Asian Manufacturers Spur Low Priced Lighting Era

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Asian Manufacturers Spur Low Priced Lighting Era

-2015 DOE SSL R&D Workshop-

Roger ChuDirector of LEDinside

28 Jan 2015

Asian Manufacturers Spur Low Priced Lighting Era

-2015 DOE SSL R&D Workshop-

Roger ChuDirector of LEDinside

28 Jan 2015


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Outline

1) Market Outlook & Perspective

-From LED to LED Lighting

2) LED Technology Development

- Trend to Cost Reduction

3) Emergence of Low Priced Lighting Era

- Rise of Asian Manufacturers

4) Conclusion

-Risks and Opportunities in the Mature Industry


2014-2018 Global HB LED Market Forecast

• The global high brightness LED market size is projected to reach US $14.5 billion (YoY +8%) in 2014. LEDinside estimates

the LED market is expected to reach US $16.2 billion in 2018, and will grow at a CAGR of 3% from 2014-2018.

-

3,000

6,000

9,000

12,000

15,000

18,000

2013 2014 2015 2016 2017 2018

Other

Signs &Signal

Automotive

Lighting

Large displaybacklight

Mobileappliance

HB LED Market Forecast (2013~2018)

2014~2018 CAGR 3%

M USD

Lighting Keeps To Grow Up

ASP

Penetration

Market Scale


12%

24%

34%

12%

12%

6%

11%

18%

39%

13%

12%

7%

11%

30%

29%

13%

11%

6%

Lighting

Backlight

2013

2014

2015

Lighting Market Demand on the Rise to Surpass the Demand

From Large Sized Backlight and Handheld Device Applications

Lighting Automotive

Signs & SignalOther

Mobile appliance Large display backlight


LED Lighting Still at High Growth Phase in 2014~2018

• Observed from LED lighting market, the LED package market value for lighting applications will soar in 2014, especially

for replacement products. Followed by significant growth in industrial, commercial, and outdoor lighting markets.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2013 2014 2015 2016 2017 2018

LED Market Value- Lighting Application

Other

Outdoor

Retrofit

Retail& Hospitality

Office

Industry

Homes

Architectural

4,881

3,879

2014-2018 CAGR12%

7,729


• Total LED lighting product shipment volume continues to grow substantially in 2014, especially, more and more lighting

brands aggressively promote LED bulbs and LED tubes.

43%

28%

8%

4%2%

1%

12%

0.5%1% 1%

2014

38%

25%

10%

5%2%

1%

15%

1% 2% 1%

2013

A-Lamp / Standard Bulb

Tube

PAR And RS

MR16

Candelabras & Decorative Lamp

Streetlighting

Downlighting

High Bay

Troffer

Paking Luminaires

2013~2014 Global LED Lighting Fixtures Demand Rapidly Growing

788 M Sets

1,368 M Sets


0%

20%

40%

60%

80%

100%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

08' 09' 10' 11' 12' 13' 14' 15' 16' 17' 18'

Global LED Lighting Scale & Penetration Rate

26%

The Global LED Lighting Market Scale is Gradually Increasing

• LEDinside estimates the global LED lighting market scale will continue to grow, from a market size of US $4.5 billion in 2008

to US $36 billion in 2018. LED lighting market penetration rates are expected to reach 54%.

36 Bn

20 Bn

M USD

CAGR+18%

54%


Outline





3)Emergence of Low Priced Lighting Era


4) Conclusion



Price Elasticity in Product Applications: lm/$

• Observations from lm/$ performance show, we can know how much lumens customers get from every dollar paid.

Lighting

Large size B/L

Small size B/L

lm

USD


5630

2835

3014

3030

Different Requirements in Different Lighting Segments

High End

Middle End

Low End

RequirementsSolutions

Light Quality

Form Factor

Color Tunable

Efficiency

Reliability

Cost!Cost!Cost!


Standard & Mid Power LEDs Become Mainstream in Lighting Market

• Mid-power LEDs including 5630, 3030, and 2835 LEDs will become mainstream on the market. LEDinside

projects mid-power LEDs to have a 48% share in the lighting-use LED market value for 2014.

