The Office of the US Trade Representative (USTR) announced today that a 25% tariff is scheduled to be imposed on a wide range of products imported to the US from China, including LEDs (light-emitting diodes) – the semiconductor chips used for general illumination in residential, commercial, and outdoor lighting applications. Because some 80% of the LED industry relies on either LED production or packaging facilities based in China, the imposition of these tariffs is anticipated to have a significant impact on the LED lighting market in the US, and may result in LED suppliers and lighting manufacturers around the world facing the prospect of having to raise costs for their product dramatically, or suffer further profit margin erosion in a market already hit by falling prices.
One major LED supplier, Seoul Semiconductor (KOSDAQ 046890) is uniquely positioned to provide LED customers an alternative source of supply that will avoid the complications created by the newly-imposed tariffs. Based in Ansan, South Korea, Seoul Semiconductor is the fourth largest LED supplier in the world, and manufactures all its LED chips in its facility in Korea. Like virtually every other LED supplier, Seoul has packaging and subassembly facilities in China; however, the company leadership had the foresight to invest in a state-of-the-art manufacturing facility in Vietnam about eight years ago, and that facility became fully operational in March of 2017. Located near Hanoi, the Seoul Semiconductor VINA facility is now the lowest cost high volume LED manufacturing facility in the world, capable of making LEDs cost competitively for a wide range of applications.
Because of Seoul Semiconductor’s advanced logistics systems and flexible manufacturing set-up, LED products ordered for a US delivery location can be packaged and assembled in the Vietnam facility, while orders for other regions unaffected by the US tariffs would continue to be shipped from the company’s Chinese locations. This has potential to be a major disruption in the LED industry, and an opportunity for Seoul to expand its customer base as US lighting manufacturers seek a new supply chain partner.