LED manufacturers had an especially tough year in 2015. Despite rising LED lighting market demands, and large scale replacements of traditional luminaires, the oversupply situation in the market has caused average sales price (ASP) of LEDs to plunge 30% to 40%. Growing number of manufacturers have incurred heavy losses and exiting the market. With 2016 just around the corner, LEDinside Research Director Roger Chu has listed ten major trends in the market including future LED industry consolidations and technology trends. Listed below are five major trends observed by LEDinside’s analyst team:

 

1.Easing LED market growth in the near future

Due to the oversupply situation in the LED industry, LEDs ASP prices plunged. LEDinside estimates the global high brightness LED market value in 2015 will increase at an incremental rate of 2% to US $14.52 billion. Even though lighting demands spurred LED usage volume growth, ironically the increasingly energy efficient LEDs are reducing usage volume. Additionally, LEDs still are under immense pressure to further lower prices. Based on these observations, LEDinside projects in the next five years the LED industry Compound Annual Growth Rate (CAGR) is unlikely to reach more than 10% in the future.

 

2.Shrinking LED component price falls

LED backlight market demands fell short of expectations, which caused sliding ASP of LED chips and LED package. This trend has been markedly observed during second half of 2015, when LED chip and package prices sharply plunged to the point that some LED chip and package spec prices are now close to material costs. Many manufacturers have incurred losses as a result. Even though manufacturers in the LED industry are being pressured to lower prices in the short term, in the long run there will be limited room for furtherLED price cuts. This can be explained by the growing number of manufacturers withdrawing from the market in the near future, as LED prices is close to manufacturing costs and reduce companies’ profitability.

 

3.China’s changing LED policy

Over the last decade, the Chinese government largely supported the local LED industry through massive financial subsidies, incentives, and resources to improve domestic LED companies manufacturing capacity. China has become the world’s largest LED lighting manufacturing base, but local manufacturers are still very dependent on international manufacturers for certain upstream MOCVD equipment and materials. Hence, future Chinese policies will encourage innovation, and focus on upstream raw materials, for example wide bandgap semiconductor development, or smart lighting applications following the emergence of the Internet of Things (IoT).