Overheat 2010 Market
After the crazy pursuit of LED build in 2010 and oversupply in 2011 that suppressed 2012 fabrication, LED makers would have seen a more or less leveling out of supply and demand. Demand is seeing drifting from LCD-backlit LEDs to LED for lighting.
2011 2012 Oversupply
In 2011, due to a combination of slower sales growth in LED-backlit LCD TV and slower growth in chips-per-backlight, much improved LED lighting efficiency and light guide efficiency. The demand for LEDs in LCD backlights did grow merely slightly, as tablet PCs goes larger and stronger penetration growth in LCD monitors*1 made up for the slash in demand from LED TV. Growth was also modest in lighting segment, as the market penetration of LEDs only grew from 1.4% in 2010 to 1.9% in 2011.
Many new LED suppliers have entered this market with rapid ramping up production. Chip size of 500um2 supply grew by 41% in 2011, compared to only 10% growth in demand. This resulted in another significant oversupply. At Same time the LED Chip MOCVD installations were either on halt or delayed.
Further ASP Drops in 2012
LEDs have been in surplus since the Oct of 2010, setting the stage for a decrease in LED prices and profit margin drastically. As a result, there has been almost no new investment in LED applications, nor any significant capacity increases in 2012. This is resulting in a 50% drop of the supply/demand glut from 2011 to 2012.
We speculate that Demand from LCD backlights will continue to dominate LED demand until end 2012, when it will reach its peak. Due to the growing popularity of advance, 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 be at peak in 2012, continuing to growth in penetration of LED backlights will lead to a small insignificant growth in 2013.
By 2014, lighting by LED will become the major demand for LEDs as price reductions will be really attractive to most of the end users and at the same time efficacy improvements drive for an increased adoption.
The penetration of LEDs in lighting will reach 17% in 2015, according to LED Market Forecast Report.
Lighting LED situation Highlight
Spotlights and LED street lights will gain higher penetration in lighting segment due to government incentive programs which acted as the major LED driver as in China 2009. The 12th Five-Year Plan in
China and the LED subsidy policy in , as well as continued growth in commercial applications. LED bulbs and fluorescent tubes are growing in Taiwan due to government incentive programs and energy-saving consciousness, especially following the March 2011 earthquake. Japan
Philips recently made an aggressive offer of less 50% for the new 10W LED light bulb for a low price as $25, and that is a big impact for the market, and I believe other major key players will observe and adjust the price at the same time.
Sapphire Substrate Supply
Rubicon’s major income on 2H 11 was coming from 6” Sapphire substrates, due to the inventory of LED substrates is high. The 1H 12 Sales will not be promising for 6” Substrates. However we could see tat SoS (silicon on sapphire) market grows 2 times from 1Q12 as comparing with Q4 11. We will see that 2H 12 Would enjoy certain growth on this 6” SoS substrates.
Rubicon will try to maintain competitive price, and they might reduce cost 20% in 2013 to maintain the profit level.
China RMB26.5bn Home appliance Subsidies
The program will be in effect for one year, and target air conditioners, flat-panel television sets, refrigerators, washing machines and water heaters. The program also earmarks RMB2.2bn for LED and other energy-saving light bulbs and LEDs.’
LED Equipment demand
If we assume the government is planning on subsidizing ~50% of LED bulb cost, assuming an average pre-subsidy price per LED bulb of ~$7, and assuming China accounts for ~20% of the worldwide bulb market, this subsidy would translate to ~104M bulbs or ~5% of China's bulb demand.
Like what we had mentioned that in the previous report, the Q4 2012 will be the turning point for the LED to move up from valley into a more or less higher growth rate after 2 years of quietness. Main driver is LED lighting. Many of the LEDMaker equipment utilization is still running at 60-75% range, with the new lighting bulb demand and China Incentive to support LED. We will see some bigger demand of LED manufacturing equipment by Oct. 2012. LED market will keep on growing 2013-2014