On April 9th, the stock price of Lumens, a Korean LED package maker and one of main LED venders for Samsung TV, fell by 14%, close to the maximum price swing on the KOSDAQ exchange. Given that Lumens had announced 14% operating profits for the previous quarter (much higher than typical for LED makers), what drove the price drop?
It turns out that rumors had spread that Topaz, a related company of Lumens, might be bankrupt. Lumens and Topaz officially denied the rumor, and Lumens stock price recovered. However, it is evident that Topaz is facing a difficult business situation, but not due to LEDs.
Topaz is a light guide plate (LGP) maker, specializing in laser engraving technology. The LGP is a critical component in LCD backlight units as it helps to spread light from the light source across the surface of the LCD panel uniformly and efficiently. When edge-type LED-backlit LCD TVs were first developed, patterning LGP technology was only available for notebook PC and monitor panel sizes, and laser technology was needed for larger LGPs. Since laser LGP capacity had not been widely developed, Topaz gained dominance with its laser technology.
Due to long processing time, expensive equipment and lower manufacturing yields, laser LGPs are more expensive than typical LGPs, as much as 40% or more. As the available sizes for patterning technology have increased, edge-type TV models are increasingly adopting patterned LGPs instead of laser LGPs and the share of laser LGPs is decreasing.
Furthermore, the overall LGP market is not growing; as published in the Quarterly Display Optical Film Report, LGP demand fell by 6% Y/Y in 2013 and is expected to decline another 3% Y/Y this year.
The decline of LGP market is mainly due to the adoption of low-cost, direct LED-backlit TVs, which do not use LGPs at all. When they were first introduced in 2012, they addressed the entry-level TV segment as replacement for CCFL-backlit TVs, but, as CCFL backlights have been phased out, direct LED backlights have penetrated the mainstream TV segment previously occupied by edge LED backlights.
These factors have also affected LGP prices; during 2012-2013, LGP prices fell by 40%. With the decrease in demand and large price drop, LGP makers are facing hard times.