The trend for energy-saving and environment-friendly products is driving China's DIP LED industry. Makers are confident adoption of this type of encapsulation will gather steam as more countries switch from traditional light sources to cost-efficient alternatives. Although orders dipped in early 2009 due to cancelations, the majority projects overall sales will remain robust, if not rise at least 20 percent by year-end.
DIP versions represent 60 percent of China's total supply of encapsulated LEDs. SMD units follow with a 20 percent share, and the rest is divided equally between piranha and high-power models. Although output of the second and fourth categories has been increasing notably in recent years, many companies are expected to continue emphasizing DIP LEDs.
The product is now used widely in LED displays, lighting, backlights, decorations, toys, instruments and equipment. Much of the market momentum comes from the first three segments. Global turnout of LED displays alone is expected to reach $1 billion this year, and will climb to $1.5 billion by 2012, according to DisplaySearch. Continued upturn in this sector will translate into more orders for DIP LEDs.
In the backlight market, broadening adoption in laptops, and high-end LCD monitors and TVs is feeding the trend for bigger models, which will boost demand further. For some companies, the shift to LEDs from traditional technologies is accelerating growth. To illustrate, buyer inquiries for DIP daylight lamps have increased 50 percent in recent months.
Under efforts to bolster sales enterprises are leveraging their price advantage, especially in the low-end and midrange segments. Many are expanding reach in the Middle East, Africa and India. Large companies with strong R&D capability are off ering upscale models that are on a par with leading brands from the US, the EU and Japan but at lower quotes.
Makers, however, anticipate a potential threat from SMD and highpower LEDs. The former is increasingly adopted in superthin LED backlights, and indoor and high-density LED displays. The other type, meanwhile, is expected to replace DIP variants in applications where fewer light sources and illumination uniformity are emphasized. The mature technology and lower price of the latter, however, will help secure its market position. Some companies also said DIP LEDs have emission angles that are easier to adjust than other versions.
Outside of the display components segments, it is LED-based terminal products that are forecast to erode sales of DIP models in coming years. Several manufacturers, including Shenzhen Betop Electronics Co. Ltd, have started targeting a large chunk of theirLED components at domestic clients in anticipation of smaller orders from overseas customers.
IPR poses another challenge for makers, especially those whose main export destinations are the US and Japan. To avoid legal problems, many are taking extra precaution in importing raw materials, particularly from Japan where most component technologies are patented. A rising number of enterprises are sourcing from local providers.
For chips, however, the lack of homegrown technologies forces mainland China suppliers to work with foreign partners, specifically Taiwan vendors. The challenge in this aspect is the limited stock of grade A ICs. These go mainly to Europe, the US, South Korea and Taiwan makers, leaving mainland companies with B and C solutions.
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