Global LED Industry Sees Shifts in Power Dynamics; Taiwan Manufacturers Face Formidable Rivals

　　The global LED industry has entered a period of shifting power dynamics. With major Japanese lighting manufacturers igniting a price war and ushering in the take-off year for LED lighting, South Korean and mainland Chinese players are also advancing aggressively, intensifying regional industry competition and prompting Taiwan's LED manufacturers to accelerate their lighting application deployments. However, the LED capacity race in 2011 may trigger concerns of oversupply, and competition between Taiwan manufacturers and international giants is set to intensify.

　　Large-size LCD backlighting and LED lighting are regarded as the dual growth engines for 2011. The industry estimates that compared with the global LED lighting penetration rate of about 3% in 2010, the penetration rate in 2011 is expected to reach 6-10%. Japanese LED lighting developments attract the most attention. Amid fierce price-cutting competition in the market, driven by the Japanese government in 2010, leading manufacturers including Toshiba and Panasonic have slashed LED bulb prices. Taiwan-based LED manufacturers estimate that with the cost-reduction trend, LED bulb prices will continue to slide in 2011.

　　LED industry players point out that currently European and American LED manufacturers' lighting product prices are around USD 1.5 per watt, while Taiwan manufacturers' prices are at USD 1.2, giving them cost competitiveness. Due to LED supply shortages in 2010, annual price declines were mild, with noticeable price drops only in the fourth quarter, including a 10-15% decline in high-power LED prices. Looking ahead to 2011, LEDTV moving toward cost reductions will lead to more LED chip capacity being used in lighting applications, and high-power LED lighting is expected to face at least a 15-20% price decline.

　　The LED industry estimates that Taiwan's LED industry output value reached approximately NT$151.6 billion in 2010, a growth of about 60%. The output value in 2011 is expected to challenge NT$201.5 billion, while in 2012 and 2013 the output value is projected to challenge NT$270 billion and NT$380 billion respectively. As for the global LED industry output value, it is expected to challenge the US$50 billion mark within 3 years at the fastest, and regional industry competition has entered a white-hot stage.

　　Comparing the LED packaging and module output values across global regions, Japanese manufacturers hold a market share of approximately 31%, ranking first, while Taiwan and South Korea each reach around 20%, and Europe and the United States each account for about 10%. Among them, South Korean players had a market share of only about 10% in 2009, but within one year it quickly jumped to 20%, keeping pace with Taiwan's LED industry. The industry further estimates that South Korea's LED output value will continue to grow over the next two years, with the LED packaging market share expected to rise to 24-25%, while Taiwan's LED packaging market share will remain stagnant.

　　However, LED industry players point out that, since South Korean LED manufacturers' capacity utilization rate is still relatively low, their capacity expansion progress has noticeably slowed since the second half of 2010. On the contrary, Taiwanese manufacturers have benefited from the sharp increase in demand for TV backlighting from Korean manufacturers, and the increase in LED procurement from Taiwan has driven significant growth in LED capacity. However, mainland Chinese LED players are catching up rapidly, and upstream MOCVD equipment may be mass-deployed in the second half of 2011. Industry players worry that once South Korean LED manufacturers upgrade their technology and mainland Chinese manufacturers also ramp up their capacity, an overcapacity race may be triggered in 2011, with the LED market entering a price-cutting competition and price drops potentially reaching over 30%.

(Editor: zl)