Outlook Bright for Taiwan's LED Lighting Industry

The outlook for Taiwan's light-emitting diode (LED) lighting industry is looking brighter as local LED suppliers have acquired authorizations from fluorescent-powder developers to use their patented technologies, which have helped them keep production costs down and may allow them to escape patent lawsuit.

White diodes, especially high-power types, are the most crucial devices for LED lighting. However, the most typical and efficient technique--covering blue diodes with fluorescent powders to generating white light--is controlled by big players like Nichia of Japan and Osram Opto of Germany.

Some Taiwanese suppliers like Everlight Electronics Co., Ltd. And Lite-On Technology Corp. have licensed the technology from Osram Opto, but the royalties are pricey. Since 2005, many Taiwanese have turned to some rising powder developers in Japan and the United States for the licenses, which are not as expensive as Osram Opto's. "Their powders enable diodes with greater brightness compared with Osram's technology, but they are still behind Nichia's in terms of illumination performance, " says Jerry Lee, a senior market research fellow at the government-backed Photonics Industry & Technology Development Association (PIDA).

While Taiwanese LED suppliers using the new fluorescent powders say their products do not violate big players' patents, especially Nichia's, Lee says the final verdict will be determined in the courts.

A Patent Problem

Lee says that the patent problem has been the most sensitive issue to Taiwan's LED industry since Taiwan is already the world's largest LED supplier, meeting 52% of the world demand. But Taiwan owns only 5% of the LED-related patents registered in the United States, according to his study released in April 2004.

In Taiwan, patents awarded to foreign suppliers have outnumbered patents to local suppliers. Lee's study shows that after 1998 patents granted to Taiwanese suppliers accounted for 52% of the total patents issued on the island, a huge drop from 75% before 1998. "The shift shows that foreign LED suppliers feel uneasy about Taiwan's dominant market share, although most of the island's manufacturers still depend on non-white diodes for most of their revenues, " he says. Taiwan now supplies 700 million blue diodes a month, making it the world's largest supplier of the diodes.

Formidable production volume, Lee notes, can be Taiwan's leverage in checking the patent threats. "Who else in the world can match Taiwan for manufacturing quality and low price? But the [patent] threats could lead Taiwanese manufacturers down the track of contract production rather than brand-name suppliers, " he says.

Currently, most of Taiwan's LED bulbs are used in flat-panel displays and mobile phones as backlight source. Outdoor bulletin boards, traffic lights, household appliances and even cars are other heavy users. Industry specialists like Lee point out that the most lucrative application for LED lamps is lighting since they are brighter, longer lasting and more energy efficient than incandescent bulbs.

Lee's study shows world lighting market averages US$12 billion a year. Citing a study from market-research organization SU of the United States, spending on LED lighting is estimated to rise to US$800 million in 2008 from 2007's estimated US$600 million, 2006's US$400 million, 2005's US$350 million and 2004's US$300 million. The increases are in pace with the growth pace of Taiwan's LED industry, which Lee estimates will increase to US$1.39 billion in 2007 from 2004's US$1.07 billion.

"White-LED lamps' illumination efficiency is estimated to reach 100 lumens per watt in 2008, nearly three years earlier than the previous roadmap, " the PIDA research fellow notes. The efficiency is ideal for day-to-day lighting purposes. Another major factor is the 2008 Beijing Olympic Games, which industry watchers believe will boost demands for various goods, including power-saving lighting products like LED lamps.

Investing in the Future

The lucrative market has inspired Taiwan to embrace the business. Subsidized by the Cabinet-level National Science Council (NSC), Chang Gun University, National Cheng Kung University, National Chung Cheng University and National Huwei Institute of Technology are co-conducting a semiconductor-lighting technology integration program. The Ministry of Economic Affairs has contracted the Opto-Electronics & Systems Laboratories and Energy & Resources Laboratories of the government-backed Industrial Technology Research Institute (ITRI) to co-implement a four-year LED-lighting technology development program.

Eleven Taiwanese enterprises, including Ledtech Electronics Corp., Formosa Epitaxy Inc., Tyntek Corp., Unity Opto Technology Co., Ltd., Epistar Corp. and Everlight Electronics Co., Ltd., formed an alliance in 2002 to co-develop white-LED lighting technology with government backing of NT$383 million (US$11.6 million). The alliance has also teamed up with Taiwan Lighting Fixture Export Association to develop semiconductor lighting.

Between 2002 and 2004, the Taiwan government spent around US$4.6 million on white-LED technology programs, PIDA's data show. The spending by U.S. government will be US$50 million from 2002 to 2011. South Korea's government plans to invest US$23.4 million on similar programs between 2004 and 2008. Japan's government plowed US$10.7 million into such programs between 1998 and 2003. Mainland China spent US$3.26 million on the technology in the 2003 to 2005 period. And the European Union spent US$980, 000 from 1997 to 2000.

In Taiwan, the Taipei Cultural Center building is lighting up its ceilings with LED lamps, while the NSC has equipped its headquarter building's lobby with LED lamps.

In the LED-lighting segment, Lee notes Taiwan's major advantage over other rivals is its well-integrated LED industry, which has incorporated upstream, middle-stream and down-stream segments. Since Taiwan's first LED supplier was founded in 1975, the island today has over 30 LED-related suppliers including providers of packaging, epitaxy-wafer manufacturing and chip-making services. The island's information-technology industry has helped incubate the LED sector into an economy-of-scale industry with the huge production volume needed to keep costs down.

This cost advantage has helped Taiwan retain its title of the "Lighting Kingdom" in the emerging age of LED lighting. (Dec. 2005)