Due to the oversupply situation in the LED industry, LEDs ASP prices plunged. Sinozoc estimates the global high brightness LED market value in 2016 will increase at an incremental rate of 2% to US $17.52 billion. Even though lighting demands spurred LED usage volume growth, ironically the increasingly energy efficient LEDs are reducing usage volume. Additionally, LEDs still are under immense pressure to further lower prices. Based on these observations, Sinozoc projects in the next five years the LED industry Compound Annual Growth Rate (CAGR) is unlikely to reach more than 10% in the future.
China’s changing LED policy
Over the last decade, the Chinese government largely supported the local LED industry through massive financial subsidies, incentives, and resources to improve domestic LED companies manufacturing capacity. China has become the world’s largest LED lighting manufacturing base, but local manufacturers are still very dependent on international manufacturers for certain upstream MOCVD equipment and materials. Hence, future Chinese policies will encourage innovation, and focus on upstream raw materials, for example wide bandgap semiconductor development, or smart lighting applications following the emergence of the Internet of Things (IoT).
Trending low LED prices, and increasing replacement lighting market penetration,LED bulb prices around the globe are nearing traditional luminaire prices, since LED bulb and tube light sources used to replace conventional lights are becoming standardized, and manufacturers’ aggressive promotion pricings. In 2017, manufacturers will continue to find cost cutting solutions. Besides lowering LED chip prices, LED luminaire manufacturers will start to evaluate whether LED driver and other component prices can be further lowered. Manufacturers aim to reach a cost reducing solution through the overall system design. Lighting manufacturers on the other hand are seeking to raise their market shares through low pricing strategies to expand sales and revenue. Hence, LED light sources to replace traditional lighting products market shares will soar in the next three years.