Falling prices, weakening demand and an unstable global economy are creating a difficult economic climate for manufacturers in the optical industry supply chain, according to a recent market forecast study by Strategy Analytics focused on the compound semiconductor industry targeting optoelectronics, materials and equipment. It reaffirmed the fact that most firms that manufacture equipment, material and devices for LEDs, optoelectronic devices and photovoltaic solar devices showed a declining revenue and income in the latter part of 2012.
Regardless of the overall trend, top-tier market leaders such as Dowa, First Solar and Cree, are still performing relatively well. Companies in the LED and optoelectronic equipment market have been faced with declining prices associated with declining demand and are struggling to increase revenue and income. Several companies including prominent LED bulb players like Osram are having thousands of layoffs to restructure their business. Moreover, Applied Materials, a leading producer of process equipment for flat-panel displays and microchips, has significantly downsized its presence in the LED market.
IMS Research is forecasting that even with the anticipated growth of energy-efficient solid-state lighting, the global market for packaged LEDs will decline in the second half of the decade. This firm has stated that many LED end markets are already saturated and that the lighting sector will be the main catalyst of growth between now and 2020. However, several other firms have published slightly brighter outlooks over this period. Fundamentally, there is an enormous opportunity in the transition from less efficient conventional light fixtures in residential, government and commercial construction to energy-efficient LED lighting, but it may require government intervention, as in the case of renewable energy, to be accelerated at a significant enough rate to put a dent in carbon emissions reductions and climate change.
IMS Research estimates the current packaged LED market to be equivalent to $10.9 billion, whereas only $2.9 billion relates to lighting but that component is rapidly increasing as LED lighting products drop in price. All other LED sectors are worth around $8.0 billion combined, but key applications such as mobile handset and TV backlighting are now essentially saturated. What’s more, the firm believes that price erosion will cancel out year-on-year market growth, generating a somewhat stagnate market. IMS estimates that the market for packaged LEDs used in lighting will double in dollar value between now and 2015, elevating the global LED market to $13.5 billion but not enough to offset the contraction for non-lighting applications in consumer electronics. Interestingly enough, the average number of LEDs per LCD TV actually fell from 175 in the fourth quarter of 2011 to 137 in the first quarter of 2012, partly due to increased brightness and efficiencies.
Most compound semiconductor companies utilizing III-V crystalline materials such as gallium nitride (GaN) for LEDs have not delved into high-power device applications, which this material is well-suited for, but Cree is one of the few exceptions with the capital necessary to focus on both markets. Therefore, Cree has been able to capitalize on the favorable growth for GaN in high-power devices that is not tied to LED market forecasts, as most analyst expectations indicate an increasing conversion toward this material for high-frequency and high-power devices that spans from military to consumer mobile device applications.
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