LED market growth in 2018 revised from 11% to 4%

The LED market will grow to $18.796bn in 2018, up just 4% year-on-year (less than the earlier forecast of 11%), according to the report ‘LED Industry Demand and Supply Data Base’ by LEDinside (a division of TrendForce). The market is slowing down since oversupply is contributing to LED price declines, together with the impacts of escalating trade war on demand in the end market, notes the market research firm.

The massive production capacity expansion of Chinese LED makers has outpaced the growth in demand, triggering oversupply in the market, says LEDinside. The Chinese LED makers originally intend to raise their revenue and profits through production capacity expansion, but the falling average selling prices (ASPs) have made the market situation more difficult. First-half 2018 saw price declines of 20-30% for some LED chips. However, LEDinside does not expect a further sharp drop in prices in the short term, since price levels have almost approached the costs.

Taiwanese LED makers may move packaging facilities out of China

On the demand side, LED makers’ export business to North America and other emerging markets has been influenced considerably by the trade war and currency depreciation. With the next wave of tariffs going into effect on 24 September, tariffs of 10% are being imposed on Chinese products, including more than 30 categories of LED lighting-related products. Accounting for around 70% of China’s LED lighting exports, the $8bn worth of products will face even higher tariffs of 25% by 1 January 2019.

LEDinside believes that the tariffs may affect Chinese LED packaging companies and lighting product makers, because they may see a large decrease in orders from foreign customers. This will in turn reduce demand for LED chips upstream in the supply chain.

Despite the impacts of the trade war, which may result in a changing landscape in the global LED industry, LEDinside believes that lighting products will still be produced in China in the short term, with little change to supply chains, because the supply chains of components and electroplating processes are long established in China. Due to the imposed tariffs and cost increase, some US LED lighting manufacturers have already reported price rises for their products in the US market. Meanwhile, to avoid the tax, Taiwanese LED makers that have production facilities in China may move assembly back to Taiwan before exporting to North America. To maintain competitiveness in the long term, LED companies may relocate production to their facilities outside China in order to minimize the impacts of trade issues, concludes LEDinside.

Tags: LED market

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