Fifteen Keywords that Defined the LED Industry in 1H16

(Author: Skavy Cheng, Editor, LEDinsidehttp://Translator: Judy Lin, Chief Editor, LEDinside)

The first half of 2016 has flown by quickly, with the LED industry entering a mature phase and stabilizing growth rates, it is gradually losing its liveliness.

Looking back to the first half of 2016, new terms emerged among the tide of acquisitions and price wars. The keywords can be summarized as five large niche lighting markets, four key markets, three competitive technologies, changes in two major products market positions, and one new technology term.

Five niche lighting markets

Automotive LEDs

Price wars in recent years caused LED profits to plummet, and forced manufacturers to search for more profitable markets. Impacted by different automotive manufacturers carbon reduction policies, many manufacturers were attracted to automotive LED lighting sector, but its high technology entry threshold limited the number of successful LED makers. It is projected that maturing technology would attract growing volume of manufacturers.

According to LEDinside’s latest research report, the global automotive market growth eased in 2Q16, but the trend of replacing traditional bulbs with LEDs continued strongly. More mature and developed markets adapted large volumes of LEDs, while emerging markets gradually caught up. It is estimated in 2016, exterior automotive LED lighting market value reached US $1.57 billion, and its Compound Annual Growth Rate (CAGR) reached 6% from 2016 to 2020.

UV LED

There is no doubt that UV LEDs profited the most during first half of 2016, and with a high gross margin it attracted a lot of international companies including Nichia, Seoul Semiconductor, Nikkiso and others to deploy their market strategies. Chinese domestic manufacturers including EpiTop, Qingdao Jason, Lattice Power, and Honglitronic which recently changed its name to Honglizhihui, have also joined the UV LED bandwagon.

“It is estimated the UV LED market value will reach US $356 million by 2020,” said Joanne Wu, Assistant Research Manager of LEDinside. “UVA LED products will mostly be applied in curing market, including food packaging, adhesive curing, medical curing, and many other curing application markets.”

The most difficult aspect of this sector is high customization demands, which requires manufacturers to work closely with curing equipment manufacturers. From chip wavelength, optic module design, UV adhesives, and cooling systems to provide a comprehensive equipment solution. UV-C LED applications include germ killing and purification markets, and holds great market potential and lucrative product profits. Manufacturers in Japan, U.S. and Korea have continued to invest in related R&D. UV-C LED technologies still require breakthroughs to improve product efficiency, lifetime, and requires market tests.

Smart lighting

The year 2016 marks China’s thirteenth 5-year plan, smart city was frequently mentioned in multiple municipal and province government proposals and reports. Several committee members also recommended the development of smart cities, placing it under the center spotlight. Smart lighting is one of building blocks of a smart city, and under the promotion of new policies, it will initiate a new round of developments. In 2014, global smart lighting market size reached about US $1.54 billion and is expected to grow exponentially to US $14.35 billion by 2019.

Especially during first half of 2016, Chinese telecommunication giant Huawei and ZTE also joined in smart lighting, which created new opportunities in the sector. Smart lighting, a portal for smart homes, smart cities and IoT, also attracted investments from many large IT enterprises, which boosted smart lighting volume on the market. This not only revolutionized the entire lighting industry it will also create a big impact on the industry.

LED grow lights

Grow lights are not new in the industry, but it is an emerging niche market. Following big international enterprises Sharp and Osram’s advancement in the field, Chinese manufacturers are also catching up. LED grow lights have created a new craze in 2016, and even was approved by Chinese leader Xi Jinping.

Global LED grow light market value has grown exponentially since 2013 to reach US $100 million by 2014, and will reach US $500 million by 2017 based on market statistics.

As man controlled lighting in plant growth factories matures, combined with traditional agricultural technology advantages in the future, semiconductor lighting and automatic technology and network messaging technologies will all become important in global semiconductor industry developments.

