Steady growth in mid-power LEDs in the lighting market next year could be positive for the nation’s LED suppliers, due to their exposure in the mid-power segment, Credit Suisse AG said on Thursday.
“Taiwanese companies will be able to receive more orders from lighting companies who need the mid-power chips for their lighting products,” Credit Suisse analyst Derrick Yang (楊泓極) said in a client note.
LEDinside, a research division of Taipei-based market information advisory firm TrendForce Corp (集邦科技), forecast that revenue shares of mid-power LEDs would expand to 52 percent next year from last year’s 43 percent, thanks to rapidly growing indoor LED lighting demand and the improving heat management of the products.
US company Cree Inc’s recent alliance with Taiwanese LED chipmaker Lextar Electronics Corp (隆達電子) is also evidence that LED lighting brands are striving for a more competitive cost structure by outsourcing their mid-power chips to other companies, Yang said.
Among local LED firms, Epistar Corp (晶元光電), the nation’s biggest LED chipmaker, is in a good place to help its clients speed up cost reductions by taking outsourcing orders, Yang said.
He said Chinese LED suppliers’ aggressive attitude toward expanding both upstream and downstream might be a concern to Taiwanese downstream players as the technology gap between Chinese and overseas LED suppliers closes.
However, as Chinese LED upstream suppliers have poor intellectual rights protection, their business would be mostly confined to the domestic market and therefore have limited impact on the global market, he added.
However, Yuanta Securities Co (元大證券) said Taiwanese LED upstream companies are losing market share to Chinese firms.
Yuanta analyst Andrew Chen (陳治宇) said in a client note on Nov. 11 that the rise of low-cost Chinese LED upstream wafer companies poses a threat to their Taiwanese peers.
“As for Taiwanese downstream packagers, this means they have a wider selection of cheaper wafers to choose from,” Chen said.
Overall, Credit Suisse holds a positive view of the LED market in the long term, saying that despite the market facing a near-term inventory correction, it believes that the LED sector will remain intact in the mid and long term, due mainly to general lighting applications.
Yang said he foresees LED lighting penetration increasing from 29 percent this year to 46 percent in 2016, noting that price elasticity will continue to be the major driver for higher LED adoption.
Government measures to ban incandescent bulbs and utility rebates are also pushing users toward energy-efficient lighting solutions like LED products, he said.
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