updated 04:47 pm EDT, Mon May 28, 2012
Price drops, surplus capacity to take down half China's LED industry
A slump in global display demand and reductions in subsidies from the Chinese government will combine to force about half of all Chinese LED manufacturers out of business, according to an analysis out from Reuters. The industry is said to be oversupplied already, and trends in the global economy are expected to prove to be too much for smaller companies to survive in the coming months. The past year has reportedly seen hundreds of small Chinese LED lighting makers shuttered, while the rest of the industry is said to be operating at 50 percent capacity due to low demand.
Due to the economic downturn, global sales of TVs and computers have lagged, leaving suppliers with excess inventory. As a result, the larger players in the LED industry have dramatically cut prices over the past several months, while smaller players are unable to do so without sacrificing their already thin margins.
This is essentially what happened to the now-bankrupt Proview, the Hong Kong company that sold its trademark on the name "IPAD" to a front company for Apple for $55,000 just before Apple announced the first version of the tablet. It is now in court demanding additional money to help pay off its $400 million debt.
The forecast price drops could take as much as 20 percent off the current price for an LED display. Meanwhile, China's government is said to be preparing to reduce its tax breaks, land deals, and cash subsidies for LED chip-makers, subsidies that have been credited with sustaining the industry over the past several years.
Analysts contend that the departure of Chinese manufacturers will be a net positive for bigger Chinese firms, which are looking to compete with other regional companies such as Taiwan's Epistar Corp and South Korea's LG Innotek.