Ten Development Trends for Global LED Industry in 2013
Although LED industry in 2012 suffered many development bottlenecks, even large-scale shuffle, the future development momentum is positive due to the energy-saving characteristic and policy support. The following displays ten trends of worldwide LED industry, from LED patent, industry shuffle, chip oversupply, the merger between large factories to innovation as well as talent.
First: part of LED patent will expire, providing possible new opportunity to LED packaging company.
Currently, the technology patent of global LED industry has always firmly held in hand of Cree, Philips, Osram, Nichia and Toyota. These five giants applied almost cover-the-entire-industry-chain patents, including raw material, equipment, packaging and application. But the patent barrier has begun to loosen. According to the provisions of the Patent Law, the patent protection period is 20 years; the protection period of utility model patents and design patents is 10 years, namely the related LED patent applied from 1990 has gradually expired since 2010 where a large part involves the important white LED. In the next 2 to 3 years, a number of core patents in the 1990s will successively expire. In addition, involving-phosphor related patents also will gradually lapse during 2012-2014.
But, as the “Shanzhai” patent of companies in Chinese market also buries risks. Carefully observed, the vast majority of patent is not original or through pick up some parts, doing some repair on the basis of the original patent of the international LED giants, or conduct some change on utility model or appearance design, so once subjected to globally large-scale lawsuit caused by international giants, more than 70% of patents in China’s market will likely become invalid.
Second: the visibility of LED lighting products strengthens in generally lighting market.
By 2013, LED lighting market will accelerate penetration due to the price decline of LED lighting products, the increasingly maturity of technology, the increased awareness of LED lighting products market and other factors. Originally, traditional lighting manufactures begin to introduce LED light source to replace traditional light source products when developing new products. As such, in the next two years, LED lighting products will rapidly improve penetration rate in generally lighting market, and penetrate into a variety of lighting fields.
Third: more bankruptcy and shuffle occur in China’s market
2013 is acclaimed as an important year for the market expansion of China’s LED, the penetration of LED downlights, spotlights in the Chinese mainland market will exceed 30%; meanwhile, the sales of LED lighting industry may reach 1 billion yuan, but for over-expanded LED industry, facing the capacity supply, manufacturers is difficult to gain profit.
Especially for those LED epitaxial vendors established in the previous years due to government subsidy, LEDinside, a division of Trendforce estimates the China’s LED semiconductor chip vendors in the next few years will be less than 30. Despite the strong endeavor of Chinese local MOCVD equipment makers, hoping to seize MOCVD equipment market monopolized by foreign companies, the imported MOCVD machines are in large-scale shutdown, these local brand MOCVD machine is difficult to have showing stage; in addition, the strength gap among LED enterprises also gradually presents out; and with expansion of large LED packaging companies, some bad-strength small and medium-sized packaging factories in Chinese mainland will face crisis of closure.
Fourth: LED chip price continues to decline, supply chain structure compresses profitability.
Benefiting from the increase of related demand for portable devices and LED lighting products, the output value of worldwide LED in 2013 will reach $12.4 billion, up by 12% from 2012, but the oversupply for overall LED industry can not be solved in short term.
The hot investment in China’s LED industry chain and the continuous purchase of MOVCD from foreign companies outside of Chinese market undoubtedly will increase the output and inventory of LED chip; in order to get profit, companies will further lower chip price, and implement a new round of price war, as such the profit margins of manufacturers will continue to scale down. According to the latest market statistic, comparing with the early 2012, LED upstream sapphire substrate and the chip price has declined by more than one third so far. China’s LED structural overcapacity situation will continue in 2013, LED chip’s price continues to slip, the profit of companies in the middle and upper reaches will shrink, oversupply also contributes to the structural integration of LED supply chain, midstream and upstream enterprises see lateral reorganization or penetrate into downstream to conduct longitudinal vertical integration.
Fifth: LED enterprises lack creative talent, poaching staffs become shortcut way.
LED epitaxial chips and other industrial chain show most lack of talents. Taking MOCVD device as an example, the US-based VEECO and Germany-based AIXTRON accounted for 90-95% of global market shares. Although Japanese equipments are relatively advanced, they basically serve Japan, exporting less. Many companies in Chinese mainland are far from actual situation, holding that the equipment they had can directly be put into production. After buying American and Germany’s device with large amount of money, these companies only to find they lack professional, experienced talent to arrange and operate devices, so that they have to employ talent from Taiwan and South Korea-based companies to solve the urgent problems, and these cases are very common.
For many companies, it is understandable to poach talents to meet their urgent needs, but they should have long-term vision and overcome the attitude of a quick profit. If without innovative soil and environment, outside talents are difficult to help the company survive, and the company will gradually wither as plants.
Sixth: LED industry chain in Chinese mainland accelerates integration.
With the excess of LED packaging market and the upgrading of LED industry in Chinese mainland, part of mainland companies turned to the field Taiwan-based companies specialize in. It is estimated the LED chip capacity of Sanan Optoelectronics in 2013 will exceed Taiwan chip leading manufacturer- Epistar. Since 2013, Taiwan-based companies has deeply felt the threat from those in Chinese mainland; before Sanan took shares of Formosa Epitaxy, Lunda Wellypower or Huga and Epistar have recognized mainland enterprises would erode the market of Taiwan-based company, and have made preparations in advance. At the same time, Taiwan-funded companies are also actively setting up factories in mainland, hoping to expand their own market share and profit through the help of capitals and market capacity advantage in Chinese mainland.
