Large profits are no longer to be found in the LED industry in 2011. According to Philips Taiwan, 2012 will be the year for the market to experience a wave of consolidation and the turbulence will likely last for 3-4 years.

According to Edward Po, president of Taiwan Philips, the revenues of LED lighting in the end market in 2011 will show on-year growth of 30-40%. The market has been expanding rapidly but a lot of firms have not yet reaped the expected profits due to price competition.

Although the output value of China's LED industry will reach CNY154 billion (US$24 billion) this year, a 22% on-year growth, the industry is experiencing oversupply and demand remains low. So numerous LED firms in China that have shut production.

Po indicated that oversupply is due to an overly-optimistic attitude by the industry during the the initial stages of market growth. The optimism attracted a lot of firms to enter the market. Once gross margins grow thinner, the firms have to use price competition to increase volumes to break even. Hence, Po pointed out, 2012 will be the year when the industry experiences consolidation and it will be just the beginning. The elimination process will last 3-4 years for the industry to return to normal.

Po anticipates the LED lighting penetration rate to reach 10% in 2011.