With the top-five LCD TV brand vendors expecting LED-backlit LCD TVs to contribute a substantially larger percentage of sales in the coming years, LED players of all levels of the supply chain are actively using strategic alliances and investments to strengthen their positions in the sector.
LED TV's share of the overall LCD TV market will spike to 34% by year's end from 6% currently, according to Digitimes Research.
The LG group is one of such companies. Its flagship company and the world's second largest LCD TV vendor, LG Electronics, projects LED TV will represent 20% of revenues in 2010 with shipments of 6.5 million units, and up to 45% in 2011. Its portfolio also includes LED lighting devices, another fast-growing market.
Though rising demand of LED TVs is indeed good news, it translates to higher pressure to secure sufficient and cost-effective supplies of LED chips and components since competing vendors are expecting huge jumps in LED TV demands as well.
Source: Companies, compiled by Digitimes, June 2010
Source: Companies, compiled by Digitimes, June 2010
The LG group has leveraged its resources, both internal and external, to ensure upstream support in anticipation for the demand boom of LED applications, said Digitimes Research analyst Jessie Lin. A good example is the announcement in early June that LG Display, Amtran Technology and Everlight Electronics will set up a LED packaging joint venture in Wujiang City of China's Jiangsu Province.
The new venture is a beneficial move for all parties involved. LG Display, also under the LG group, will form a tighter alliance with Amtran, an important LCD panel client, and secure LED chip and packaging capacity for LG Electronics since Everlight is a major player in the LED chip supply chain.
Amtran manufactures LCD TVs for its affiliate Vizio, currently the sixth largest LCD TV vendor globally. With Vizio aiming to sell 1.5 million LED TVs in 2010, Amtran is also under pressure for stable panel and LED supplies. The joint venture is certainly a strategy to solve both issues, said Lin.
For LED chip packager Everlight, the alliance with LG Display and Amtran enables the company to basically receive commitment for orders from and shipments to two of the world's largest TV vendors prior to any actual capacity increase, which is always a good method to limit expansion risk, the analyst commented.
LED packaging joint venture of LGD, Amtran and Everlight | |
Facts of the new company | |
Announcement time | Early June of 2010 |
Total investments | US$30 million |
Stakes | Everlight 60%, LG Display 20%, Amtran 20% |
Volume production schedule | December 2010 |
Capacity | 100 million units initially and up to 200 million in 2011. |
Location | Wujiang City, Jiangsu Province, China |
Products | LED TV BLU |
Source: Companies, compiled by Digitimes, June 2010
Internally, the LG group has aggressively ramped up LED chip production and packaging capacity via subsidiary LG Innotek, which in the past was not considered a major player in the LED sector. The company purchased 50 MOCVD machines in 2009 and another 50 are expected for 2010.
In 2010, LED business is projected to bring in 800 billion won (US$650 million) in revenues, up 174% from 2009, for LG Innotek. For the first quarter, its LED business posted 155.1 billion won in sales.
MOCVD procurement by panel makers' subsidiaries, 2009-2010 (units) | ||
2009 | 2010 | |
Samsung LED (Samung subsidiary) | 70 | 120 |
LG Innotek (LG subsidiary) | 50 | 50 |
Lextar (AUO subsidiary) | 15-20 | 60-70 |
Source: Companies, compiled by Digitimes, June 2010
Despite the rapid equipment procurement, LG Innotek has to continue outsourcing both LED chip production and packaging to fulfill orders.
The entire process of setting up a new MOCVD machine, turning raw materials into a LED chip, delivering the chip for packaging, using it in a back-light unit (BLU) for an LED TV and distributing the TV into sales channel typically takes up to 10 months, according to the Digitimes Research analyst. Therefore, many LG Innotek's MOCVD machines that are going online this year will not be able to actually benefit LG Electronics until 2011.
LG Innotek sources LED chips from Toyoda Gosei, Samsung LED, Seoul Opto Device, Epistar and Formosa Epitaxy, and chip packaging from Everlight, Seoul Opto Device, Wooree LED and Heesung.
LG Group's LED investments, 2008-2010 | ||
Date | LG subsidiaries | Investments and alliances |
2008 | LG Display | Invested in Wooree ETI to secure LED component supply from subsidiary Wooree LED |
Jul 2009 | LG Innotek | Signed MOU with local government of Gwangju, South Korea to invest 151.3 billion won in the region to expand LED chip production and packaging capacity |
2009 | LG Innotek | Capex for LED business totaled 400 billion won |
Nov 2009 | LG Display | Partnered with Formosa Epitaxy, Amtran and Unity Opto to set up LED facility in Yangzhou, Jiangsu Province |
2010 | LG Innotek | 800 billion won capex for LED business |
Source: Companies, compiled by Digitimes, June 2010
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