As countries kick off incandescent bulb phase out policies, soaring LED lighting demands has attracted market attention. UBS latest report is optimistic that the LED industry will enter another expansion phase in 2014. In addition, LED stocks will also be on the rise this year. 

UBS highlighted three factors contributing to the LED industry bull market: 1) Other secondary IT sectors Return on Investments (ROI) performance were not as good. 2) Driven by general lighting market, the LED lighting market is expected to grow from US$ 7 billion in 2011 to US$ 45 billion in 2016. 3) LED factories rebounding capacity utilization rates and profitability will also allow LED stock performances to surpass the overall regional performance this year.

The LED industry growth trend will be similar to the DRAM industry during 1990-1995, when PC penetration rates increased, according to UBS. Conditions including new LED application demands and low penetration rates will cause the industry to enter a rapid expansion phase. Plunging costs will also play a key role. Furthermore, the industry’s disperse supply chains will allow manufacturers to achieve better profitability. 

From an investment perspective, spurred by the industry’s rebounding profitability, many LED stocks are anticipated to catch on this “rising trend.” UBS has a positive outlook for Taiwanese LED chip manufacturer Epistar, vertically integrated manufacturer Lextar and Korean LED package manufacturer Seoul Semiconductor.