Weak demand on TV backlight affects Taiwanese LED makers
The LED chip manufacturers’ monthly revenue has decreased by 6.1% to NTD 4.34 billion, compared with that of last year (MoM-6.2%; YoY-6.1%). Furthermore, the LED package manufacturers’ monthly revenue has sharply dropped by 14.8% to NTD 4.89 billion, compared with that of last year (MoM-6.1%, YoY-14.8%).Taiwanese chip manufacturers’ performance of June 2011LED chip manufacturers’ performance of June 2011 indicated that, due to weak backlight demand, LED manufacturers’ production capacity has decreased to 50%, and shifted MOCVD equipment from production development to R&D development.Although backlight market performance is less than expected, LED backlight market is still the main development area for LED manufacturers before the popularization of LED lighting products. The LED chip manufacturers’ monthly revenue has decreased by 6.2% to NTD 4.34 billion.Notably, Lextar benefited from ODM/OEM orders from international lighting companies with 30% of the revenue from LED lighting products. Additionally, its parent company, AUQ group, continues to contribute to the stable orders from within. Currently, more than half of its lighting products are shipped to Japan, and order backlogs are queuing up until end of August. Hence, the company’s sales performance of third quarter is noteworthy.Taiwanese package manufacturers’ performance of June 2011Moreover, Lite-On Technology benefited from increasing orders of invisible light products and backlight products in addition to commenced development of lighting business. The sales figure of Lite-On Technology set a record high and reached NTD 1.32 billion (MoM+3.1, YoY+23.5%).Due to the weak demand in the backlight market, most Taiwanese package manufacturers’ performance extensively dropped, and their business strategy commonly shifted to focus on increasing lighting products in 2H11. Furthermore, Unity Opto’s Beijing plant is estimated to be come on line in early 2012, and is projected to conveniently offer LED backlight products to BOE and LED lighting products to the Northern Chinese market.In addition, Korean LED manufacturers postponed their expansion plans due to weak TV sales. However, rising inventory level led to severe price cuts. Manufacturers even sold their LED inventories at low price to the lighting market, which in turn raised competitive pressure of the lighting market.LED market trend of 2Q/11In addition, due to slow economic recovery, the worldwide LED backlit TV shipment is obviously less than expected. It is estimated that TV shipment in 2011 is adjusted down to 203 million units from 220 million. Moreover, the price gap between LED backlight and CCFL backlight still exist, so most TV vendors have downgraded their target LED penetration rate for TV to 50%.Furthermore, LEDinside predicts that LED usage volume for the TV application is only 17.5 billion units, which translates to USD 167 million, a decrease of 26%, compared to TV brand vendors’ expectation. Currently, many LED makers indicate that TV demand remains unclear until July. However, as demand from early inventory fulfillment for Christmas holiday season is going to end, many manufacturers take a pessimistic attitude toward the market condition of 2H11.On the other hand, affected by Japanese earthquake, demand for LED lighting rose earlier than expected. Starting from July 1 to September 30, energy-saving policy is conducted in service areas of Tokyo Electric Power Company and Tohoku Electric Power Company. LED light bulb discount coupon and free LED light bulbs are used to encourage participating households and enterprises. It is estimated that LED lighting replacement can bring business opportunities.Korean government announced “Green LED lighting popularity development program” on June 8, and expects penetration rate of LED lighting to rise to 60%. A series of subsidies and LED installation plans are introduced as well. In addition to LED carbon trading system, it is estimated that there is a 26% increase in demand from LED lighting replacement.Lighting manufacturers of various types such as LED manufacturers, traditional lighting vendors and penal makers are eager to enter the lighting market in 2011. LEDinside estimates that the market heat will extend till 2012, and the LED lighting penetration rate is expected to increase to over 7%.At early stage of the lighting market development, if severe price competition occurs, it will lead to Gresham’s Law and accelerates the industry reformation. Therefore, only companies that attain superior product quality, cost management, and have a stable customer base and channel management can stand out in the market.