The Price Downtrend Persisted in The LED Market in 3q11

According to the latest price survey conducted by LEDinside, a research division of TrendForce, the price downtrend persisted in the LED market in 3Q11. The price of LED (5630) for TV backlight dropped by 8-15%. Since TV backlight products will start adopting 7030 spec in 2012, South Korea manufacturers have been aggressively digesting the inventory of older specification, which result in a huge price gap in the market.

The price of high-power LED plunged by approximately 8-10%, which is less drastic compared to drop in 2Q11. The minor price plunge reflects the fact that the lighting market’s demand is rather stable, but huge orders are still rare in the market. Looking at 4Q11, in addition to transition from the old to the new specification, the LED makers will continue to face inventory pressure. Hence, the prices of  LED (5630) for TV backlight and high power LED are expected to continue to fall.


Transition to New Module Triggered Apparent Decline in TV Backlight Price
Due to the underperformance of LCD TV sales in 3Q11, the price of LED (5630) for TV backlight took the most considerable dip of 10-15%. Most notably, LCD TV manufacturers plan to adopt new the 7030 spec in 2012, resulting in an uncertain price outlook in the market. South Korean manufacturers’ aggressive inventory digestion caused a huge price gap in the market. LEDinside predicts that the price will continue to drop in 4Q11.

South Korean and Chinese Makers to Spur Price Competition in Portable Device Market
Due to its maturity, the LED price for the notebooks, monitors and mobile devices only experienced a slight drop of 5-10%. As for mobile phone’s backlight module, the price drop averaged 8-10%.

LEDs for notebooks and mobile devices are relatively cheap, and they are the key products for Taiwanese LED manufacturers. However, as more and more Chinese LED manufacturers have made their way into the mobile backlight market while South Korean makers’ increasing their focus on mobile backlight module, the price competition is expected to intensify.

LED for Lighting Products Experienced Relatively Small Price Downtrend; Price Competition Remains Fierce
The decreased growth momentum of the LED lighting market in 3Q11 was caused by the global economy climate. The market demand is mainly underpinned by the indoor lighting sector. In order to obtain cost competitiveness, the majority of LED indoor lighting products adopt 5630 and 3014 LED packages, which compromises the demand for high-power LED. In addition, the manufacturers continue to cut prices in order to stimulate demand. However, due to the sharp appreciation of US dollar and Renminbi, Taiwanese maufacturers’ LED prices merely dropped 5-10% after they were converted into NT dollar, which alleviates their price pressure.

On the other hand, the price competition between global major companies remained fierce. In particular, these major global firms each offer more room for price negotiation for important clients; Japanese, South Korean, European and American manufacturers have all cut prices. As for 4Q11, LED inventory pressure will most likely persist. The uncertain economic conditions affect manufacturers’ inclination to purchase materials in advance, which will in turn cause price downtrend in 4Q11.

LEDinside Insights
According to LEDinside’s analysis, the LED market is still under oversupply pressure; most of LED companies are currently facing inventory pressure. Therefore, LED price downtrend is expected to persist in 4Q11. However, LED lighting demand has recently begun to pick up: in addition to the existing demand from Japanese, European and American markets, Australian government has also started to replace traditional street lights with LED ones. Looking at 4Q11, China’s “Roadmap to Phase-Out Incandescent Light Bulbs” is schedule to take effect since October, 2011. These policies are expected to increase demand for LED lighting.