LED market underperformed in 2Q15, due to waning backlight market during the quarter and cutthroat pricing competition in the lighting market, a CNA report cited Epistar Chairman B.J. Lee saying.

Speaking at a shareholders meeting recently, Lee projected in the short term LED price falls will come to a halt, and was optimistic the LED industry market performance will rebound in 3Q15.

Lee noted globally there are 70 billion lamp sockets, but LEDs have less than 5% global market share. Yet, Lee was upbeat that LED market penetration rates would be driven up by the world’s annual 12 billion bulbs market demand.

Bulb price wars undermine global LED market performance in 2Q15

Despite cutthroat pricing in the lighting industry, LED chip prices have remained fairly stable and had limited impact on the Taiwanese LED chip maker’s business.

Major lighting players LED bulbs low pricing market strategies disrupted the LED market this year, a China Post report cited Lee saying. Lighting giant Philips initiated a price war in the North American market by selling two LED bulbs for US $4.99 in April 2015. After the three month promotional period, the 60W LED bulb prices will rally to US $3.97 per bulb. GE has retaliated with its plan to launch three 60W LED bulbs for US $10 in August, while another big lighting manufacturer will be offering a four LED bulb pack for US $11.97 in Walmart.

These intense pricing competitions have driven LED bulb prices lower than CFL, and hurt CFL sales significantly, said Lee. Prior to the LED bulb pricing competition triggered by Philips, CFL sales declined at a rate of 10% per year, but the price plunge tripled to 30% this year. The recent round of LED bulb price cuts might put traditional CFL players out of business, said Lee.

According to industry insiders, LED bulbs factory price tend to be around US $2, fairly close to CFL’s price of US $1.2 to $1.5. Some Asian LED manufacturers are planning to launch LED solutions with a factory price of US $1.5, and predicted factory prices for 60W LED bulbs will drop to around US $1.2 to $1.5.

To cope with raging LED bulb price wars in the North American market, SSL manufacturers have changed their lighting solution designs in 2Q15, said Lee. Following the commencement of luminaire redesigns, market orders will be reinitiated in 3Q15, and spur exponential LED bulb volume growth. He projected LED light bulb volumes will reach 2.5 billion in 2015, and market penetration rates will quadruple from 5% to above 20%. The market will hold huge potential and is estimated to grow another 30% in 2016. LED bulb price falls will come to a temporary stop after this wave of price cuts.

Lee estimates LED lighting supply chains will have to accept the price cuts, and his company prepares to respond by increasing its revenue and launching smaller LED chips onto the market. He also pointed out, LED driver prices will could drop from US $0.3 to US $0.1, and new players entering the North American lighting market will need to make adjustments in driver components.

LED backlight application market growth slows in 2Q15

As for backlight applications, global LCD TV market demands have been lowered in 2015. In addition, the Korean TV market peak season has come to an end, and even underperformed compared to previous years, reported UDN. However, Lee noted there are plenty of opportunities for the Chinese TV market in 4Q15. Samsung’s adoption of flip chip LED products in 30% of its TV backlight applications has impacted LED usage volume, since a single flip chip efficiency is about 1.5 times that of an average LED chip. These factors combined with the rise of Chinese LED chip makers had impacted Epistar’s performance in 2Q15 and might lower the company’s revenue performance for this year.

Epistar’s utilization rates for 2Q15 reached 70%, and benefiting from the tumbling LED bulb prices last quarter, its utilization rates will exceed 70% for 3Q15.