You can now go down to your local television store and buy an LCD-TV with a direct backlight utilizing red, green and blue light-emitting diodes - or RGB LEDs for short. The thousand-dollar premium Samsung charges for this feature, relative to a slightly less well-equipped 42-inch model with CCFL backlighting, is likely to deter most potential customers. But those willing to spend $2500 or a 42-inch set (and more for larger sizes, of course), will be rewarded with a very large color gamut, deep blacks, beautifully rich saturated colors, a very large true dynamic contrast ratio, and power savings.

Ken Werner
Senior Analyst and Editor

Samsung isn’t even stiffing its customers at this price. It’s hard to know what Samsung is paying for its LEDs, but it’s a good guess that the cost of the LEDs alone for the 42-inch backlight is about $600, so Samsung might just be breaking even on the entire LED backlight unit (BLU), if they’re lucky.

The economics are entirely different for the monochrome backlights for small displays powered by one - or no more than a few - LEDs at the corners or edges of the displays, whose light is distributed with amazing uniformity by the current generation of light-guide plates (LGPs). LEDs were the standard backlighting source for panels up to 7 inches on the diagonal the last time I looked, and it may be up to 10 inches by now.

So, if LED BLUs for LCD-TVs are too expensive to become mainstream any time soon, and if, for small displays, they are yesterday’s news, where is the new frontier?

That frontier has been high-value notebook PCs, specifically, the very light and thin PCs where the extra cost of an LED BLU (in the form of an edge-light, like the CCFL backlight it replaced) added enough value to attract buyers.

Now, the frontier is expanding to a broader range of notebook PC panels. In fact, AU Optronics (AUO) president and COO LJ Chen said recently that, because of the substantial growth of LED backlighting in all types of notebooks, all of AUO’s notebook modules will incorporate LED backlight units by 2012. By 2011, Chen said, AUO will quadruple the proportion of its LED-lit notebook panel shipments compared to 2008.

Currently between 5% and 6% of the panels AUO ships support LED backlighting, according to AUO Senior VP Paul Peng. That ratio is to grow to 20% in 2008, double the estimated industry penetration of 10%. And what AUO does is significant, since it currently ships 2.5M notebook panels per month, making it the third-largest notebook panel supplier, Peng said.

But then he went on to make a more interesting comment. LED backlighting will spread beyond high-end notebook panels, Peng said, because the price premium does not have to be as high as it is for high-end notebooks. Because high-end notebooks must have very slim, high-resolution panels that optimize performance, they need more LED chips, which enlarges the price gap between LED and CCFL.

But mainstream notebook PCs can accept panels with more modest specifications, which requires fewer LEDs, and this will narrow the price gap with CCFL to US $10, Peng said. And the price gap will shrink further as LED technology advances.

The migration of notebook PC backlighting to LED technology will open a major new market for LED chips. If one notebook panel requires 40 to 50 LED chips, the requirements of AUO alone could grow to several hundred million chips. Supplies of some LEDs have been tight, so AUO is looking for partnerships with LED makers, and is also investigating whether it should produce its own epitaxial wafers.

AUO isn’t alone in its LED bullishness, of course. For just one more example take Innolux Display, which says it will manufacture 500K LCD-TV sets and 35M LCD monitors this year. The company is raising its LED orders to Unity Opto Technology so sharply that Unity, a Taiwanese LED packaging house, is predicting its monthly SMD LED manufacturing capacity may grow to 60M units by the middle of this year, up from 30M now, and that capacity will further increase to 100 million units by the end of 2008. And we’re not even mentioning LEDs for general lighting, which will eventually dwarf the backlight market.

Bottom line: There’s lots of growth in the LED value chain.

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