Morgan Stanely Projects LED Driver IC Benefits from Rise in LED Lighting Demands

LED driver IC is unsurprisingly the upcoming star of 2014, spurred by the increasing demand for LED general lighting. However, the driver IC market appears to commoditize rapidly with competition from China vendors. According to a recent report by Morgan Stanley, LED general lighting penetration rate is estimated to reach 17% in 2014, up from 8% in 2013. LED lighting penetration rate is anticipated continue rising to 44 percent by 2016. Each light needs an LED driver IC to control the electric current and, in some cases, offer dimming function. The volume for LED driver ICs will thus grow proportionally with LED lighting.

Investors are looking for volume plays in LED general lighting in semiconductors. Several Asian analog IC design companies may benefit, but the volume growth may be offset by rapid ASP erosion and market share dilution, said Morgan Stanley. Power module ASIC could act as a disruptive solution for LED lighting as well.

Although the volume of demand for LED driver IC is rising alongside LED lighting, competition is also becoming increasingly fierce. Compared to only 5-10 vendors before 2012, there are now at least 15 competitive vendors for LED driver IC in 2014, according to Morgan Stanley. China is likely to be the most crowded market with emerging local suppliers.

Before 2012, the LED lighting market was dominated by US and European analog IDMs, such as Power Integration, NXP, and Texas Instruments. Today, these US and European vendors still have high market share at international lighting brands, such as Philips, Osram, and GE, thanks to their better technology and legacy relationships.

Several Asian analog IC companies, such as Richtek and O2Micro, have been providing LED driver ICs for both LED panel backlights and LED general lighting since 2009. On-Bright as a leading LED driver IC vendors in Asia in 2012, given its distribution network in China, and Silergy had a strong footprint in industrial LED lightings.

As the LED driver IC technology has matured, we have seen several China semiconductor companies enter the market, such as Silan, Sunmoon, SiFirst, and Duty Cycle. Specifically, Silan has its own wafer manufacturing facility. Leading European and U.S. manufacturers’ profit margins are around 50-60 percent. For Asian supply chain profit margin is about 40-50 percent. Low-cost vendors have a profit margin of 20-30 percent.

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