Top Taiwanese LED manufacturers Epistar and Everlight delivered strong revenue performances in 2Q14, according to statistics compiled by Chinese media Sinai.

The two companies saw 30 percent Quarter-on-Quarter (QoQ) growth. Epistar especially set another new quarterly revenue record. Having underwent four consecutive months of growth, the company’s consolidated revenue was up 30.2 percent Year-on-Year (YoY).

The company’s revenue soared 46.45 percent MoM in June to NT $2.82 billion, and grew at an incremental 0.88 percent YoY. Everlight on the other hand, also saw June revenue climb up 33.83 percent MoM to NT $2.53 billion. However, the company’s YoY was down 2 percent.

In general, the two major LED manufacturers’ revenues continued an upward climb. Upstream manufacturer Epistar’s 2Q14 consolidated revenue was up 30.2 percent YoY to NT $8.13 billion. Taiwan’s largest LED midstream manufacturer Everlight’s consolidated revenue also set new quarterly record of NT $7.69 billion.

Analysts noted Taiwanese LED manufacturers’ total revenue in June 2014 reached expectations, since this is the industry’s conventionally low season. Lextar’s revenue in June for instance set new monthly record high of NT $1.36 billion. The company’s stock prices also reached a new high in the last three months, with stock prices in June up 10 percent to NT $30.20 on June 30.

Stats show the Taiwanese LED industry consolidated revenue as of June 2014 reached NT $9.74 billion (US $320 million). Eight LED chip manufacturers consolidated revenue was up 11.8 percent MoM to NT $4.44 billion. However, YoY was down 11.5 percent. In contrast, nine Taiwanese LED package manufacturers consolidated revenue dropped 20 percent MoM to NT $5.30 billion, a decline of 10.8 percent YoY.

Analysts noted the LED industry is quickly entering a market penetration phase as the LED industry enters conventional peak season in the second half of the year. In addition, most leading European and U.S. LED lighting manufacturers will be launching products during mid-year. Although, the industry is still in its slack season, the conventional peak season will arrive during 3Q14, which will further contribute to the industry’s growth.

Mid-term market investment opportunities

High LED lighting market demand growths this year and rising LCD TV and smartphone demands have led to shipment shortage situation in Taiwan’s LED industry. With Taiwanese LED manufacturers delivering stellar revenue performance, the market region has become an important industry indicator. Therefore, many industry insiders project, the LED industry’s YoY growth will speed up in 3Q14, which will further raise the industry’s gross margin.

Worth noting, in the first half of 2014, leading LED manufacturers have been leaking restructuring information, indicating the industry concentration in the upstream sector. On June 30, Philips announced restructuring of LED business Philips Lumileds with automotive lighting company. Many U.S. media believed the move will eventually lead to the merge between Philips Lumileds and Cree. On the same day, Epistar announced its acquisition of FOREPI. Latest research reports released by Ping An Insurance uphold an optimistic outlook for future LED developments and especially focused on mid to long term investment opportunities.

In reality, the LED industry is continually shifting to specializing LED lighting. Therefore, LED lighting is entering high market penetration phase, with a trend of increasing market penetration rate and YoY growth.

Although, consumers are still purchasing conventional lighting products in large volumes, distributors have started to lower procurement of conventional light sources, noted CITIC Securities. The financial institute estimated LED lighting market share in China will reach 35 percent to 40 percent, which is expected to gradually increase per quarter. The current LED lighting market ratio is only 25 percent to 30 percent.

Furthermore, smart lighting has become a new field that top LED manufacturers are competing to enter. As large LED manufacturers focus on releasing new products in second half of 2014, third quarter revenues will further increase. Ping An Insurance believes smart lighting market is in an initiate phase with large manufacturers promoting related products, the market will enter a fast development phase in the next one to two years.  

CITIC Securities forecasted development of smart lighting, which is a sector of smart lighting, will require full cooperation throughout the industry chain. In the future, it will lead to significant changes in the industry ecosystem, especially as lighting manufacturers start cooperating with Internet of Things (IoT) companies in partnership with professional control manufacturers can mass produce products. In addition, cooperation between system integrators and platform manufacturers will become a future development field for smart lighting.