Trade Resources Industry Views Tough Battle Ahead for Taiwanese LED Manufacturers Following Revenue Drops in August

Tough Battle Ahead for Taiwanese LED Manufacturers Following Revenue Drops in August

Taiwanese LED manufacturers revenue performance continued to wane in August, according to Pingan Securities. Revenue performances downed both annually and on a monthly basis, according to statistics released by Taiwanese companies.

The downtrend was mainly caused by Philips low LED bulb pricing strategies of US $2.5 per bulb in May 2015 that ignited large scale price wars, analyzed Pingan Securities. Weak LED backlight demands in the notebook and mid to large-screened TVs have also impacted LED demands. The Chinese financial institute projected impact from the above two factors would continue well into third quarter, and gave a pessimistic outlook of the LED industry developments in September 2015.

LED industry reaching a low point despite new product releases

During April 2015, many LED manufacturers initiated LED bulb price wars that have been ongoing for four months. Based on manufacturers stock up cycles, it is about time that older LED models are cleared from the inventory. Epistar and GPI have reported LED orders rebounded in September. With the European and U.S. market entering its lighting replacement season from September to December plus lower LED prices, new products have been released onto the market. It is expected demands will improve in September, but with suppliers clearing inventories with low pricing strategies some smaller manufacturers risk bankruptcy. Remaining manufacturers will implement more stringent measures to regulate inventory and supply. Based on these observations, Pingan Securities estimates the LED industry is hitting rock bottom during fourth quarter.

LED manufacturers aim to transform business models during times of difficulty

LED manufacturers profitability were compressed, due to price wars and many manufacturers adjustments of their business models. International giants Osram, Philips and Samsung have chosen reduction strategies, while Panasonic announced it will be shutting down two LED manufacturing facilities in Japan by the end of September this year. Closure of the company’s factories in Indonesia is scheduled to be completed by the end of October 2015. This trend has urged MLS, Hongliopto, Lianovation and other domestic LED package manufacturers to establish their own strategic lists during second half of 2015.Some are searching to expand through horizontal acquisitions and others through vertical mergers. Nonetheless, it is becoming evident that the difficult circumstances are accelerating the LED industry’s concentration. Leading LED manufacturers in China are solidifying their market positions through acquisitions and integrating new businesses, as they carve out their path to becoming a national brand.

LED bulb price wars have been ongoing for more than four months, driving prices to rock bottom. These developments have made horizontal and vertical integration a definite trend in the industry. Manufacturers that possess both technology and size advantages will have an advantage edge during the integration process.

Source: http://www.ledinside.com/news/2015/9/tough_battle_ahead_for_taiwanese_led_manufacturers_following_revenue_drops_in_august
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