This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

LED Revenue Growth Slowing: IMS Research

Stocks in this article: CREE VECO AIXG RBCN

NEW YORK ( TheStreet) - Revenue growth in the LED sector will be only 4% in 2011, reaching $8.7 billion, according to the latest estimate from IMS Research, a sign that margin and pricing pressure, fostered by increased competition, will remain a headwind for LED stocks, including Cree (CREE), Rubicon Technology (RBCN), Veeco Instruments (VECO) and Aixtron (AIXG).

LED unit growth will increase by 32% to 75 billion units, but the backlighting market for LEDs, which has been the near-term driver of demand, is screeching to a halt, according to IMS Research. IMS predicts that backlighting revenue grows only 2% in 2011. The general lighting market for LEDs will be the fastest-growing market, up 29%, but it represents only 20% of LED market revenue.

The backlighting market, which ranges across consumer electronics from flat panel TVs to notebook computers and cell phones, has caused a boom and bust cycle over the past few years.

"Backlighting is the primary problem. Despite significant reductions in packaged LED prices, demand is growing slower than expected as panel suppliers cut both their overall forecasts for monitors and TVs and lower their LED penetration forecasts. LED penetration is growing, just slower than expected," said Ross Young, IMS Research senior vice president and LED market analyst.

Cree has reduced its exposure to the backlighting market -- Wall Street now estimates Cree has roughly 5% exposure to backlighting. However, Cree bears argue that even if it is less directly exposed to backlighting, the weakness in backlighting ultimately hits pricing and margins across the LED supply chain.

For Cree, IMS Research's Young says that revenue growth is nearing a bottom, and the general illumination market should start to become significant as a driver. However, competition will intensify as the market grows, so as the opportunity gets bigger, so do the number of players. Chinese competition has a subsidized cost base from the Chinese government and the Korean and Taiwanese players continuing to make major investments as well.

Cree's technical advantages should result in premium pricing, but prices and costs are still expected to fall rapidly. "I wouldn't predict margin expansion at this point, but do see the market growing and Cree should certainly participate although it should lose share as the number of players grow," Young said.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs