The LED market is facing significant headwinds of late. The current downturn in the LED market is largely due to reduced prices for LED-based TV backlight and lighting systems. This is because of inventory adjustments, and increased competition from more backlight makers entering the LED market. The Bedford Report examines the outlook for companies in the semiconductor industry and provides stock research on Cree and Veeco Instruments.

According to IMS' research, backlighting, which ranges across consumer electronics such as flat panel TVs and cell phones, is expected to grow at a mere 2 percent this year, while the general lighting market for LEDs will be the fastest-growing market, up 29 percent. IMS Research's latest "LED Supply and Demand Report" expects longer-term strength in the LED market. The firm estimates 36 percent revenue compound annual growth rate from 2010 to 2015 for packaged LEDs to $6.3B, up from $1.75B in 2011.

Reflecting on the industry in general, Cree CEO Chuck Swoboda believes the huge increase in chip production to service LED backlighting applications in recent years has put pressure on the rest of the market. On the upside, Cree is gaining strong demand for its product due to rising number of LED-based lighting designs on the market.

Veeco makes equipment to develop and manufacture LEDs, solar panels, hard disk drives and other devices and so should also benefit.