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Supply and demand for LEDs to stabilise in 2012

Demand from LCD backlights will continue to dominate LED demand until 2013, when it will reach its peak

The year 2011 was a challenging one for LED makers. After taking off in 2010, the growth in demand from LCD TV backlights dwindled. This was, due to a combination of slower growth in LED backlit LCD TV sales and slower growth in chips used per backlight, due to efficiency increases.

According to the "NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report", the demand for LEDs in LCD backlights did grow slightly, as use in tablet PCs and strong penetration growth in LCD monitors made up for the drop in demand from TV. Growth was also modest in lighting, as the market penetration of LEDs only grew from 1.4% in 2010 to 1.9% in 2011.

At the same time, many new LED suppliers had entered the industry, and were rapidly ramping up production. Measured in standard units of 500 × 500 µm chip size, supply grew by 41% in 2011, compared to only 10% growth in demand. This resulted in a significant over-supply throughout 2011.

“LEDs have been in surplus since the end of 2010, setting the stage for a decrease in LED prices and margins,” says Steven Sher, Analyst, NPD DisplaySearch. “As a result of this surplus situation, there has been almost no investment in LED applications, nor any significant capacity increases in 2012. This is resulting in a halving of the supply/demand glut from 2011 to 2012.”

Figure 1: LED Supply/Demand for Backlight and Lighting Applications (Source: NPD DisplaySearch Quarterly LED Supply/Demand Market Forecast Report)

Due to the growing popularity of new, 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 peak in 2012, continued growth in penetration of LED backlights will lead to slight increase in LED demand in 2013.

By 2014, lighting will become the dominant source of demand for LEDs as price reductions and efficacy improvements drive increased adoption.

The penetration of LEDs in lighting is expected to reach 16.8% in 2015. NPD believes spotlights and LED street lights will gain higher penetration in lighting due to government incentive programs, such as the 12th Five-Year Plan in China and the LED subsidy policy in Taiwan, as well as continued growth in commercial applications. LED bulbs and fluorescent tubes are growing in Japan due to government incentive programs and energy-saving consciousness, especially since the March 2011 earthquake.
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