IR LED

Since 2016, VR, drones, and robot technology have advanced rapidly. Changes in IR LED growth from the past and present can be marked by smartphones IR LED demands for retina recognition and CCTV or surveillance systems, while VR, robots and drones fall under the large umbrella of future applications, and are viewed as the future growth momentum for IR LEDs.

LEDinside’s survey during first half of 2016 showed IR LED market penetration rose in VR, robots, and drones, moreover IR LED market demands skyrocketed in 2016. These new applications added on top of automotive, security, surveillance and consumer electronic applications.

Growing demands in these sectors led to increased IR LED market penetration in other markets, where Asia Pacific has become the world’s largest IR LED market. It is projected the global IR LED market CAGR will reach 9% from 2015 to 2020.

Four market keywords

Cross-industry

The list of companies on China’s over-the-counter market list has grown significantly, acquisitions are broadening and no longer limited to the LED sector, but increasingly involves newcomers from different sectors. Examples include Ledman Optoelectronics acquisition of several sports enterprises, Changelight selling its LED business to focus on education industry, Changfang Lighting establishing an education fund, and Honglitronic’s rebranding as Honglizhihui to enter connected car sector.

The first half of 2016 is marked by horizontal and vertical alliances in the industry, where acquisitions are no longer the main theme. Cross-industry transitions have become the new show of the year to stimulate the industry. If acquisitions was the main thing in the past few years, than the first half of 2015 is marked by cross-industry collaborations and transitions.

Niche lighting market

The LED industry was bombarded with price wars, which made it difficult to ensure product profits. LED niche markets have become the new generation of less explored blue sea markets, such as automotive LEDs, UV LED, IR LED, smart lighting and grow lights.

In the past few years, “super” price wars diminished LED lighting industry profits. To avoid being destroyed by price wars, the industry is seeking less explored markets. The year 2016 marks the LED industry blue ocean year, where manufacturers are exploring opportunities in automotive lighting, UV and IR LED.

LED+

The post LED lighting era is still mostly stuck in the mentality of replacing conventional light sources, where the market outlook is dim. The post LED lighting era has presented diverse possibilities for LED+ concept, such as integrating the light source with VR, robots, design, connected cars, and even education.

Finding one’s market is most important for LED manufacturers during first half of 2016, and after undergoing massive restructures in 2015, the LED industry has become much more rationalized in 2016. Enterprises have also eased their price wars, and started to deploy their “plus” concept in the LED industry. The LED plus concept is picking up rapidly in the VR market, and sectors including industrial robots highlighted by the Made in China 2025 initiative and online banking.

Patents

Some of Nichia’s YAG patents will expire by 2017. Chinese manufacturers that are in desperate need to export products have witnessed major global players up their game in patent disputes. For instance, Nichia and Everlight’s long patent disputes are coming to an end, Harvatek and Cree arrived to a settlement, and Enplas and Seoul Semiconductor patent lawsuits concluded.

Chinese LED manufacturers need to resolve patent issues if they want to export their products overseas, but have been the Achilles heel for most Chinese companies. In the last two years, Chinese companies launched acquisition campaigns to bridge the technological gap with international companies. Upgrading patent wars is crucial if Chinese manufacturers want to export their products abroad in 2016.

Three competing lighting technologies

OLED

Market rumors that iPhone will be fully converting to OLED displays by 2018 propelled the OLED industry during first half of 2016. OLED has been coined the next generation display technology, and its market share has rose among smartphone displays. According to market research organizations estimations, China’s smartphone AMOLED panel market penetration rates will reach 30% by fourth quarter of 2016, much higher than the global average of 20%.

Yet, OLED have short lifetimes, and there are still many challenges to mass producing large OLED displays. However, injection of capital and more comprehensive technologies will allow it to replace certain LED applications. Especially, once lighting developments reach a certain stage, consumers are looking for more than just a simple luminaire, paying more attention to its aesthetics. OLED can help designers achieve diverse possibilities.

