The cool thing about economies of scale, and especially about cutting-edge gadgetry, is that generally the price goes down over time (remember the $500 iPhone?). But that may not be the case for ever-more-popular LED-backlit LCD TVs this year, or for LED light bulbs for that matter. Accompanying the surge of LED use in electronics, a shortage of light emitting diodes could put upward pressure on prices as device makers cut deals to get their hands on the essential little components.
The problem is a simple one of demand outstripping supply, but it's not such a simple problem to resolve. Global industrial capacity sits at about 75 billion units according to market research firm iSuppli. In 2009, technophiles swallowed up 63 billion units, but next year demand is supposed to hit 80 billion, creating a 5 billion unit gap that can only be met if production speeds are increased.
But that's not the only problem; demand is supposed to jump by another 20 billion units to top 100 billion in 2011, so even if manufacturers manage to ramp up production to meet demand this year, they face another double digit increase in production next year.
Though lots of our daily tech relies on LEDs, it's LED-backlit LCD displays in televisions and laptops that are really driving demand up; their superior picture quality and low power needs make them an obvious step forward over cold-cathode fluorescent lamps used previously. LEDs are also popping up in car headlamps (Ferrari's latest makes them a key design element), and as the technology comes along, we'll see more light bulbs for the home.
While the shortage may not drive the cost of new devices stratospherically higher, we'll probably lose the incremental decreases in cost that we're used to seeing in our technology. So the price of an LED television now might remain the same throughout the year and into next. Which is annoying, sure, but over the next couple of years the market will likely find its way back to equilibrium. And since that TV you've been eyeing won't be coming down in price for awhile, we strongly encourage you to pass the time by reading a magazine.
I saw that picture in LED throwies. Hope you didn't take it!
Demand is always greater than supply.
Prices are always in equilibrium.
The location of the equilibrium point is determined by the theoretical intersection of the supply and demand curves. Demand can increase relative to supply, or decrease relative to supply, but the price will always be in equilibrium. Equilibrium does not mean "low prices".
So, prices will not "return to equilibrium" because they never left it. Rather, prices will come down once the supply of LEDs increases to better satisfy demand.
Blah, blah, blah
I've seen this trick numerous times in my life. In the 1990's it was computer memory.
I agree with "Mr. Mark". Prices will fall dramatically over the next few years.
I don't think that's what Mr. Mark was saying, but I could be wrong I suppose.
The leds in your device are a rather low percentage of the total cost. You could raise the cost of an led four fold and the consumer would not notice. Leds are great but they are not a required bit of technology, they may be the best choice for many applications but they certainly aren't the only choice.
Shortages don't exist in the free market.
The proper definition of a shortage is when government artificially holds down the price, allowing quantity demanded to exceed quantity supplied on a continual basis instead of tending back towards equilibrium. When the government does this some of the people and companies who were willing to buy a certain quantity of LEDs at the government's ceiling price will not have their demand sated, that's the shortage.
In a market the price just goes up until there's a new equilibrium; the people who want as many LEDs at 6 cents as they did at 4 cents still get them, but the people at the margin who are not doing something profitable enough to justify buying as many LEDs at 4 cents as at 6 voluntary choose to buy less of them.
It's actually even worse than that when government fixes prices. Prices are signals; a high price but low cost to produce LEDs screams "hey, there's a profit opportunity here, come make more LEDs!". There's also an arbitrage opportunity between the price ceiling and the real market price that people are willing to pay absent government intervention, this is an opportunity to create a black market in LEDs. The black market is simply the market re-asserting itself; naturally it will be created by various unsavoury types with experience in running illegal businesses(the maffia etc.). In reality of course, it is the price-fixers in government who are the big crooks in this whole sordid affair.
There are also non-price compensation mechanisms. If you have a ceiling price on gasoline you get gas-lines because standing in line is a cost to the people who are doing it, they're willing to pay in lost time to get gasoline at the government fixed price. If the government had stayed out of the way.
in my opinion Allow to cool in the scale, and the latest technology, usually lowest prices from time to time (as the iPhone $ 500?). But this is probably a problem for LCD TVs with LED backlight more and more popular this year, or LED lamps. Top jump to the use of LEDs in electronics, the lack of light emitting diodes could put pressure on prices, such as providing device manufacturers to cut to get my hands on the pieces is important.The problem is not only exceeds the demand, but is not a simple problem to solve. Total industrial capacity is approximately 75 million dollars, according to iSuppli research farm. In 2009, rondine technophilia 63 billion units, but at the request of next year should hit 80 billion, creating a vacuum that is 5 million units can be achieved if the production rate increases <a href="http://mortgagecalculatorlender.com/">mortgage calculator</a>
I new it! We are using far more lights in our homes than ever. AT least with the old bannot lighting we actually had one in each room, not 10 or twenty as is the case with new homes.
I don't think that's what Mr. Mark was saying, but I could be wrong I suppose...
"The proper definition of a shortage is when government artificially holds down the price, ". I agree with statement one hundred percent and it is not only the governments, business will reduce production to ensure their price structure is maintained.
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n a market the price just goes up until there's a new equilibrium; the people who want as many LEDs at 6 cents as they did at 4 cents still get them, but the people at the margin who are not doing something profitable enough to justify buying as many LEDs at 4 cents as at 6 voluntary choose to buy less of them..
- Glenn Douglas