Trends in the Global LED Market - verani.net.br€¦ · Trends in the Global LED Market An Upstream...

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Trends in the Global LED Market An Upstream Perspective Falk Meissner Chief Strategy Officer, Lumileds March 2017

Transcript of Trends in the Global LED Market - verani.net.br€¦ · Trends in the Global LED Market An Upstream...

Trends in the Global LED MarketAn Upstream Perspective

Falk Meissner

Chief Strategy Officer, Lumileds

March 2017

Tremendous Development of the LED Industry

TODAY

India to switch all its streetlights to LED in 2 yearsClean Technica

Daimler announces Digital Light, headlamp in HD qualityAutomobile-Production

Apple just released what it says is best camera ever on a smartphoneCNBC

TCL showcased world’s first QD on LED chip TVCES

TOMORROW

Japan’s vertical farming, feeding the world in the 21 centuryCNN

Autonomous vehicles could reduce traffic accidents by 90%McKinsey

4K UHD TV sales forecast to exceed 330M by 2019IHS

Our fingerprints, eyes and faces will replace passwordsEngadget

YESTERDAY

“Our diodes are already in use on computer panels,

freeing the man who used to look for burned-out bulbs

among all those hundreds of winking lights.

That’s a good market.

But let’s look at markets to come.

How about…

a flat head-light as wide as your car,

To evenly light the road?

Or an inch-deep color TV set?

Or a wrist watch without a dial, that shows the time in

numbers at the instant you push a button?

That’s part of the future we see in crystal chips.”The Wall Street Journal, 1971

Nevertheless, The Recent Slow-Down Reset LED Market Growth Expectations

Packaged LED market size in USD billion

Note: “Other” includes Signage, Automotive Interior, Projectors…Source: IHS, Strategies Unlimited, Lumileds global market model

2012 – 2014: Double-digit growth

• Driven by Illumination and Display

2015 - 2016: Market reset

• Rapid ASP erosion and shift to (lower cost) Mid-Power LED

• Performance improvements change system architecture and lower LED count

• Overcapacity, subsidies, China slow-down…

2017 – 2020 Mid-single-digit growth

• Continued LED penetration

• New applications

• Market consolidation

12.213.8

15.0

2012 2013 2014 2015 2016 2017 2018 2019 2020

Illumination Display & Mobile Auto Exterior UV IR Other

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2012 2013 2014 2015 2016 2017 2018 2019 2020

Illumination Display & Mobile Auto Exterior UV IR Other

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Illumination Display & Mobile Auto Exterior UV IR Other

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2012 2013 2014 2015 2016 2017 2018 2019 2020

Illumination Display & Mobile Auto Exterior UV IR Other

LEDMarket

Average analysts’ forecast

!?

Slow Starts and Bearish Predictions are Nothing New During Technology Transitions

YESTERDAY

“The automobile is only a novelty…”

President of the Michigan Savings Bank advising Horace Rackham (Henry Ford's lawyer) not to invest in the Ford Motor Company, 1903

TODAY

“World vehicle population tops 1B units”

Sources: Forbes, USA Today, New York Times, Gartner

“Cellular telephony: just a niche market…”

McKinsey predicted for AT&T in 1980 that the market for cellphones in the US would amount to only 900,000 subscribers in 2000

“Nearly 1.5B smartphones sold in 2016”

• Increasing performance, higher reliability enabling everyday use

• Lower cost triggering mass adoption

• New form factors and functions more suited to the application

• New consumer behaviors and new applications expanding the market opportunity

• New ecosystems: infrastructure, suppliers, channels, support, standards & regulations, financial tools

• Consolidation of the industry

KEY SUCCESS FACTORS

The Cycles of Technology Transition are also Driving the LED MarketReplacement of old

technologyDisruptive Performance, lower cost,

miniaturization, new form factorsNew ecosystems enabling new

applications and markets

Automotive • ADAS/Autonomous• Digital head light• Connected• Biometrics

Mobile • Biometrics, AR, VR• Connected • High-Gamut Display• Camera picture quality

Display • Smart Home• HDR 4K• Ultra-slim, Curved• High Gamut Color

Illumination • Smart & Data Driven• Application specific• Quality of light• Integrated solutions

Conversion to LED – Not Done Yet!

