Brief Review of 2010 LED Industry Development – LED Manufacturers Celebrated a Fruitful Year

2010 was a fruitful year for LED manufacturers. Not only did manufacturers overcome the gloomy market condition in 2009, most managed to grow their revenues at an exponential rate due to the robust demand for large-size LED backlighting.According to LEDinside, total revenue of global packagers in 2010 reached $12.8 billion with an annual growth rate of 57%. In regional performance, Korean output value in particular, increased at an exceptional rate – the main reason behind the growth was that large conglomerates that own television brands such as Samsung and LG provided the necessary support to drive the growth of Korea’s LED industry.

Looking forward into 2011, LED-backlit TV and LED lighting markets are still the main driving force for the LED demand, and LEDinside estimates that there is still substantial room for further growth. From the perspective of market supply, LED manufacturers have undergone aggressive capacity expansion in 2010. Therefore, it is foreseeable that in 2011, the industry will witness explosive growth in both supply and demand. Nonetheless, only the manufacturers which are able to maintain quality while keeping costs low can outperform others in the competitive industry.

Although LED backlit TV penetration rate only reached 18.5% in 2010, which was lower than what LED manufacturers had expected, more TV brand vendors and manufacturers are jumping on the bandwagon of introducing LED-backlit models in 2011, which is expected to increase the penetration rate of LED-backlit TV from 18.5% to 43%.

As for the development trend of LED-backlit TV in 2011, edge type have more cost competitive advantages than direct type, thus, edge type will be the market mainstream with a focus on developing thinner and lower cost models. For high-end TV sets with slimmer bezel, manufacturers continue to slim down the light guide plates, reducing the thickness of LCM from 10mm to 9mm. Direct type LED backlit TVs on the other hand, use LCM that has a thickness of 20~22mm, about twice as thick as that of edge type. Therefore, unless manufacturers can achieve a significant technological breakthrough or find an alternative to overcome the thickness issue of direct type LED backlighting, it will be difficult to witness notable growth in this segment in the near future.

Furthermore, as a solution to bringing down production costs, manufacturers successfully reduced the number of LEDs used in backlighting through advanced optical films and optic designs. Currently, a 42-inch LED-backlit TV uses 230 units of LEDs and the number is expected to drop to 120~150 in 2011, substantially decreasing the cost of LED backlight module. It is exciting news for end product applications as the difference in retail price of LED TVs and CCFL backlit TVs is estimated to narrow down to 20% in 2011, compared to 30~40% in 2010.

Although the market penetration rate of LED-backlit TV is estimated to rise dramatically in 2011, LEDs used in mid- to large-size backlight applications will see no signs of oversupply. Yet, LEDinside believes that the growth rate of LED-backlit TV will gradually slow down after 2012. Thereafter, the market demand momentum will have to be driven by LED lighting applications.

According to LEDinside, revenues from LED lighting applications are estimated at $1.8 billion in 2010, an 81% annual growth rate compared to 2009, of which, architectural lighting and projection for commercial purposes account for the majority. In general lighting market, the price difference between LEDs used in indoor lighting and traditional lamps is still significant, and thus it creates a huge hurdle in consumers’ willingness to switch.

Global warming has brought more pressure on countries around the globe to reduce carbon emissions, and governments in many countries continue to implement subsidies for renewable energy and other means of carbon reduction. Japan, being the most representative country among all, carried out a comprehensive plan called “Eco-Point,” aiming to provide subsidies for energy-saving household appliances. The outcome was a huge success in 2010. In particular, the Japanese government encouraged consumers to use the Eco-Point obtained from buying appliance in exchange for free LED bulbs, which indirectly stimulated the LED market. Eco-Point program was initially slated to expire at the end of 2010, but considering the domestic economic condition, the Japanese government extended the subsidy till March 2011. There is currently no official information as to whether there will be other similar subsidy policies after Eco-Point is terminated.