The LED industry continues to feel low demand in fourth-quarter 2011. Despite there being some urgent orders for backlight products, the price drops and high inventory will likely push tier-two firms into losses, according to industry sources.

The price of LED blue chips has been falling significantly since third quarter. Industry sources pointed out the price drop dropped 10% in September. As the market enters the low season in October-November, the price of some products has been falling 10-15%. The rapid price drops will likely shrink gross margins for LED chipmakers.

Taiwan-based LED chipmaker Epileds Technologies reported November revenues of NT$79 million (US$2.6 million), down 16.8% on month. The market estimates Epileds' fourth quarter gross margin is likely to fall to 13%.

Formosa Epitaxy reported November revenues of NT$300 million, down from NT$327 million in October. Market estimates for Formosa Epitaxy's fourth quarter revenues are likely to fall by 13% compared with the third quarter.