By BizLED Bureau
Nov 24, 2015: Industry experts have already started predicting the trends of the global LED industry in 2016. Despite increasing demand for LED lighting, and large scale replacements of traditional lighting to LED lighting, the oversupply situation in the market has led the average sales price (ASP) of LEDs to increase from 30% to 40%.
Rate of LED component market growth to shrink
LEDinside estimates the global high brightness LED market value in 2015 to increase at an incremental rate of 2% to US$14.52 billion. Although high lighting demands spurred LED usage volume growth, ironically the increasingly energy efficient LEDs are reducing usage volume. Manufacturers are still are under immense pressure to further lower prices of LEDs. Based on these observations, LEDinside projects that in the next five years, the LED industry?s compound annual growth rate (CAGR) is unlikely to reach more than 10% in the future.
Limited scope for further price cuts
The demand for LED backlights fell short of expectations, causing sliding ASP of LED chips and LED package. This trend has been observed during the second half of 2015, when LED chip and package prices sharply plunged to the point that some LED chip and package spec prices are now close to material costs. As a result, many manufacturers have incurred losses. Though manufacturers are being pressured to lower prices in the short term, in the long run, there will be limited room for further price cuts.
Manufacturers will look for different cost reducing solutions
In 2016, manufacturers will continue to face cost cutting solutions. Besides lowering LED chip prices, manufacturers will start to evaluate whether LED driver and other component prices can be further lowered. Manufacturers aim to reach a cost reducing solution through the overall system design. LED lighting manufacturers are seeking to raise their market shares through low pricing strategies to expand sales and revenue. So, LED light sources to replace traditional lighting products market shares, which will increase in the next three years.
Much depend on China?s LED policy
Over the last decade, the Chinese government supported the local LED industry, so it has become the world?s largest LED lighting manufacturing base, but still it depends on international manufacturers for few upstream MOCVD equipment and materials. So their future policies will encourage innovation, and focus on upstream raw materials or smart lighting applications following the emergence of the Internet of Things (IoT).
A bankruptcy wave will hit the industry
Due to currency fluctuations in 2015, end market demands in several countries have been much lower. LED prices have also continued to slide in 2015. Many SMEs in the LED industry are facing financial losses, and sinking into negative cash flow cycles. These developments have ousted many smaller manufacturers. The next bankruptcy wave in the LED industry will be evident before the Chinese Lunar New Year.
Chinese LED companies have been acquiring international companies to transform their business models. This trend will continue.
Some of them are targeting major international LED players? patents and lighting brands, hoping to strengthen their patent portfolio and oversea distribution channels.
Apart from that, these manufacturers are also transforming their business models. Some of them aim to enter other market sectors through mergers and acquisitions.
No smooth sailing for smart lighting sector
Although LED companies are able to raise retail prices for smart LED lighting products, sales have fallen below and the issue is whether smart lighting products with added value can meet consumer demands. Most smart lighting products with added value have been remotely controlling lighting devices. They have features like dimming and color tuning, but despite added features, most consumers are unwilling to pay extra cost for these product features, which will impact smart lighting sector?s overall supply chain ecosystem, and requires long term observations.
Laser will replace LED in automotive lighting?
LED automotive lighting developments have shifted from high-class car models to mid and high-class car models. It is expected that laser lights will fill this void, but since automotive laser supplies are only available in small volumes it will be applied in specific car brands and car models. Following the entry of more suppliers in the market, it is hoped that the proliferation of laser car lights will spread to more car models. Besides, adaptive driving beam is an emerging trend. Adaptive driving beam headlights control semiconductor that are incorporated in the LED headlight, shutting off particular lighting beam area, which prevents glaring issue from oncoming vehicles.
Non-visible LED light applications will get a boost
Due to fierce LED pricing competition in the white LED market, manufacturers are looking for innovative or special lighting applications and are turning their focus to LED applications in the non-visible light spectrum, such as UV or IR LEDs. LEDs in the non-visible LED sector have a small market size that cannot be compared to LED lighting or backlight applications. Therefore, non-visible LED products gross margins are evidently better than white LEDs.
Flip chip LEDs will see various applications
In the technology front, some important LED technology developments will take place in 2016.
A growing number of Taiwanese and Chinese LED manufacturers are promoting the LED technology to be used in a wide range of applications, for example, the smaller CSP LEDs usage in the TV backlights. As a result, it spurred the rapid ascension of flip chip LEDs market penetration in the LED TV market in the last few years.