According to iSuppli, the industry's total capacity of 75 billion units was almost reached last year.
This indicates that many LED manufacturers were operating at nearly 100 per cent utilisation levels and if this continues, demand could end up outstripping supply, the company believes.
Jagdish Rebello, senior director and principle analyst for wireless research at iSuppli, said that because LED market growth is predicted to rise dramatically over the next three years, "a drastic undersupply situation could occur this year unless additional capacity is brought online to meet the increased demand".
The firm stated that the shortage applies to LEDs used to in the backlighting of large-screen LCD TVs.
In related news, the Wall Street Journal recently reported that "brisk" orders for electronics and construction materials are driving the need for semiconductors in Asia.
