The analysts at iSuppli Corp. believe there will be a significant shortage of LEDs in 2010 that will affect flat-panel TV makers. According to the company, the industry consumed 63 billion LEDs in 2009, representing a 6 billion rise over 2008’s figures. The analysts set 75 billion units as the market’s total (100%) capacity, a limit, as the analysts put it, “dangerously close” to 2009’s numbers.

“It is clear that demand is outstripping supply,” says Jagdish Rebello, senior director and principal analyst for wireless research at iSuppli. “With LED market growth forecasted to rise by double-digit percentages for at least the next three years, a drastic undersupply situation could occur this year unless additional capacity is brought online.”

WHO WILL THE SHORTAGE AFFECT?

According to Sweta Dash, senior director for LCD research at iSuppli, a shortage of high-brightness (HB) LEDs will affect LCD-TV makers since they are used to backlight large-screen panels.

“On the demand side, the shortage is being spurred by strong consumer desire, given the growing popularity of LED-backlit LCD-TVs. On the supply side, television manufacturers are striving to increase their sales of LED-backlit sets,” Dash claims.

According to the analysts, displays in notebook computers use about 50 HB LEDs while standard monitors employ approximately 100. However, current LCD-TVs on average command from 300 to about 500 HB LEDs per panel.

If there’s such a high demand for the HB LEDs, why aren’t the LED makers cranking them out? Is there a shortage of silicon and/or cheap labor?

“The solid-state lighting industry is in the midst of explosive growth driven by new applications and the increased penetration of LEDs in existing lighting applications,” Rebello says.

“The supply chain is trying to respond by increasing manufacturing capacity as much as possible, from increased die manufacturing to production of packaged products,” Rebello continues.

“This requires new CVD capacity, increased test and measurement capacity, and increased capacity for packaging and qualifying final product—not to mention increased demand for sapphire substrates and raw materials. But it takes time to ramp up capacity.”

In response to the impending shortage, iSuppli says, LED companies such as Aixtron and Veeco Instruments plan to double production capacities by the fourth quarter compared to the end of 2009.

REALITY CHECK

As for the 2010 demand, iSuppli forecasts LCD TV shipments to reach 169 million units, up 19% from 2009. “We are seeing signs of economic recovery and consumer spending opening up since Q4 2009,” says Riddhi Patel, iSuppli’s director of television systems and retail services. “The demand for TVs is very strong in emerging markets.”

Optimism is a wonderful attribute. Yet in another report, iSuppli researchers found that “Despite the prodigious growth of the global large-sized LCD market in recent years, panel suppliers are struggling to maintain profitability, forcing them to cut materials and component costs.” The analysts also say that “Losses were particularly acute during the dismal first quarter of 2009.”

One might view this a couple of ways: sales of LCD TVs (see the figure) and related displays are slumping, and/or the manufacturers are selling a lot of product but aren’t making a profit.

“Suppliers of large-sized LCD panels are facing profitability challenges due to the cyclical and volatile nature of the consumer markets they are serving,” Dash says. Apparently this market is or is not volatile enough to prevent a forecast of a 19% upswing in LCD TV sales during 2010.