UBS Has Positive Outlook for non-Chinese LED Chip OEM Market in 2014

The LED industry has been stuck in a oversupply situation for the past few years but 2014 will finally see the first light to equilibrium. The supply shortage situation is expected to reemerge in 2014 brought on by rising LED lighting demands, stable backlight demand, and limited production capacity expansion by LED chip manufacturers, according to a recent report from UBS. Long term orders from OEMs for large lighting manufacturers Philips and Osram will benefit non-Chinese LED chip manufacturers.

LED chip demands in 2014 will increase 29 percent compared with 2013, but supply growth will only increase 17 percent from 2013 clearly showing a reemergence of LED chips supply shortage in 2014, according to the financial organization. In addition to  rise in LED lighting demand restricted production capacity expansion over the past few years by LED chip manufacturers is also an important factor contributing to the supply shortage. With the supply and demand trend stabilizing, UBS estimates that the average price of LED chip products in 2014 will decrease around 10-15 percent, a slow down compared with price decrease of 20 percent in 2013 and 30-40 percent in 2012.

In terms of LED chip manufacturers supply aspect, production capacity will only increase by 14 percent in 2014, forecasts UBS. Chip manufacturers cautious production expansion attitude has  stabilized chip pricesand hopes to increase profitability. Following LED bulbs continued sales price drop, UBS believes that Philips and Osram will pursue low-cost solutions. Therefore, non-Chinese LED chip manufacturers with advantages in patent strategies will likely become large international manufactures long term OEM partners with. UBS names Epistar as one of the main benefactors.

UBS has a positive outlook for lowered LED bulb price driving demands. The financial service firm anticipates proportion of LED products in general lighting demand to increase to 9 percent in 2014 from 3-5 percent in 2013. In regards to LED lighting market development, LED products used in commercial and outdoor lighting is relatively high. Decrease in LED bulb prices plays a major role in influencing residential lighting market growth. Consumers are more willing to use LED lighting products due to lowered prices, energy saving advantages, and lack of toxic materials.

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