2013 one-fifth LED lighting business or closed down?

About 4,000 LED lighting companies in China were initially attracted by tax deductions, subsidies, and cheap industrial land. Companies have invested in this industry. Now these players are trapped in fierce competition in the industry, and the price of the products has been declining in the past three years.

Pan Yirong, director of Shenzhen Zhongming Semiconductor Planning, said in an interview: “Everyone is doing LED now. The industry is very turbulent.” He also pointed out that “As soon as a new industry emerges, everyone is swarming in and immediately makes this industry. Rotten."

The goal set by the Chinese government is that by 2015, LED will account for 30% of the domestic lighting market share, which is more than three times the current level. According to official estimates, this will save 35 million tons of coal per year.

If half of the lights in China use LED lights, the annual savings will be equivalent to 2.5 times the annual power generation of the world's largest hydropower station, the Three Gorges Dam.

However, the demand in the domestic market is sluggish. Despite the subsidy, and if the use of electricity will be reduced, but the Chinese family to replace the LED lighting process has been more sluggish, because the price of LED lighting is much more expensive than the traditional lighting. In addition, quality issues also affect consumer confidence in it.

Turn off the lights

Industry experts and even some high-level LED companies believe that at least 20% of LED lighting companies in China have been eliminated from the industry.

"Many small LED lighting companies are facing difficulties and may not reach the end," said Wei Li, the senior secretary of Caishang. Qinshang Optoelectronics is a major manufacturer of LED street lamps in China.

“Five to ten years later, the industry will not have so many companies,” she said in an interview with the company’s headquarters in Dongguan.

Given that China's 60-70% of its LED production capacity is used for export, industry consolidation may temporarily disrupt the global LED supply chain. However, in the long run, the restructuring of the industry structure should make China's LED industry more healthy, which will also help improve product quality.

At present, there are more than 20 Chinese LED companies listed in Hong Kong and the Mainland. Some of them have attracted private equity investment before listing. As the profits of these companies declined, their share prices also fell sharply. Lehman Optoelectronics shares have fallen by 48% from the peak in March, while the share price of Transstar has fallen by 37%.

Industry experts believe that foreign lighting giants including Philips PHG, Osram Osram and GE GE should be able to stand out with their strong financial power and advanced technology. The German industrial giant Siemens SIEGn holds a partial stake in Osram.

Support Policies

Although the industry is expected to usher in integration, the Chinese government is still committed to supporting the industry. China's Ministry of Science and Technology said last summer that it plans to increase the LED lighting industry's scale to 500 billion yuan by 2015.

The Ministry of Science and Technology also plans to nurture 20-30 technologically competitive leaders in the LED chip-related industries, and include the industry in the government's list of industries supported by the government. At present, the annual output value of this part of the industry is 200 billion yuan.

China's LED manufacturing companies now rely heavily on foreign chips, and chip costs already account for half of the cost of the product. The introduction of chip technology into the country will help reduce costs. For China to achieve its own LED-related goals, reducing costs and upgrading technology are critical.

The GLII research report pointed out that by 2016 China's LED lighting market will have a compound annual growth rate of more than 40%, accounting for 46% of the total domestic lighting market. This is also a global trend.