China's LED industry has been facing pressure due to high levels of inventory and oversupply in the market. The second factor has caused prices of LED chips to drop more than 20% on average in China so far in 2011.

Industry players estimate that there are currently about 5,000-6,000 LED firms in China. Most of these firms are relatively small in size but have high similarity of products, hence the competition has been fierce. There are about 60-80 upstream LED chipmakers with only 10 of them being considered large-size in China.

Taiwan's LED price has fallen more than 15% this year and the market expects the price of LED chips will likely to continue falling through the end of 2011.

Industry sources indicated the fall of average selling price (ASP) of LED products in Taiwan is likely to be more significant than estimated. Since the second quarter, the price of LED backlight has fallen around 10-15%. Small-size backlight products have been showing price drop of 8-10% per quarter due to falling demand of mobile phones.

Compared with TV backlight products, the price fall of high-power LED lighting has been relatively small. However, due to growing competition between international firms, the price of LED light bulbs is likely to drop to US$10/unit in 2012.