Rising Material Costs Continue to Affect LED Industry

Estimated reading time: 1 minute

The LED chip subsidiary of China’s major LED supplier San’an Optoelectronics has just announced an 8% price hike for some its products that will take effect on January 10, 2017. Following four major waves of price increases implemented by participants in the global LED industry during 2016, San’an Opto is now leading another major price adjustment at the start of 2017. LEDinside, a division of TrendForce, believes that the main factor behind these price hikes is the rising costs of raw materials in the upstream of the supply chain, while warming demand and extremely low quotes also made the price increases more noticeable. LEDinside furthermore expects the material and manufacturing costs will play a central role in the pricing among industry players. 

According to LEDinside’s analysis, another surge in the costs of raw materials is driving the current price upturn in the LED chip market. There had been increases in prices of copper, gold wire, aluminum and PCB substrates through 2016. This latest wave was triggered by the result of the U.S. presidential election. Raw material markets are being lifted by the anticipation that the incoming administration will launch major infrastructure programs. Additionally, the recent sharp depreciation of China’s currency has also indirectly pushed up material costs for LED chip makers. 

Despite the price hike announcement by San’an Opto’s, most LED chip makers have yet to follow suit as they will wait and observe the follow-up development in the market. With costs increasing, LEDinside expects some small- and medium-sized LED manufacturers will become too uncompetitive to stay in the market. Product orders instead will gradually concentrate on the major manufacturers. The consolidation process of the LED industry therefore will also become more apparent later on.