LEDs in 2020/2021 – Zero Sum Game
Let’s start off with 2020 was not a good year for the LED space as the COVID-19 pandemic took its toll on the industry. 2020 LED revenue is expected to have dropped ~10% to $15.13b according to the most recent data we have seen. After such a poor showing, the predictions for the industry in 2021 are for a ‘recovery’ of 3.8% to ~15.7b, but few forecasters would take the opposite view after such a poor year for the industry, especially given the recent arrival of vaccines that could help to prevent the spread of the disease in 2021.
That said, the LED industry is really an application specific one, with each segment having its own performance characteristics and issues, and performance varied considerably in each. The LED display backlighting market did well as stay-at-home consumers bought tablets, notebooks, and TVs in unusually high volumes to work or entertain themselves during the pandemic. LED demand from the display space reflected the increased ‘screen’ demand as the number of LEDs used in more specialized products such as gaming monitors also increased. Given the fact that the pandemic has not disappeared as quickly as some hoped, expectations are for a continuation of display demand into 2021, and logically LED backlight demand should correspond, however we are a bit less sanguine about the full-year prospects for the display space in 2021.
The display industry paints a strong picture for 2021, or at least the early months of the year, however we note that the CE space is just slightly more than a zero sum game, with overall population and economic growth being the increment. If consumers bought lots of tablets, monitors, and TVs during the pandemic, what would drive them to rapidly replace those items when the pandemic is over? Unless there is some earth-shattering new development in CE in 2021, we don’t see enough of a driver to offset the demand that was pulled in during 2020.
The only mitigating factor would be how long it takes for the COVID-19 infection to recede enough to allow a more normal business and socialization environment, and while that factor is a main focus for anyone in the CE space, we are a bit less optimistic about CE growth in 2021 than others, and that would be reflected in LED backlight demand. We do expect mini-LEDs to become ‘a thing’ in the display space in 2021, but even with the support of much of the LED industry and major CE firms and spectacular y/y growth, we expect mini-LEDs to be less than 1% of the overall LED industry in 2021,
As to LED lighting, in the near-term it seems Chinese LED packaging suppliers have indicated that they would be increasing quotes by 5% to 10% to reflect ‘increased production costs’ and that is being passed down to those that produce LED based lighting, who are expected to raise their prices by 8% to 10% in the New Year. With Asia being the dominant LED lighting materials supplier and the largest LED lighting market, we expect others will follow. Automotive LED lighting was also a casualty of the pandemic as global car sales hit record low levels, although there is some optimism that a recovery is already underway and that 2021 will see enough growth to offset much of the negative growth seen in 2020. We are also optimistic but expect it will take ~18 months for the automotive LED segment ot return to pre-pandemic levels.
There were some positives in the LED lighting segment despite generally poor demand as the shuttering of many businesses saw reduced or very limited hours. The use of LED lighting for horticultural purposes got a boost as a resurgence in indoor agriculture for food and the legalization of recreational marijuana stepped up that niche of LED lighting, but was offset by commercial LED use, meaning use for large scale advertising and promotion which was hard hit in 2020 as performance gatherings were severely limited. We expect there will be some growth in the commercial LED signage space in 2021 but we expect the dependence the COVID-19 timeline will affect this segment most pointedly. We could see some pent-up demand stimulating sales if the pandemic subsides enough for large scale gatherings, but our gut says it will likely be a year of relatively small growth for the LED signage space.
All in, timing will be everything for the LED space in 2021 and while there will certainly be other plusses and minuses, the development and distribution of vaccines on a global scale will set the tone for LED demand in most cases. The aforementioned price hikes in LED lighting might give a small boost to overall industry revenue as would premium display backlight products such as mini-LEDs, but the general tone will be determined by at what point during the year the virus subsides enough for consumers to regain some normalcy to daily activities. Restrictions as to indoor dining and large venue gatherings will have to be eased, along with corresponding psychological barriers that have been imbedded in a hopefully more cautious population, before the LED space could be considered to be in a realistically ‘normal’ mode. But we expect the potential changes, both positive and negative, that were seen in 2020 in the LED space, will offset each other as 2021 progresses, which leads us back to the zero-sum game theory that tempers or enthusiasm a bit more that the more optimistic view the LED industry prefers.
