Prices for mid- and high-power LEDs continue to fall in the 10 to 15 percent range, according to LED suppliers. Pricing for mid-power LEDs has been falling at a faster clip, around 20 percent, primarily due to an oversupply in the market over the past few years. Contributing to the price declines for mid-power is weakening demand from TV manufacturers and a large number of competitors.
The high-power LED market, on the other hand, has fewer large suppliers so the market dynamics are a bit different. While pricing for high-power LEDs appears to have stabilized over the past few years, according to suppliers, the market is expected to see strong price erosion as volume demand continues to increase. Growth drivers are coming from a range of applications including consumer lighting and outdoor illumination.
IHS recently reported that it expects a continued oversupply situation in the LED market over the next few years mostly due to continued increases in capital spending and production as well as government incentives. IHS attributes this to an expected surge in the lighting business.
The market research firm expects LED supply, in terms of manufactured die, will exceed demand by 69 percent in 2013 and in 2014. This will decline slightly in 2015, falling to 61 percent, and reach 40 percent by 2016.
With an oversupply in the market, buyers have put more price pressure on suppliers for mid-power LEDs, resulting in price declines of roughly 20 percent year-on-year.
But there have been some pockets of tight supply over the past few months. For example, Philips Lumileds recently told me that the company experienced tight capacity for its mid-power LEDs due to good market response for some of its new products. The company didn’t enter the mid-power market until early 2013.
Philips Lumileds expected demand to pick up in the third quarter, but was surprised when demand hit in the second quarter. It projects good demand for several of its new products, including the LUXEON M, LUXEON T, and LUXEON Z ES families.
To keep up with increasing demand, Philips Lumileds has continued to increase production capacity over the past few months, which has kept deliveries at a reasonable level. Lead times range between six to eight weeks for both high- and mid-power products. The LED supplier also keeps lead times in check through its strong distribution channel.