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TV backlighting chipmakers to shine on LCD

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CIOL Bureau
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BANGALORE, INDIA: The fast-expanding market for LCD televisions and monitors is likely to light up the fortunes of some small and mid-sized chipmakers, which make chips used to backlight those sets.

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Liquid crystal display (LCD) televisions need backlighting, which can be done using either light-emitting diodes, which require chips, or the traditional cold cathode fluorescent lamps (CCFLs).

LCD TV makers are now increasingly switching to sets using LED backlighting since they are thinner, more power efficient and provide better images than those lit by traditional CCFLs.

As a result, niche semiconductor companies, which make LED backlighting chips such as Supertex Inc, Monolithic Power and Microsemi Corp are poised to benefit from the growing market.

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"I think initially when the market is young, the smaller players will benefit more," Thomas Weisel analyst Tore Svanberg said.

LED backlighting has been there on mobile phones for a while, but increasing adoption by television OEMs and monitor makers is set to give these companies a shot in the arm.

"The market is being driven largely by the LED LCD TVs right now," Lazard Capital Markets analyst Daniel Amir said. "That's a big, big business."

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The LED backlighting market for handsets is already mature and commoditized, with players like Fairchild Semiconductor International Inc, Texas Instruments Inc and National Semiconductor Corp competing against one another.

Although the semiconductor giants are foraying into the market for LED backlit TVs and monitors, analysts believe the smaller firms will benefit more in the near term.

"The larger chipmakers tend to be more broad-based and diversified, whereas the smaller companies tend to be more niche and they focus on very unique applications," Svanberg said.

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In a recent report, Display Search, a research firm focused on display-related industries, forecast that LED backlight demand for all applications would grow to 770 million units in 2015 from 114 million in 2009.

The research firm expects the shipment of LED backlight units for LCD TVs to increase to a 72 percent penetration rate with 184.9 million units in 2015 from a 20 percent penetration rate with 36.5 million units in 2010.

LED backlights will make up for about 84 percent of notebook PC shipments in 2010 and about 95 percent in 2011, it said.

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Competition to intensify

Analysts also expect competition to intensify in 2010 and beyond with chipmakers like Monolithic Power, O2Micro and Microsemi trying to capture a bigger share of the market for backlighting of LCD television sets.

Supertex, based in Sunnyvale, California, is currently the dominant chipmaker in the TV market. LEDs accounted for 26 percent of the company's revenue in its most recent quarter.

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"The company probably has a 100 percent penetration into Samsung LED-backlit televisions," Brigantine Advisors analyst Ramesh Misra said.

Korea's Samsung Electronics, which expects to sell 10 million LED-backlit TVs in 2010, has enjoyed an early lead in the race.

Larger chipmakers like Maxim Integrated Products, ON Semiconductor Corp, Texas Instruments and National Semiconductor have also launched products in the LED driver segment and may attempt to extend their presence in the next few years.

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"Once the (LCD) TV market really takes off, it's safe to assume that there will be a lot of other suppliers that will come in, but I think at least in these initial phases, companies like Supertex will benefit from some of the earliest trends in this space," Misra said.

IMS Research analyst Jamie Fox said competition will stiffen, and it will eventually strain profit margins.

"Everybody wants to get into it because it's the most notable main growth area," he said. "I think three or four years from now the profit margins will become quite small."

Chipmakers supplying drivers for LED backlighting are also keeping an eye on the market for LEDs in general lighting applications, though initially they are most likely to maintain their focus on the backlighting markets.

LED lights are more energy efficient, do not contain mercury and beam brighter than incandescent or CFL lights.

Researchers at consultancy iSuppli expect that global sales of LED lights in 2013 will be around $15 billion.

The market for chips used in general lighting is fairly small right now, about $25 million, but is expected to double in 2010 and grow at a rate of about 60 percent after that, analyst Thomas Weisel's Svanberg said.

He said the lighting market offers margins of about 60 percent to 70 percent, higher than the 50-58 percent margin in television backlighting.

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