85% of installed luminaires still based on conventional technology in 2020

Strategies Unlimited

3 Billion extra city dwellers by 2050United Nations

x2 number of lights in the average British home in the last decadeEPR Retail News

85%

15%

LED Adoption is Driving Growth in Automotive

101 Million light vehicles produced globally in 2020IHS

75% of global cars to have conventional lighting by 2025Internal model

<1% penetration of global cars with Laser or HD Digital Headlight in 2016Internal model

75%

25%

New Light Functions are Emerging Through Spectra Engineering and Control

Stadium HD-TV broadcasting, TLCI, multi usage and show effects

Horticulture

Human-centric

Biological, emotional, health or wellbeing benefits

Vertical inner-city farming, faster growth, higher quality plants

Sources: LEDs Magazine, Ephesus

Technology Innovation and Performance Improvements Create Attractive Segments

QD LED

IR LED

UV LED

High Gamut Displays, High-CRI Illumination…

Curing, Counterfeit detection, Disinfection, Purification…

Biometrics, Night vision, Wearables, Proximity sensing, ADAS …

Sources: YouMobile, CNET, TCL

Continued Drive to Miniaturization and Higher Levels of IntegrationHave Been Seen Before in the Semiconductor Industry

Pack

age

Den

sity

@

sh

rin

kin

g p

in p

itch

DIP (2.54mm)

PLCC(1.27mm)

QFP(1.0mm)

PGA (2.54mm)

BGA (0.4mm)

QFN (0.5mm)TSOP (1.27mm) Package On Package

3D Stacked

Semiconductor Industry

LED portfolio and package development

Flu

x &

Lev

el o

f In

tegr

atio

n

at s

hri

nki

ng

LED

siz

e

LUXEON I/III/V LUXEON K2 LUXEON Rebel LUXEON M, T, MZ, EZ CSP, MP/LP CoB, DoB, Connectivity

Development of the Digital Ecosystem Requires both: LED Performance Improvements and Integration of Digital Value-Add

ElectronicsTunability, Driver on Board, sensing, control

OpticsSecondary optical assembly integration, environment protection

Spectra engineering & controlVisual preferences, non-visual responses

The Ecosystem of Conventional Lighting was Based on Vertical Integration

Vertically Integrated

The LED Lighting Ecosystem is Evolving with Companies Becoming More Focused within the Value Chain

Vertically Integrated

LED components

Lighting solutions

Light engine integrators

Digital Lighting is Building on new Capabilities and Extended Ecosystems, Disrupting the Industry Structure

Lighting solutions

Light engine integrators

Semiconductor Players

Service & Infrastructure

providersBig data

System integrators

Distributors or Direct

(Lighting) Systems, Data,

Services

The Semiconductor Industry, an Example for ConsolidationSemiconductor market,Market share of Top 10 as % of total market size Recent M&A’s among Tier 1 players

48% 47%

10% 12%

16% 15%

4%5%

7%4%

4%

2015

3%3%

4%

2012

3%3%

3%3%

4%

Others Others

May2015

$37B

June2015

$17B

March 2015

$12B

October 2016

$39B

Sources: IHS, Forbes

Date Deal valueBuyer Acquired

Healthier market dynamics… … is expected to balance supply and demand

Declining LED subsidies, China’s focus moving to compound semiconductor

Reduced capacity expansion since 2012

Combined MOCVD shipment of Veeco and Aixtron (in units)

Sources: Bloomberg, IHS

0

50

100

150

200

250

Q1’14 Q1’15 Q1’16Q1’13Q1’11Q1’10 Q1’12Q1’09

0

50

100

150

200

250

300

350

20202015

LED supplyLED demand

Trillion sq. mils of LED

Surplus>20%

2015

<5%

2020

The LED Industry Shows Indicators for Consolidation and More Rational Market Behavior

The LED Industry Shows Indicators for Consolidation and More Rational Market Behavior

Sources: Company financial reports

Declining performance of Top 7 Chinese players …. … forces more rational market behavior

0

1

2

3

4

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Measure of Liquidity

Quick Ratio =𝐿𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

LEDinside, May 2016

LEDinside, August 2016

LEDinside, December 2016

Despite some Transactions, the LED Industry Remains Fragmented

¹Deal value not disclosed, based on estimates from LEDnews.org and China’s Securities DailySources: Strategies Unlimited, company websites

Packaged LED market,Market share of Top 7 as % of total market size Recent M&A’s

43%49%

6%5%

10%8%

17% 15%

5%6%

6%6%

8%8%

2012

4%

2015

4%

OthersOthers

Date Deal value

July2015

$130M¹

Buyer(s) Acquired

August2014

$83M(13% stake)

July2014

~$435M(share swap)

June2013

<$30M¹

Blocked by CFIUS

Trends in the LED industry - An Upstream Perspective

The LED transition is still at its beginning … global megatrends and low penetration rates drive long-term growth

The LED market is bifurcating … lower cost and commoditization trigger mass adoption, while …

Innovation and performance improvements enable fast growing and profitable LED segments

Miniaturization, application specific LEDs, and connectivity … drive new form factors, customization, higher levels of integration, and create new sources of value-add

The ecosystem of digital lighting is forming … driving growth in new applications and markets, while disrupting the value chain

Consolidation is expected … but not yet happening