Micro-LED

Micro-LEDs are currently the most anticipated LED technology for 2016, especially after price wars disrupted LED industry supplies. Once OLED panels are fully adopted in monitors, micro-LEDs will become an innovative technology. The emergence of micro-LED is viewed by the LED industry as a chance to overturn LCD market conditions.

Micro LED’s future potential still largely rests on Apple. Apple acquired LuxVue in 2014 to manufacture micro-LED displays, bounding the emerging display technology future developments to it. Based on latest news, Apple Watch will be using micro-LEDs in 2017, and there are even rumors the Cupertino-based company has started testing micro-LEDs.

Once it is confirmed that Apple will adapt micro-LEDs in its next generation devices, it will no doubt stimulate the market, and create new opportunities for the LED industry.

Laser

The types of lasers LEDinside addresses here are GaN based laser diodes combined with advanced phosphor powder technology to emit white light. Lasers are focused onto a tiny spot on the phosphor, which is converted into white light. The laser is able to emit a direct white light that is safe, accurate, and directional. Additionally, micro optical lenses and reflectors can optimize light control to achieve better lighting effects.

Compared to blue LEDs, lasers do not have lumen depreciation issue. Lasers are highly efficient light sources. Nobel Prize Laureate Shuji Nakamura projected lasers would eventually replace LED lighting, and mentioned numerous times during talks in 2016 that lasers would be the future for lighting. He even claimed lasers would replace LED lights within 10 years.

Two LED products market position readjusted

Filament LED bulbs market position rises

The year 2016 turned around LED filament bulbs market situation, despite initial misgivings from the industry it succeeded against all odds. Filament bulbs have attracted Philips, Osram, GE and other global manufacturers to invest in the technology, while Chinese companies including Yankong Lighting, Foshan Lighting, INESA, Oppel Lighting, Honglizhihui, MLS, Runlite and other LED manufacturers that have pitched in  production expansions.

According to an industry source, LED filament bulb market had grown exponentially from second half of 2015 till first half of 2016. The products are very popular in international markets mainly in North America, Europe, South America and other regions. It has also became a highlighted product in the Asia’s LED lighting supply chain.

Small pitch LED displays centered in battlefield

Small pitch LED displays are a conceptual product that was first proposed in 2008, flourished and grew exponentially in 2014. After 2014, though its growth had slowed significantly and failed to deliver. The industry even questioned if small pitch LED displays stellar performance would never return again.

By first half of 2016, small pitch LED displays market volume increased, presenting a lot more business opportunities for LED display manufacturers, especially with VR and AR trends. As a basic hardware infrastructure, LED displays also entered a phase of explosive growth, where HD displays and seamlessly connected small pitch LED displays greatly improved VR products and user experiences.

In the face of this new blue ocean, VR and AR have been integrating small pitch LED displays, to develop new commercial applications through new business models and profitability patterns. A lot of LED display manufacturers are ready to try out the new technology, including listed company Leyard, Liantronics, and Absen Opto.

One new LED chip term

FEMC

FEMC is a new term presented by Refond Opto in 2016, when it was showcasing its new product portfolio. It is a brand new terminology in the LED industry, and stems from flip-chip +EMC concept, which means placing a flip chip LED package onto an EMC. The EMC is a type of flip chip product.

The emergence of FEMC has also kicked-off many flip-chip concepts, where there are many different types of flip chip models, which is not restricted to Chip Scale Package (CSP) models. There are many different types of FEMC including FC and PCT package structures, although flip chip lead frames are not a revolutionary technology, whether it will spread in the industry requires longer observation period.

Despite all the challenges and issues in the LED industry, there has been many changes during first half of 2016. The LED industry may be declining but it has also presented many new opportunities, whether from a technology or market development stand point. The LED industry delivered good performance during first half of 2016, and will maintain strong growth in second half of the year.

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