A pixel array may be illuminated with backlight illumination from a backlight. The backlight may include a two-dimensional array of light-emitting diodes, with each light-emitting diode being placed in a respective cell. Different light-emitting diodes may have unique brightness magnitudes based on the content of the given display frame. Driver integrated circuits may control one or more associated light-emitting diodes to have a desired brightness level. The driver integrated circuits may be formed in an active area of the backlight. The driver integrated circuits may be arranged in groups that are daisy chained together. A digital signal (that includes information such as addressing information) may be propagated through the group of driver integrated circuits. To manage thermal performance of the backlight, the backlight may include a thermally conductive layer and/or a heat sink structure. To increase the efficiency of the backlight, the backlight may include one or more reflective layers.