Jed Dorsheimer, a senior asset analyst from Canaccord Adams, discussed the cyclical issues in the LED market. The first cycle began in the first few years of this century, mainly driven by mobile handheld devices. LEDs were used to illuminate keyboards, and later became the backlight source for mobile phone color screens. The significant growth in LED manufacturing resulted in overcapacity between 2004 and 2005. However, during this period, it drove the improvement of LED performance and the decrease in price, which in turn opened up the second cycle of LED as a backlight source for medium-sized laptops and large-sized televisions. Based on the rapid growth of the (flat) TV market, Dorsheimer stated that the LED industry will experience significant capacity shortages, with a shortage of 70-100 billion LED chips by 2012. We need to invest in the production capacity of several hundred MOCVD machines, and there should also be sufficient supply of sapphire substrates. Dorsheimer believes that according to the development trend, there will be a 30% overcapacity in LED production in the future, requiring a "one to two year digestion cycle"; There will not be a significant increase in production capacity between 2014 and 2016. History will repeat itself, as the decline in LED prices and improvement in performance will help the industry advance to the next cycle, but the driving factor is lighting.