That said, the LED industry is really an application specific one, with each segment having its own performance characteristics and issues, and performance varied considerably in each. The LED display backlighting market did well as stay-at-home consumers bought tablets, notebooks, and TVs in unusually high volumes to work or entertain themselves during the pandemic. LED demand from the display space reflected the increased ‘screen’ demand as the number of LEDs used in more specialized products such as gaming monitors also increased. Given the fact that the pandemic has not disappeared as quickly as some hoped, expectations are for a continuation of display demand into 2021, and logically LED backlight demand should correspond, however we are a bit less sanguine about the full-year prospects for the display space in 2021.
The display industry paints a strong picture for 2021, or at least the early months of the year, however we note that the CE space is just slightly more than a zero sum game, with overall population and economic growth being the increment. If consumers bought lots of tablets, monitors, and TVs during the pandemic, what would drive them to rapidly replace those items when the pandemic is over? Unless there is some earth-shattering new development in CE in 2021, we don’t see enough of a driver to offset the demand that was pulled in during 2020.
The only mitigating factor would be how long it takes for the COVID-19 infection to recede enough to allow a more normal business and socialization environment, and while that factor is a main focus for anyone in the CE space, we are a bit less optimistic about CE growth in 2021 than others, and that would be reflected in LED backlight demand. We do expect mini-LEDs to become ‘a thing’ in the display space in 2021, but even with the support of much of the LED industry and major CE firms and spectacular y/y growth, we expect mini-LEDs to be less than 1% of the overall LED industry in 2021,
As to LED lighting, in the near-term it seems Chinese LED packaging suppliers have indicated that they would be increasing quotes by 5% to 10% to reflect ‘increased production costs’ and that is being passed down to those that produce LED based lighting, who are expected to raise their prices by 8% to 10% in the New Year. With Asia being the dominant LED lighting materials supplier and the largest LED lighting market, we expect others will follow. Automotive LED lighting was also a casualty of the pandemic as global car sales hit record low levels, although there is some optimism that a recovery is already underway and that 2021 will see enough growth to offset much of the negative growth seen in 2020. We are also optimistic but expect it will take ~18 months for the automotive LED segment ot return to pre-pandemic levels.
There were some positives in the LED lighting segment despite generally poor demand as the shuttering of many businesses saw reduced or very limited hours. The use of LED lighting for horticultural purposes got a boost as a resurgence in indoor agriculture for food and the legalization of recreational marijuana stepped up that niche of LED lighting, but was offset by commercial LED use, meaning use for large scale advertising and promotion which was hard hit in 2020 as performance gatherings were severely limited. We expect there will be some growth in the commercial LED signage space in 2021 but we expect the dependence the COVID-19 timeline will affect this segment most pointedly. We could see some pent-up demand stimulating sales if the pandemic subsides enough for large scale gatherings, but our gut says it will likely be a year of relatively small growth for the LED signage space.
All in, timing will be everything for the LED space in 2021 and while there will certainly be other plusses and minuses, the development and distribution of vaccines on a global scale will set the tone for LED demand in most cases. The aforementioned price hikes in LED lighting might give a small boost to overall industry revenue as would premium display backlight products such as mini-LEDs, but the general tone will be determined by at what point during the year the virus subsides enough for consumers to regain some normalcy to daily activities. Restrictions as to indoor dining and large venue gatherings will have to be eased, along with corresponding psychological barriers that have been imbedded in a hopefully more cautious population, before the LED space could be considered to be in a realistically ‘normal’ mode. But we expect the potential changes, both positive and negative, that were seen in 2020 in the LED space, will offset each other as 2021 progresses, which leads us back to the zero-sum game theory that tempers or enthusiasm a bit more that the more optimistic view the LED industry prefers.
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