The LED Industry Saw a Recovery with Increased Orders of Large-Size LED Backlights

The LED industry saw a recovery in the first quarter with increased orders of large-size LED backlights. This has increased LED firms' utilization rates to around 80-90% and revenues in March will increase as well. This is an improvement compared to the decline in the fourth quarter of 2011. However, capacity utilization is not equivalent to profits and LED firms still expect to see losses in the first quarter. Global TV brand vendors such as Samsung and LG will soon launch new LED TVs, which is boosting orders for LED backlight units (BLUs). But the LED industry is still being hit by oversupply. Even though new LED TVs offer much better specifications, price competition is heavy. Firms say that TV brands have strict requirements for LED BLUs, but the prices they offer are so low that there even has been negative gross margin in some cases. Demand for LED TV applications is boosting LED chip makers' capacity utilization, and as a result, firms including Epistar and Formosa Epitaxy saw revenues rebound 15-20% in February, and their sales are expected to grow even more in March. However, LED firms said the bust in 2011 is still fresh in their memory and if new TV sales are not as high as expected in the second quarter, there will be competition of getting rid of excess inventory. LED plants are still cautious and will be observing the market closely in May and June. LED firms pointed out that Taiwan's LED backlighting applications are mainly shipped to South Korea brand vendors. In late 2011, these Korean clients required higher LED BLU specifications for their new TV models: the LEDs were 20% brighter and LED driver voltage increased to 3.1- 3.2 volts. But as the industry was at a low at the time, LED components prices continued to be suppressed in line with TV manufacturers' cost control. In contrast, China TV brands have lower requirements for LED BLUs, which means higher margins for the supply chain. Demand from China is already growing ahead of the Labor Day holidays in May. Corresponding LED TV supply chains said even though the LED industry will become stronger in upcoming months, the first quarter of operation will focus mainly on South Korean TV backlighting and losses will narrow compared to fourth-quarter 2011. But it is estimated that small- and medium-size products will increase in sales in the second quarter and with the LED lighting market gradually opening up, orders are increasing and sales are expected to break even during the same time. Sources in the industry said they expect to see a 70% growth in LED TV sales during 2012, but that large-size TV backlighting no longer contributes to an improved gross profit margin for LED manufacturers. LED chip count in TV BLUs is decreasing - a 42-inch TV model now only needs 120 LED chips. Nevertheless, LED manufacturers will be using lighting as the layout for competing in the market during 2012, especially in specialized lighting markets, such as applications for plant factories and automobiles. Source: www.digitimes.com