Despite the lingering market pessimism which may last through 2013 and bring even greater challenges to LED lighting companies, the anticipation of a growing market share for LED lighting gives reason for optimism.
The market slump may continue for years and the European Union, the world's largest LED lighting market, may still be under the shadow of the debt crisis, but technology improvements are brightening the prospects of the LED lighting industry, said Brian Fiser, marketing director of the U.S.-based Bridgelux. Fiser is an optimist who sees hope of a market rebound in 2013, or in 2015 at the latest, as a result of the reduction in LED-bulbs prices.
Fiser pointed out that upstream technology has significantly boosted the power efficiency of LED lighting, and that the efforts of downstream companies to add innovative functions to their lighting products will help expand LED's share of the global lighting market.
Robert Yeh, chairman of Everlight Electronics, predicted that the oversupply of upstream LED chips will continue into 2014, dragging down the prices of LED chips and final LED lighting products and thus strengthening market demand.
Yeh estimated that the penetration rate of LED lighting will reach a new high of 25% or even higher in 2013, increasing the value of the industry's global market to US$15 billion, up around 20% from the US$12.5 billion recorded in 2012. With this optimistic outlook, Yeh urged, “Taiwan should develop LED lighting brands soon; otherwise, the massive market opportunities will be captured by companies from China and Korea.”
Philips Survey
Philips is also upbeat about LED lighting market prospects, believing that the global LED lighting market will continue growing and reach a market value of around NT$2 trillion (around US$66.6 billion at NT$30:US$1).
The optimism of Philips is not without foundation. According to news reports, the company has been undergoing reorganization in the past few years and has closed unprofitable businesses like TVs, semiconductors, and monitors. Its lighting business is not only being retained but expanded, mainly to keep up with demand in the global LED lighting market. This new type of lighting is bringing new hope to the old company, which has been in business for more than a century. LED lighting products now contribute around 20% of Philips' total revenue (not including LED chips and packaging).
Philips was a bit late jumping onto the LED lighting bandwagon, but this year it seems to be performing much better than other companies in terms of LED lighting sales.
Market Performance
The current lighting market encompasses more than 80,000 kinds of lighting products, including residential lighting, office lighting, outdoor lighting, transportation lighting, factory lighting, medical lighting, and auto lights, among others. The LED is expected to broaden the field of lighting applications even further.
“The sliding LED prices will continue to encourage consumers to buy the new-generation lighting products,” commented TrendForce, an industrial research body, in an industrial report compiled by its LEDinside division. “In terms of market areas, Japan is the most-fast-growing LED lighting market in the world. In Japan, lighting stores set an annual target for LED lighting sales—roughly 30-50% of overall sales, and most stores recorded that they have reached 70-90% of the annual target in October.” These figures imply a bright performance for LED lighting sales in Japan in 2012.
According to TrendForce, the LED lighting market developed much earlier in Japan, where LED lighting appeals to consumers with its strong advantages of power efficiency and much longer life cycle, than in other countries. TrendForce estimated that annual LED bulb sales there would grow 2.6% in 2012, the small percentage of growth indicating that Japan's LED lighting market has reached a certain level of maturity. The continued growth, though small, constitutes a sharp contrast to the downturn in other areas.
Taiwan is another market with growing LED lighting sales in 2012. Compared to Japan, Taiwan's LED lighting market is lagging; in fact, it is still in the initial stage of development.
China Electric Mfg. Corp., expects sales of 600,000 LED bulbs in 2012, around five times the number it recorded the year before. The company claims that the 8W LED bulb it launched in August 2012 produces as much light as a 40W tungsten bulb, and that the 9W LED bulb it launched in September is an ideal power-efficient alternative to a 60W tungsten bulbs. With a complete line of LED bulbs, China Electric is confident in the future of its LED lighting business.
Tatung is another major electric appliance company in Taiwan. With a trademark that is over 40 years old, it is promoting LED lighting products in all of its 245 domestic outlets and chalked up an admirable performance for its LED lighting business in 2012.
A number of new suppliers have jumped into Taiwan's LED lighting market in recent years, resulting in severe competition. Large makers such as Everlight and Delta, 3C chain stores like Tsann Kuen, hypermarkets like B&Q, and convenience stores like 7-Eleven and Family Mart have all launched new projects to promote sales of LED lighting. One of their marketing strategies is price-slashing, which has significantly cut the prices of LED bulbs. The retail price of an 8W LED bulb, for example, has dropped to NT$300—a cut of around 50% from 2011—or even lower.
The Photonics Industry & Technology Development Association (PIDA) attributed the booming LED lighting sales in Taiwan to two major advantages: falling prices and improved power efficiency. It predicted that the island's LED bulb sales would top 1.05 million in 2012, 2.7 times the volume achieved in 2011.
Ongoing Price Cuts
The PIDA observed that most of LED lighting suppliers are launching their own brands and gradually reducing their OEM business. This branding strategy gives them greater flexibility in pricing, which has led to the interesting phenomenon of great price differences among different brands.
The price differences may reflect differences in the inner structure and power efficiency of different brands of LED bulbs; although different brands of bulb look much alike, they might differ substantially in functionality and quality. An LED bulb of 6W to 12W power, equivalent to a 40W-60W tungsten bulb, generally has a power efficiency range of 40 lm/W to 100 lm/W, and an illumination angle of 120-320 degrees. Among the local brands, a 6W-12W LED bulb can be sold at a price as low as NT$276 or as high as more than NT$1,400. Foreign brands are usually tagged at NT$1,012 to NT$2,220 each.
On the international market, noted LEDinside, the average price of an LED bulb equivalent to a 40W tungsten bulb in brightness dropped to US$19.6 in mid-2012. Britain recorded the largest drop in price, to just US$9.7. In the U.S. market, however, prices actually rose.
The unit price of LED bulbs is generally expected to continue falling in the foreseeable future, due partly to flagging prices of upstream materials as a result of oversupply and partly to the price-slashing marketing strategies of bulb suppliers. The rapid improvement of epitaxy manufacturing technology has also made a great contribution to the decline in upstream materials costs.
Market Prospects
In general, the global LED lighting market remains gloomy, and suppliers in the line, especially those from Taiwan and China, are facing ever more severe competition. This situation might force some companies, sooner or later, to withdraw from the market. Some estimates have it that around 30% of the LED lighting companies in the greater China area will shut down or merge within three years.
Thanks to the proliferation of small and medium-sized LED lighting manufacturers since the early 2000s, the most severe oversupply problems have been experienced in the field of low- to medium-priced products. The manufacturers of those products may be the first to be forced out of the market.
“For LED lighting companies in China, the end of the high-profit period has come and 2013 will usher in a new era of domination by slim-profit operational strategies,” commented the Topology Research Institute.
Another brewing trend for the greater China market is the strengthening of cooperative links between Taiwanese and Chinese companies for the joint development of the LED lighting market in China, where the Beijing government has instituted measures to boost sales of this new-generation lighting under its green-industry policy.
The announcement in November 2012 of a merger between San'an Optoelectronics, China's largest MOCVD (Metal Organic Chemical Vapor Deposition, a key upstream material for LED bulbs) maker, and Formosa Epitaxy Inc., Taiwan's second-largest MOCVD maker, came as no surprise to industry observers. For LED companies on the two sides of the Taiwan Strait, this merger will set an example of the integration of resources for strengthened competitiveness not only in the greater China area, but also in the worldwide market. (December 2012)
