UV LED market: too many players for decent margins?
The fast adoption of UV LEDs for curing applications drove the number of UV LED companies up 6-fold since 2008, a growth emphasized by the strong price-pressure environment seen in the visible LED industry since 2012. The growth in unit will even be higher in the next years, fuelled by price decrease, expects Yole.
“The recent UV LED price decreases are forcing manufacturers to review their strategy”, comments Pierric Boulay, Market & Technology Analyst at Yole. “The visible LED industry is suffering from strong price pressure. As a consequence, LED manufacturers are looking at new opportunities to increase their revenues and margins”, he adds.
In this context, the UV LED market has been perceived as a potential ‘blue ocean’ of attractive opportunity for these players.
Since the 2012 boom of UV curing applications, more than 55 LED companies have entered the UVA LED industry. Today the UVA LED industry is well structured, with a large number of suppliers, and the price and performance of devices in greater agreement with application level requirements. A good symbol of this maturation is the involvement of six of 2015’s top-10 visible LED players: Nichia, Lumileds, Seoul Semiconductor/Seoul Viosys, Everlight, LG Innotek and Lumens.
“So what’s next? Will the UVA LED industry follow the same trend as the visible LED industry, a blue ocean that turns into a bloodbath?” wonders the analyst.
Most of the new entrants are coming from Taiwan and China. The emergence of these players already had an impact on the industry, forcing all manufacturers to dramatically reduce their prices and margins in 2015.
The industry can handle such price reductions and the intensifying competition only if the market can offset it, for example through a volume increase. But it is likely that several players will exit the business, unable to develop as required.
Indeed, UV LED device development seems to have reached a limit because manufacturers use techniques developed in the visible LED industry. Further performance improvements and price reductions will therefore require strong R&D investment. This trend will benefit big players that are more able to make the necessary financial commitment.
Smaller players, if they want to survive, will have to differentiate themselves or develop new strategies. Vertical integration up to the module/system level could represent the best opportunity for them to generate additional revenues.
Yole sees a well-structured UVA LED supply chain. This market segment is showing 6 of the top 10 visible LED players in 2015 that have a strong foothold in this business. All companies are developing specific strategies to maintain their positioning and business.
From its side, UVB/UVC supply chain is step by step more mature and is becoming more structured. Indeed current technologies point out good performance and players enlarge their manufacturing capacities. According to Yole’s analysts, recent joint ventures and mergers and acquisitions occurred mostly in the UVB/UVC LED industries. Their objectives were to get an access and/or secure technologies.
The market research firm estimates that if new applications inaccessible to UV lamps were to take off with UV LEDs, they could represent an additional revenue of nearly US$143 million in 2021.
Yole’s “UV LEDs – Technology, Manufacturing and Application Trends” report reviews the global UV LED industry, from substrate to system and provides insights into the modification of the supply chain including new entrants, mergers and acquisitions. It presents a detailed analysis of the industry as well as a comprehensive overview of UV LED device manufacturing, describing UV LED structures, current challenges and key research directions. UV LED performance and price roadmap are also included.
Visit Yole Développement at www.yole.fr
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