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The scale of China’s LED package industry grew just 2% annually to US$8.8 billion in 2015, according to the 2016 Chinese LED Chip and Package Industry Report by LEDinside, a division of TrendForce. The weak performance of the Chinese LED industry last year was mainly attributed to the global economic slowdown.
LEDinside analyst Allen Yu said the market is showing some signs of rebound this year as branded lighting vendors have been restocking their inventories, thereby generating demand and boosting the capacity utilization of LED chip suppliers. Only a few chip suppliers have raised prices, but their efforts are enough to stop the general downtrend in the chip market. Consequently, package prices will also remain stable in the short term. As the industry enters its maturation phase, technological advances have lowered LED usage volumes for some applications and caused these markets to contract. LEDinside projects the scale of the Chinese LED package industry to grow 5% annually in 2016 to US$9.3 billion.
The main growth driver for the Chinese package industry last year was the lighting sector. However, lighting’s contribution to demand growth was smaller than anticipated due to the weak U.S. and European economies. Yu pointed out that the Chinese exports of LED lighting products slowed down dramatically from the annual growth rate of 60% in 2014 to 16% in 2015, when they reached US$16.4 billion in value.
The scale of China’s LED backlight market has contracted as technological improvements continue to reduce LED usage volume. As for the Chinese LED display market, demand is growing for the fine-pitch LED display application, but this market is still too small to make a significant contribution to the overall demand.
As Chinese package suppliers increase their market shares, foreign competitors adopt strategies to differentiate themselves
LED package suppliers saw their revenues being squeezed last year as LED lighting vendors, who were under immense competitive pressure, compelled them to cut prices as well. China was the weakest region for foreign suppliers as their revenues from that market fell by 10% on average in 2015. Chinese suppliers, by contrast, posted annual revenue growth of 7% on average for the same year. Chinese package companies increased their revenues against the market headwinds because they benefitted from the successes of their compatriot LED lighting vendors in Southeast Asia, India and other emerging markets. Yu expects non-Chinese package suppliers to differentiate their products and develop new market segments as to avoid head-on price competition against the Chinese suppliers.