Too Many LEDs A Bad Thing?

The LED research division of TrendForce, has indicated that there will be no obvious increase in LED production in 2011. Although this is traditionally the peak season for the LED industry, there has been strong doubt about oversupply spreading on weak market demand. LEDinside estimates that LED chip supply volume in 2011 will be about 100 billion units and demand volume is around 89 billion units; an oversupply ratio reaches 12%. In addition, after LED chip makers’ capacity expansion comes online in 2012, supply will increase rapidly. It is estimated that oversupply ratio will then rise to 21%.

For the consumer this should be a good thing with LED prices falling in accordance with the nature of supply and demand cycles. However, with the main force behind purchases being cash-strapped governments, both local and federal, many LED companies, especially the supply and distributors will feel the pain of the weak economy and may not be able to recover. Many of these companies are sitting on large inventories of LEDs that will soon be valued far less than what they were paid for. The inevitable will be large dumps of  LEDs on the market, further reducing prices. Again, great for the consumer, but only for the short term.

The long term outlook doesn’t look so rosy.  These mid-sized companies play an important role in forcing manufacturers to retain quality control procedures that they would otherwise not bother with. They also protect consumers by weeding out poorly made LEDs. Without them LED lights would not have come this far and won’t be able to go much further.