Faced with price competition, LED manufacturers are changing strategies


( Resource: BizLED Bureau )


The growth of global LED packaging industry is slowing down, as there will be a slight increase of just 3.2% in 2015. The market will up from US$14.6 billion in 2014 to US$15 billion in 2015.

According to the global LED package industry report released by Taiwan based market intelligence firm TrendForce, the growth in the LED package market has slow down as a lot of competitive pressure is coming from China. Due to this competition, the LED industry will face major challenges in 2015. Mainly due to China-based LED manufacturers’ price competition, costs for packaged LED products will drop by 15-20% in 2015.

The LED lighting manufactures of China are rapidly developing their manufacturing scale and technological capability and are posing low cost pressure for Taiwan, Japan, South Korea and countries and this pressure will be clearly threatening in 2015. This is possible because China-based LED manufacturers have the advantage of very attractive government subsidies.

Change in strategies to meet price competition

Look out for new markets: With a number of LED lighting manufacturers from Asia emerging with low cost products, the LED lighting giants like Philips and Osram are not only facing a fierce competitive, but also changing their strategies to maintain their position in the industry.

LED lighting manufacturers from Japan, Taiwan, South Korea are also changing their strategies to counter the fierce price competition. They are looking for emerging markets to penetrate and boost their profit margins. These manufacturers believe that the new and emerging markets will be promising in 2015 as they face challenges in selling in the matured markets at such a low cost. Hence they feel that if they penetrate new markets they can sell more. It will also be relatively easy to acquire patents in the emerging markets. They are also positive about the strong population growth and government support in developing countries.

Economies of scaleLED lighting manufacturers have also realised that as the trend is for low-priced lighting, they can achieve cost advantages only through economies of scale. Given the low costs of LED lighting products, specifications of LED are becoming standardised, particularly in China. China-based LED manufacturers have a strong grip on the low end LED market as they get very attractive grants from the government, besides other funds. That has helped them to achieve economies of scale.

Today, high-power LEDs have been almost replaced by mid-power LEDs. And Chinese LED manufacturers have an upper hand in 2835 LED market because they have invested significantly in to boost its production capacity. 2835 LED are not only low cost and have economies of scale, it is also suitable for bulb and lamps.

Some small players will exit from the market

Industry experts believe that in 2015, many LED manufacturers will look to forge strategic alliances like joint ventures or through stock investments. This trend will give immense challenge to small and medium manufacturers of LED lighting products. If they fail to face this trend and build joint ventures, many will have to quit the industry as they will not be able to make profit if they have to sell their products at a low price like those in China.