In 3Q09, the increasing demand in LED backlight for NB and TV led to a
shortage in the supply of LED chips, and stabilized their prices, only the
white LEDs dropped slightly. Looking forward to Q4, as the capacity of
upstream chips has not ramped up in time, and demand has not been met,
LEDinside projects that the prices will likely remain flat amid the supply
shortage. Similarly for white LEDs, the insufficient chip capacity limits
price decline, and LEDinside indicates that the LED chip shortage and price
stability is expected last till 1Q10.

According to survey from LEDinside, prices of high-power LEDs (with
luminance efficacy above 80Lm/W) are quite resilient - this is due to robust
demand and stable supply from leading global LED makers. These high-power
LEDs are priced at $1.5-$2 in Q3, falling slightly by 4%. As the high-power
LEDs with luminance efficacy of 60-70Lm/W are mature products with more
abundant supply, their price drops are more substantial, down 8% QoQ, to
$0.6~$1.1.

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LEDinside added that the strong demand of LEDs for large-sized backlight
applications and general lighting purposes has caused a strain in the LED
chip supply chain, and thus also stabilized the price of white LEDs; this
was particularly evident in LED backlights for TVs - not only were LED chips
in short supply, white-LEDs also faced shortages. In light of the above, LED
prices will likely sustain. Yet, if we look into new application segments in
the future, in order to expand the application of LED backlight, such as in
monitors, LED prices may need to reduce more drastically to compete with
that of CCFL.

LEDinside: Penetration of LED backlight for NB continued to grow in 3Q09;
LED demand is expected to expand

LEDinside reported that in Q3, the penetration of LED backlight in notebooks
has increased dramatically, thanks to NB brand vendors' aggressive
promotion. It is forecast that the penetration rate for the whole year will
reach 52%.

Japanese LED makers are still the primary supplier for LED chips used in
notebooks, and Nichia currently dominates the supply. The mainstream
specification of LED for notebooks is between 2000 to 2300mcd, with prices
ranging from $0.07 to $0.12. Due to short supply of high-brightness (In)GaN
chips, and price strategy of Japanese chip makers, price of white LED used
in notebooks only fell by 5% in Q3.

As for LED backlight in Netbooks, the current mainstream specification is
between 1800 to 2000mcd, priced around $0.05-$0.07, a 10% decline in 3Q09.
Despite its robust demand, the significant price drop was attributed to the
aggressive sales promotion in China.

Shipment increase in smartphones supported the price of LEDs for mobile
applications; therefore, prices only fell by a moderate 5% in Q3.

The increase in smartphone shipments not only improved the brightness
requirement of LEDs, but also increased the shipment of LEDs for mobile
applications. Moreover, LED chip shortage affected the supply chain, thus
eased LED packager's pressure to cut prices of white LEDs. In Q3, the price
was between $0.03~0.07 with a 5% slide.

High power LED price maintained in 3Q09

Despite the rapid improvements in its efficiency, prices of high power LEDs
still saw a moderate drop. As upstream chip makers shifted their capacity to
produce more mid-power LEDs because of the rising demand in TV backlight,
supply of high-power LEDs was affected as a result, therefore, prices of
high-power LEDs maintained in Q3.