Is the LED boom and bust cycle leveling out?

May 16, 2012 — After a surge in 2010 and oversupply in 2011 that suppressed 2012 fab, light-emitting diode (LED) makers will see a leveling out of supply and demand into better equilibrium, according to the NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report. Demand will shift from liquid crystal display (LCD)-backlit LEDs to LEDs for lighting.

LED makers faced challenges in 2011, after skyrocketing demand in 2010. In 2011, growth in demand from LCD TV backlights reversed course, due to a combination of slower growth in LED-backlit LCD TV sales and slower growth in chips-per-backlight, due to efficiency increases. The demand for LEDs in LCD backlights did grow slightly, as use in tablet PCs and strong penetration growth in LCD monitors made up for the drop in demand from TV. Growth was also modest in lighting, as the market penetration of LEDs only grew from 1.4% in 2010 to 1.9% in 2011.

At the same time, many new LED suppliers had entered the industry, and were rapidly ramping up production. Measured in standard units of 500µm2 chip size, supply grew by 41% in 2011, compared to only 10% growth in demand. This resulted in a significant oversupply.

“LEDs have been in surplus since the end of 2010, setting the stage for a decrease in LED prices and margins,” said Steven Sher, analyst, NPD DisplaySearch. “As a result of this surplus situation, there has been almost no investment in LED applications, nor any significant capacity increases in 2012. This is resulting in a halving of the supply/demand glut from 2011 to 2012.”

Figure. LED supply/demand for backlight and lighting applications. SOURCE: NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report.

Demand from LCD backlights will continue to dominate LED demand until 2013, when it will reach its peak. Due to the growing popularity of new, low-cost direct-LED backlight designs for LCD TVs, the demand for LEDs in backlights will continue to increase through 2013. While the number of LED packages per LCD backlight unit will peak in 2012, continued growth in penetration of LED backlights will lead to slight increase in LED demand in 2013.

By 2014, lighting will become the dominant source of demand for LEDs as price reductions and efficacy improvements drive increased adoption. The penetration of LEDs in lighting will reach 16.8% in 2015, according to the Quarterly LED Supply/Demand Market Forecast Report.

Spotlights and LED street lights will gain higher penetration in lighting due to government incentive programs, such as the 12th Five-Year Plan in China and the LED subsidy policy in Taiwan, as well as continued growth in commercial applications. LED bulbs and fluorescent tubes are growing in Japan due to government incentive programs and energy-saving consciousness, especially following the March 2011 earthquake.

The NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report analyzes supply and demand on a quarterly basis for the entire LED industry. From chip prices to LED maker roadmaps, this report gives a clear outlook and reliable forecast of LED supply/demand, along with an analysis of the impacts on pricing. DisplaySearch provides market research and consulting on the display supply chain, as well as the emerging photovoltaic/solar cell industries. For more information on DisplaySearch analysts, reports and industry events, visit http://www.displaysearch.com/.

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