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Weak LED backlight demand slumps revenue

Posted: 29 Aug 2011 ?? ?Print Version ?Bookmark and Share

Keywords:LED chip? LED package? LED lighting?

The weak demand for LED backlight has compromised the profitability of the industry, according to LEDinside, the LED research unit of TrendForce Corp. The total monthly revenue of LED manufacturers in Taiwan reached $298 million (NTD 8.648 billion) in July this year (MoM 6.35 percent, YoY 18.8 percent). LED chip manufacturers monthly revenue slid by 20.5 percent to $136 million (NTD 3.95 billion), compared last year (MoM 8.9 percent, YoY 20.5 percent). In addition, LED package manufacturers monthly revenue sank by 17.4 percent to $162 million (NTD 4.695 billion), compared to that of last year (MoM 4.1 percent, YoY 17.4 percent).

Affected by decreasing subsidies from local governments in China, LED chip makers have delayed their equipment installment plans, whose fulfilment will be the key to equipment makers revenues in 2H11. Additionally, the Japan earthquake, Greek debt crisis, oil price surges and global inflation have placed a dent in the worldwide demand for LCD TV and greatly damaged consumer confidence. The rising popularity of tablets has also resulted in declines in other products market shares. WitsView, another research division of TrendForce, has estimated that the annual demand for LCD TV will drop to 201?203 million units. Due to the weakening demand for end-market applications, the average utilization rates of panel makers in Taiwan and South Korea in 3Q11 are expected to reach 70?75 percent and 80?85 percent, respectively.

LED manufacturers are mainly underpinned by the demand for large backlights. Influenced by inventory digestions of TV brand vendors, weak demand in slow season and the underperformance in peak season, the revenues and utilization rates of LED chip makers have suffered major setbacks. Moreover, no rebound is in sight for the gross profit rates in 3Q11. Taking into account that Q1 and Q4 are the conventional slow seasons for the electronics industry, the downturn is expected to continue until the end of 1Q12.

With respect to LED manufacturers that have made their ways into the supply chains of tablet PCs and LED lighting supply chains in Japan, they are expected to see less decline in their revenues in 3Q11 due to steady overseas shipments. The July revenue of Genesis Photonics remained stable compared to June, whose joint efforts with JFE Engineering Corp. is expected to pay off in 2H11. Furthermore, even though the Japanese government has ceased imposing electricity rationing, the LED price trend, consumer acceptance and the possibility of re-imposing electricity rationing should still be considered.

LED revenue ranking

Monthly sales revenue

Despite the weak demand for backlight applications and chip price drop, manufacturers that have already invested in the lighting market, such as Lextar and Edison Opt, suffer less severe downturns compared to other manufacturers that solely focus on backlight applications. Benefiting from orders for invisible light and backlight applications, Liteons revenue hit $43 million (NTD 1.254 billion). On the other hand, purchase orders from Excellence Opto for vehicle lighting and street lighting have boosted High Power Optos revenue by 65 percent in July. The prevailing LED market conditions have caused product focus to shift to lighting applications. LED makers in Taiwan and South Korea stated that LED products for lighting applications are expected to account for 25?35 percent of the total product line in 2H11.

LED packaging ranking

LED package revenue

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