High Power LED COB LED Mid Power LED Standard LED


Lighting

LED TV Direct Type

LED TV Edge Type

NB &Monitor

SmartphoneTablet

Sign Board

30143020

3528(Slug) 3528(1.0T) 5630(Slug)

6060 5730(Slug)

3030 EMC3535 EMC

2016 Ceramic3535 Ceramic6060 Ceramic

COB Ceramic

3528 EMC3030 EMC

3535 Ceramic6061 Ceramic

5630(Slug) 6780(Slug) 6720(Slug) 7020(Slug) 7030(Slug)

2014 3020 4014

4014(Slug) 3020(Slug)

010(0.4T) 030(1.2T) 3808(1.0T) 008T(0.8T) 336(0.8T)

3528 1015 2121 5050 3535

Power Consumption

0.05W - 0.3W 0.3W - 0.5W 0.5W - 1W 1W - 3W 3W - 7W 7W - 100W

C/P Ratio Becomes Key To Success With Tech Advancements

Product Application

PPA/PCT

EMC/SMC

Ceramic

Lead Frame & Substrate in Different Product Position


Outline





3)Emergence of Low Priced Lighting Era


4) Conclusion



Philips Lighting Business Restructures to Face the Challenge

Royal Philips

Consumer LifestyleHealthcare Lighting

Innovation

& Service

Package & AutomotiveAnnual Revenue Guidance

>USD 2 Billion

Philips LightingAnnual Revenue Guidance

>7.1USD Billion

The rise of Asian lighting

producers has brought

intense competition, and

traditional lighting firms such

as Philips and OSRAM have

started to plot new

strategies to correspond to

the change.

What’s The Impact From Chinese Low Price Strategy


Confronted By the Rise of China, Taiwan LED Companies to Cope With Industry Changes through Acquisitions and Alliances

Horizontal Integration Vertical Integration Strategic Alliance

Because LED industry is suffering from oversupply issues, LED companies continue to go out of business and being merged. Take Epistar for example, it copes with industry changes through horizontal integration. Everlight also finds more opportunities by acquiring downstream lighting manufacturers. On the other hand, CREE has become a shareholder of Lextar, a LED manufacturer, hoping to reduce costs through strategic alliance.


Low-Priced Lighting Era

Manufacturers Turn to All Sorts of Methods to Lower Costs

Lighting manufacturers are implementing

various low-pricing strategies to meet

market demands, as competition

intensifies and the industry enters low-

pricing era.

Gov. Support

Economics of Scale

Automated Production

New Business Models

Low-priced Lighting Era


• After Chinese local governments decided to subsidize Chinese LED chips since 2010, the MOCVD installation in China has

been higher than other regions. Through the upstream subsidies, China can have high cost competitiveness when

manufacturing LED.

Chinese Subsidies Lead to Higher MOCVD Installation in China Compare to Other Regions

Global New MOCVD Installation By Region

2014 2015(F)

HC Semitek Sanan Opto

Sanan Opto Changelight

Changelight Kaistar

Aucksun HC Semitek

Nanojoin Tongfang

Top 5 LED Chip Manufacturers with the Largest MOCVD Expansions


MOCVD Remained as the Main Subsidy Target

• Subsidy provided by China local authorities accounted for around 3-5% of the companies’ revenue in general and MOCVD

remained as the main subsidy target.

• San’an Opto recorded RMB 196 million (US $31 million) subsidy for 1H14, and total subsidy for 2014 is expected to

double the growth of the previous year. Hence, San’an Opto will plan for large scale capacity expansion during 2014-

2015.

2013 (Million USD) Sanan ETI Nationstar Refond

Sales Revenue 601.95 504.82 184.25 110.00

Total Subsidies 33.86 37.42 6.47 1.84

- MOCVD 30.62 9.02 X X

- Other (e.g. buildings) - 28.40 6.47 1.84

Other Support (e.g. higher sales prices, Government Project..)

Project Support Project Support


China Package Manufacturers Actively Expanding

to Reach Economies of Scale

KK Pcs/M

• The major strength of China package manufacturers still rely on cost competitiveness, where manufacturers actively expand

their capacity to produce standardized products, and ultimately achieving economies of scale.

• Tier-one Chinese LED package manufacturers’ capacity grew 40-50% in 2014. Chinese manufacturers’ capacity is close at

Taiwanese manufacturers’ heels.


Chinese Package Manufacturers Raise 2835 Strength

Through Standardization and Domestic Production

• Chinese package manufacturers 2835 LEDs are very cheap, mainly because of economics of scale achieved by standardization.

Therefore, pricing has been very competitive.