Taking into account the vast LED commercial application, outdoor lighting and other application market size advantages as well as the Taiwan-based company’s technology and standard advantages, the integration focus of LED industry includes the merger between Taiwan-based LED epitaxy manufacturers or LED lighting manufacturers and mainland LED companies.
Seventh: industry transfers, foreign company swallow market, Chinese local enterprises fall on serious competition.
The huge potential in Chinese mainland market attracts increasing international LED giants to turn to China, having adjusted strategies to intensify layout in China, shifting industry to China and increasing opening up China market. For instance, OSRAM set up LED chip shell packaging plant in China’s Wuxi; Philips established Philips Professional Lighting, Demonstration Garden in Chengdu; GE built its first customer collaborative innovation center in the northwest region of China. As for China’s market, LED industry is also playing a gradient-transfer migration movement, including Leigu moving to Huizhou base, NVC Lighting moved headquarters from Huizhou to Chongqing.
Based on above the migratory situation as well as development plan of giants in LED international or Chinese market, 2013 is still a year for industrial transfer. With the help of China’s policy support and preferential policies announced by local governments, along with the huge market in China, lower production and labor cost advantage is also one of factors for foreign company increasing investment in China.
Eighth: Luminous efficiency competition continues, and it is expected the mass production product in 2013 to focus on 160lm/W~180lm/W.
Luminous efficiency competition has always been the war various vendors can not lose. The invincibleness of Cree in lighting market relies on the technical ability to constantly refresh the luminous efficiency record. In 2012, these chasing each other among manufacturers did not relax, contrarily result in bigger gap. And the appearance of GaN homoepitaxy shows the intension of overtaking. Seoul Semiconductor released the news of nPola single chip enabling Luminous Flux of 500lm, but did not say the specific input power, causing many guess to the luminous efficiency from outside. In addition, the substrate supplier Mitsubishi becomes the first customer of this product, but it is also its maker.
In 2013, luminous efficiency contest will continue, but in terms of product that can achieve successfully mass production, product around160lm/W will be the mainstream in 2013.
Ninth: 「GaN-on-Si」substrate is still the focus of the market, and nPSS may become a new hot spot.
In 2013, which technologies can really access the central stage decides the rhythm of technological progress for the overall industry? LEDinside believes「GaN-on-Si」substrate is still the focus of the market, and nPSS may become a new hot spot, remote phosphor shows vast space.
From the substrate material, the silicon substrate probably becomes a real challenge from previously years of theory threat. On December 14, 2012, Toshiba declared having developed white GaN-on- Si LED chip “TL1F1 series (1W)” used for LED lighting, and began to achieve mass production of 10 million per month from the late December. Unexpected, the market shares of LED of GaN-on-Si in 2013 may come in at single-digit percentage, falling on another technological race with the mainstream sapphire substrate, or SiC substrate.
Tenth: countries accelerate the industry standardization process, 2013 will form LED standard year
In the past few years, a variety of countries have announced LED industry certification, standards; established the Industrial Union institutions to regulate industrial development, introduce the mess LED industry into track as soon as possible.
European regulation (EU) No. 1194/2012 about the eco-design requirements of directional lights, LED lights and related equipments, along with ENEC (European standard electrical certification) is European safety certification Universal logo aiming at specific and suit- European-standards products (such as lighting equipment, components, and office & data equipment).
In North America, various testing standards related to LED products has always continued to maintain updating, mainly comprising IES LM-79 “electrical and brightness measurement of solid-state lighting products”, IES LM-80 “maintenance rate measurement of LED lamp Lumen” as well as the latest released IES LM-82 “electrical and brightness performance identification of LED light engine (as a function of temperature) in 2012, along with provisions LED product safety standards UL. In addition, the Energy Star energy conservation programs implemented jointly by the U.S. Department of Energy and the Environmental Protection Department is also very important LED product certification, and has been adopted by Australia, Canada, Japan, Taiwan, New Zealand as well as EU and other regions. Aside from various certification standards, the U.S. government has also launched a “National Semiconductor Lighting Research Plan”, “Next-generation Lighting Plan (NGLI) ” and other important layouts.
The METI provided, since July 1, 2012, LED Bulb and LED lamps shall be affixed to the circular PSE to be sold in Japan’s market.
China also released “semiconductor lighting energy saving evaluation requirements (2012)”, covering energy-saving evaluation and technical requirements of the application of such LED lighting products as street, tunnel lighting and indoor lighting, coupled with the engineering requirements of LED lighting used in airports, railway stations, urban track traffic and other places.
Various countries and regions are ramping up the LED industry standardization to regulate the quality and performance of LED products through a variety of certifications and requirements, to avoid the disordered competition from causing mess quality. LEDinside expects the set-up of industry alliances can play the role of leading and regulation in LED market and companies, solving key technologies and common problems to promote the development of industry.