recent development and future trends of the LED market; LED industry ranking; the LED industry in mainland China and Taiwan; trends in the upstream metal-organic chemical vapour deposition (MOCVD) and sapphire substrate sectors; and the world’s 37 biggest LED makers.
While 2010 was the LED industry’s springtime, 2011 was its wintertime, notes the report. For most manufacturers, the cold winter may last until 2013 or 2014. In 2009, the notebook computer, monitor and TV sectors started to adopt LED backlight units (BLUs) to replace old cold-cathode fluorescent lamp (CCFL) BLUs. In 2010, the market grew by leaps and bounds and many enterprises saw their annual revenue soar more than 100%, prompting a wave of capacity expansions among LED makers and attracting many Chinese enterprises to tap into the LED arena. All this contributed to LED prices falling. In particular, front-end epitaxy suffered a steep drop in price, notes the report. Back-end packaging firms showed a mild downturn in revenue, but a larger decline in profit.
The global LED industry is concentrated in four regions. The Europe-America region takes general lighting as its main development focus and attaches great importance to high reliability and high brightness of the products. Of the main players (Cree, Philips Lumileds and Osram Opto Semiconductors), Cree occupies the leading position in the general lighting market, aided by its silicon carbide (SiC) substrate technology.
Japan boasts the most comprehensive technologies, both in general light and backlit displays. The main firms are Nichia Corp and Toyoda Gosei, developing LEDs for sectors such as general lighting, automobiles, mobile phones and TVs.
The third region includes South Korea and Taiwan, which specialize in BLUs for notebook displays, LED monitors, LED TVs and mobile phone BLUs (featuring large shipments, low unit price, and low gross profit).
Mainland China focuses on outdoor displays, advertising screens and the signal light market. The applications place low requirements on product technologies and appear in the form of projects, with customers widely spread.
The report lists the following reasons why manufacturers in mainland China are only producing red, yellow and green LEDs with minimal technical content. First, there is a shortage of LED expertise (nearly all manufacturers in mainland China recruit talent from Taiwanese firms by offering higher salaries, says the report). Second, the patents for blue LEDs and white LEDs are mostly controlled by Japanese, European and US manufacturers (with Nichia in particular having secured the most patents and often pursuing patent lawsuits). Third is the authority for procurement. Although mainland China is the world’s largest producer of laptop computers, monitors and LED TVs, the procurement authority for 99% of these LED backlight products belongs to manufacturers in Taiwan and South Korea, which select LED suppliers in those countries with regard to management of the supply chain.
LED prices fell substantially in 2011. On the one hand, capacity expansion by manufacturers led to market oversupply. On the other hand, declining shipments of LED TVs in second-quarter 2011 and the adoption of LED chips with higher brightness reduced LED consumption. Firms in Taiwan and South Korea were hardest hit by the declining price, notes the report.
Since 2009, the LED industry in mainland China has witnessed a wave of investments that continued until the end of 2011. The number of LED chip projects initiated between 2009 and 2010 totaled 46. However, of these, 16 have not gone into operation, 10 have been cancelled or seen no progress, and only 20 have been put into production. The original 46 projects planned to buy 1220 MOCVD systems, but only 436 systems have been purchased.
Although there are a number of LED enterprises in mainland China, they do not represent any threat to foreign companies for the time being. China's largest LED enterprise, Sanan Optoelectronics, derived $180m in revenue from LED chips in 2011, ranking only 19th worldwide.
However, LED lighting – for which LED makers hold much optimism - is by no means as promising as expected, says the report. There is a large disparity between the price of LEDs and that of compact fluorescent lamps (CFLs). Other than in Japan, the price of even the lowest-priced LED bulb is about five times higher than that of a CFL. In most regions, the sales of incandescents will be halted between 2012 and the end of 2015, but the CFL will be in use until at least 2020. Other than incandescents, the CFL is the LED’s main rival. Nevertheless, LED lighting is expected to be widely applied as soon as 2015, when the price differential between CFL and LED narrows to two-fold, reckons the report.
Japan has the largest LED lighting market. For example, the global sales volume of LED bulbs reached 41 million units in 2011, of which Japan accounted for 62% and Europe just 16%. Fueled by the boom in the Japanese market, Nichia continues to widen the gap with its rivals, and its revenue from LED chips is estimated to exceed $3bn. Dragged down by the European economy, Philips Lumileds and Osram Opto Semiconductors present weak performance. Moreover, they still lag behind Cree, Nichia and Toyoda Gosei in technology, concludes the report.
