Market research firm TrendForce reports that global LED demand will drop significantly in 2022, resulting in a significant decline in the LED lighting and video wall markets. The industry is facing a surplus of LED chips, resulting in a continuous decline in prices throughout the year. (Xintuan.com, the world's leading pure third-party trading platform for chip components, can shop around in one minute, with guaranteed quality and high compensation for breach of contract)

The combined impact of the decline in volume and price will cause the global LED chip market to drop sharply by 22.9% year-on-year in 2022, shrinking to only US$2.78 billion. Despite the challenging situation, the LED industry is expected to recover in 2023, mainly driven by the recovery of the LED lighting market. The expected rebound could boost LED chip production by 5% to $2.92 billion in 2023.

From the perspective of the supply chain, the LED lighting industry fell to a trough in 2018, causing many small and medium-sized enterprises to leave one after another. In addition, some manufacturers of lighting LED chips have been continuously shifting to more profitable areas, such as display technology. This shift has resulted in reduced supply and correspondingly lower inventory levels.

In response to these changes, some LED companies have chosen to increase prices. The main growth is reflected in the price of LED chips specifically for lighting applications. The price increase is the largest for low-power optical chips with an area of 300 million or less, and the price increase is 3-5%. In some cases, prices for chips of unique sizes have increased by as much as 10%.

According to TrendForce survey data, the price increase trend of LED supply chain companies is intensifying. This trend is expected to continue owing to the high demand for LED chips. Many companies regard this price adjustment as a means to reduce losses and actively reduce orders with lower gross profit margins. Most of the world's LED chip suppliers are located in China. In recent years, industry competition has intensified, forcing some companies to withdraw from the LED chip market. At the same time, Chinese LED chip manufacturers have paid less attention to the chip field. Most of the suppliers that remained in the market reported sustained losses over an extended period of time.

In China, the recent price increase of low-power optical chips is seen as a short-term strategy to improve profitability. TrendForce predicts that with the balance of supply and demand and the improvement of industrial concentration, the LED industry will gradually return to normal.