Taiwan's LED Lighting Makers See Brighter Times Ahead

Falling prices will boost sales in the years to come

Having weathered the doldrums of 2012, Taiwan's LED lighting industry seems to be catching a glimmer of light at the beginning of 2013. Stocks of major LED lighting manufacturers were buoyant when the stock market opened after the New Year holidays, implying brighter prospects in the year ahead.

For most industries the first quarter is usually a slack season, but Taiwan's LED lighting industry is optimistic because of the increasing application of LED lighting and the healthy consolidation that the industry has undergone.

The prices of LED lighting products have been falling—bad for the industry's profits in the short term, but boosting the penetration of LED lighting. (Philips lighting expects the global LED lighting penetration rate to reach 50% by 2015.) Most LED manufacturers reportedly expect revenues to grow this year; according to a survey cited by the Taiwan LED Lighting Alliance, the global LED lighting market is expected to grow at a compound annual rate of 32% from 2010 to 2020. The promotion of energy-saving LED lighting by government's everywhere will help achieve this growth.

As a result, Formosa Epitaxy believes that the LED industry will enjoy a general improvement, and Genesis Photonics doesn't think that there will be an oversupply of LEDs this year.

TrendForce's LED research arm, LEDinside, predicts that the size of the global LED lighting market may top US$11 billion this year, for a growth of 26%, and that it will continue growing to US$19.2 billion in 2015, for a compound annual growth rate of 20% during the 2012-2015 period.

Expansion in the Offing
According to LEDinside, the expected boom in the LED industry this year will encourage companies in the line to expand their operations. Two of Taiwan's LED companies held extraordinary shareholders' meetings in the first week of this year, Formosa Epitaxy to approve the transfer of a major stake to China's San'an Optoelectronics, and Tera Xtal to consider the raising of funds through the issuance of another 100 million shares. These moves imply new investments in the near future.

Nan Ya Photonics, a joint venture between Formosa Plastics and Epistar, recently completed its first assembly line with a monthly capacity of half a million LED light bulbs and will soon launch a campaign to promote the sale of its products.

Upon the completion of the new line, Wang Wenchiao, chairman of Nan Ya Photonics, pointed out the advantages of LED lighting: economy, long life, safety, lack of pollution, and controllable light wavelength. “It would be extremely regrettable if high prices held back the spread of these products,” Wang commented. “So we made the decision to set up an automatic assembly line to bring costs down.”

Epistar's chairman, Lee Bingjie, expressed his approval of automated assembly lines, noting that most LED bulbs are now assembled manually and that without automation it would be difficult to bring prices down and meet the demands of the market.

A joint-venture upstream LED module maker that was established by Taiwan's Epistar and LiteOn Technology in Changzhou, China, began to see booming growth in the second half of 2012 as LiteOn boosted orders for modules to support its sales of LED lighting products. This has prompted the Changzhou factory to speed up the installation of MOCVD facilities in anticipation of growing production.

In addition to supplying its parent company, the Changzhou plant also ships to Japan, Europe, and the U.S.

LiteOn also has another venture in China, Leotek, which makes street lamps. Epistar, too, has ventures with other companies; it has teamed up with Everlight Electronics to establish another LED module maker in Xiamen, Fujian Province, which began turning out products with seven MOCVD machines (soon to be expanded to 15) in September 2012. Another Epistar venture, in cooperation with Delta Electronics, has commenced operation in Guangzhou.

China Electric Manufacturing Corp., another major LED lighting supplier in Taiwan, has set up a subsidiary in Xiaman, Fujian Province to turn out LED lighting and electric vehicles in partnership with upstream materials and parts suppliers. China Electric has already been active in China, marketing lighting products under its own brand name.

Lucrative Opportunities
Growing sales of LED lighting will bring opportunities to manufacturers in peripheral industries. LED lighting drivers, for instance, are vital components that help determine the quality of light, and most Taiwanese suppliers of this product are also engaged in the production of the power management chips that can enhance the performance of LED lamps. Demand for their products is booming, and many of them expect to double their output this year.