In 2014, Chinese LED package performance was not ideal in general. Although, the market maintained high growth rates, manufacturers revenue performance remained low, especially among small second-tier manufacturers.
Main Chinese LED package manufacturers’ gross margin began to fall in 2013. Manufacturers’ average gross margin in 3Q14 was 24%, mainly due to LED lighting market’s intense market competition that spread to LED package market for lighting applications. These developments led to LED manufacturers lower gross margins. Chinese LED manufacturers focused on LED lighting businesses all reported low gross margins.
However, the majority of Chinese LED package manufacturers and many second-tier LED package manufacturers are scaling up LED lighting businesses. All these manufacturers are transiting into LED lighting package sector. Manufacturers are vying to enter LED lighting industry, which leading to the competitive LED package market. The situation is expected to further worsen.
In the competitive market, cost control is the decisive factor in market competition. Since the LED lighting market still has large growth potentials, manufacturers with technology and financing capacity will start mass producing products to lower costs. This is the the majority of Chinese LED package manufacturers’ production expansion plans.