By David Hsieh – Vice President, Greater China Market, DisplaySearch
LED supply demand, short- and long-term, is always a hot topic in the LCD TV industry, Brands are trying to aggressively grow LED-backlit LCD TV volumes, growing so fast that the LED supply chain cannot keep up. Meanwhile, issues like binning, LED yield, white LED color mixing, and the relationships between LED makers, panel makers and TV brands are affecting the smooth supply of LEDs. The LED supply is very tight right now and panel makers have successfully increased panel price premiums for LED from Q2’10. As the DisplaySearch Monthly Large-Area LCD and PDP Pricing Report shows, LED panel prices increased while CCFL panel prices decreased.
However, we forecast that the LED panel premium increase will only last until Q3’10, and the LED supply will be more in balance from the middle of Q3’10. The current tight atmosphere created many challenges for forecasting. In a recent discussion with LED makers, we also sensed that many people in the LED supply chain are worrying about the impact on LED chip prices due to the enormous capacities coming on line from now until next year. LED companies, after struggling many years with low margins and revenues from low-end products like Christmas tree lights, now see a chance to move into higher margin, higher-end products with high revenues like flat panel TVs.
The problem is that their return-on-investment calculations assume that chip demand will continue to grow and can easily absorb expanded capacity. Meanwhile, LED makers can easily fund capacity expansions, from the open capital market or from their industrial groups. LED companies have never experienced the Crystal Cycle before. But when TFT LCD goes into over-supply, it can be a nightmare for the supply chain because panel prices fall faster than expected and component makers can be vulnerable. Even components with oligopolistic supply can suffer when demand freezes.
On the other hand, the competitive environment, driven by game theory, leads LED makers to conclude that if they don’t expand, another maker will. Capacity expansion, indicated by MOCVD ordering and ramping, is accelerating, at Samsung LED, LG Innotek, Epistar, FOREPI, Nichia, Toyoda Gosei, Lexstar and others.
Component makers entering the TFT LCD industry must cope with the TFT LCD Crystal Cycle. This has happened with CCFL, TAC film, ITO, wide-view angle film, and other components. Supply of these materials was thought to be an oligopoly, and shortages were expected for a long time, but they fell into over-supply when panel demand dropped, even faster than other components because of over-expansion during the time of shortage. Is it possible that this will happen to LED?
While LED makers are quickly moving in MOCVD machines, engineers in the panel companies are trying to reduce the number of light bars used in LED TV backlights, enhancing the yield rate and luminous efficiency in the light guide system, while better binning methods and improved LED yield rates are lowering costs. Going forward, increased transmittance technology will be implemented in mass production of TFT LCD, and as LEDs luminous efficiency improves with volume production, fewer chips are required. This is a challenge to the assumption that as LED-backlit LCD TV demand grows, the number of chips demanded will grow continuously.
It is risky to claim that LED will be tight for more than one year, as everything related to TFT LCDs is dynamic . Some in the LED industry think that when white LED prices fall because of the TFT LCD industry, we will see the ramp up of LED lighting, which utilizes similar white LED technologies. Meanwhile, DisplaySearch is working on an LED supply/demand model to try to predict price swings.
