London — China’s MLS Electronics Co. Ltd. rose to the No. 10 rank in the worldwide market for packaged LEDs in 2013, up from No. 14 in 2012, according to IHS Technology. This is the first time a Chinese company has made the ranks of the top 10 suppliers of packaged LEDs. IHS attributes the win to China’s huge investments in LED manufacturing capacity.
MLS is one of many Chinese LED suppliers that have entered the market during the surge in LED production, although the others don’t even rank among the top 20 global suppliers, said IHS. Analysts at the IHS LED Intelligence Service describe China’s LED supply base as “massive and highly fragmented, with thousands of small manufacturers located across the country.”
“Since 2011, most of the new LED production capacity that has been added worldwide has occurred in China,” said Jamie Fox, principal LED analyst for IHS, in a statement. “Because of this, it was inevitable that Chinese companies eventually would penetrate the ranks of the top 10 LED suppliers. MLS was first to join the global elite, having established itself as the clear leader in the Chinese market by capitalizing on strong domestic demand. For the major suppliers, MLS’s ascent into the market’s upper ranks represents a clear signal that Chinese firms soon will become major competitors in the global LED business.”
“Despite leading the domestic market, MLS accounted for less than 10 percent of Chinese LED revenue in 2013,” said Alice Tao, China LED analyst at IHS, in a statement. “The next five largest LED suppliers in China represented only about 20 percent of the market.”
Analysts report concerns about overcapacity with the increase in LED manufacturing capacity in China, which may result in the shutdown of some Chinese suppliers. It’s reported that some of the equipment purchased for metal-organic chemical vapor deposition (MOCVD) manufacturing now sits idle in China. So far, only a few of the smaller Chinese suppliers have closed their operations, and most of the top suppliers are posting strong profit margins, according to IHS.
So far, leading LED suppliers like Nichia, Osram, Philips Lumileds and Cree have only been slightly impacted by Chinese vendors, which face several barriers to entry in the global market, said IHS. These include pricing issues, as well as concerns about intellectual property (IP) and quality for buyers considering Chinese suppliers. But IHS believes these issues will be overcome by several factors: patent expirations, China’s history in other industries, volume of manufacturing capacity, and many LED lamps are already assembled in the country.