Sanan Opto, ETI ,

HC SemiTek, Epitop…

Chongia, Everwin,

Dongxu Metal….

Grirem Advanced

Material, Bree Optronics…

Standardization

LED Chip

LeadFrame

Phosphor

Domestic Production

60%24%

5% 7%

2% 2%

Chip (10x30mil)

Lead Frame

Adhesive

Gold Wire

Phosphors

Labor

2835 BOM Cost Analysis


Automated Production Lines Sufficiently Lower LED Bulb BOM Cost

• Take LED bulbs for example, 40 equiv. LED bulbs Labor costs were halved by introducing automated production lines, and

production volume is estimated to be above 10-15 million bulbs to be economically beneficial.

14%

Labor

7%

Automated

LED

AC/DC Driver

Heat Sink

Housing

Screw+Glue

Assembly

Others

Assembly Assembly

40W Equiv. LED Lamp BOM Cost


What Can you Buy with RMB 11?

• A 1.2 m LED tube’s FOB price costs a mere RMB 11. Twenty-three manufacturers from different industries have established

a LED Lighting Strategic Alliance to develop cheap LED lighting products. These manufacturers are sharing the same market

resources to quickly develop lighting products, while lowering material prices and production costs reasonably.

LED Package

AluminumCapacitors

MB6S

Driver IC

Transistor

Glass Tube

ALPCB

Ceramic Capacitors

LED Driver

Brand & Channel

SMT

Capital

It is Not Enough to Buy Fast Food in Shenzhen, China


Outline





3) Emergence of Low Priced Lighting Era


4) Conclusion



0%

10%

20%

30%

40%

50%

60%

LED Chip LED PKG Lighting

HHI Index

High Oligopolistic Concentration

Low Oligopolistic Concentration

Red Sea Competition

Low Entrance Threshold Leads to Chaotic Condition in LED Industry

Four Market Structure and Its Corresponding Price Competition

Type of Competition

HerfindahlIndex Range

Intensity of Price Competition

Competition ＜10% Intense

Low Oligopolistic Concentration

10~18% May be intense or low, depends

on product differentiation

High Oligopolistic

Concentration18%~60%

May be intense or low, depends on competition among companies

Monopoly ≥60% Usually low, unless there is threat

The Herfindahl–Hirschman Index(HHI) is a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them. It is defined as the sum of the squares of the market shares of the 50 largest firms within the industry, where the market shares are expressed as fractions. The result is proportional to the average market share, weighted by market share.


Taiwan:

Epistar group recorded monthly TIE capacity reached 850K pcs in 2014. Total production capacity is expected to exceed 1,200K pcs/month in 2015 after merge with FOREPI.

China:

San’an Opto recorded 600k monthly capacity in 2H14, which will reach 1,000k/month by 2H15, nearing rival Epistar’s production capacity.

HC Semitek has two wafer manufacturing bases located in Wuhan and Suzhou. The TIE capacity will reach 200k/month by 2015.

HC Semitek

Philips Lumileds

Lextar

Seoul Viosys

OSRAM Opto

Samsung LED

LG Innotek

Nichia

Sanan Opto.

Epistar Group

2015(F) 2014

Chip House's Wafer Capacity Estimates

The Industry Will be Concentrated as Tier-Two Competitors Begin to be Eliminated after The Market Matures

While tier-one LED manufacutrers continue to work on capacity expansion, price reduction remains in the LED industry. Soon, tier-two manufacutrers will be eliminated from the market follow this trend. Profits in the overall industry will also increase as the industrial concentration becomes more obvious.


Time

Decorative

Mobile Backlight

TV BacklightDisplay

LED Lighting

2014

Market Size

LED Industry

Gradual decline

缓慢的衰退

Need innovative applications to fill the gap

Smart Lighting？

Plant Growth Lighting?

产业成熟化：新的创新应用是什么？

LIFI？Rapid decline

Industry Maturity: What is The Next Innovative Application?

• Entrepreneurs should take LED innovation cycle into consideration to push the industry onto the next level.• If the industry recession becomes a reality, how to deal with the industry downturn, as well as how to manage

the industry after the downturn.


TrendForce

LEDinside

WitsView

DRAMeXchange

EnergyTrend

ANAVTI

Thank you!

儲于超 Roger Chu,

Research Director of LEDinside,

TrendForce

[email protected]

www.ledinside.com TRi

mailto:[email protected]

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Asian Manufacturers Spur Low Priced Lighting Era