Micro-LEDs offers the benefits of high brightness, high response frequency, and low power consumption, making them an attractive candidate for future display technologies and Visible Light Communication (VLC) systems. Nonetheless, their low External Quantum Efficiency (EQE) currently impedes their scaled mass production and further applications. In order to break through the bottleneck of low EQE, we conducted an analysis of Micro-LED external quantum efficiency’s contributing factors. The influencing factors for EQE are analyzed. It is concluded that the carrier loss and non-radiative recombination caused by sidewall defects are the main reasons for the decrease in EQE. In addition, we summarized the impact of sidewall defects on carrier transport and composites, and we also reviewed the commonly used sidewall treatment technology and repair methods, and pointed out that the existing sidewall treatment methods are helpful but insufficient for improving EQE, and the mechanism of carrier interaction with sidewall defects is not very clear. It is suggested to carry out a thorough and systematic study on the types and distribution of sidewall defects, the mechanism of carrier and sidewall defects, and the defect repair mode in the sidewall treatment process. Finally, future development trends are projected. This paper offers design ideas and theoretical foundations to enhance the external quantum efficiency and accelerate the process of commercialization and mass production of Micro-LEDs.