China LED Lighting Industry Grows at Exponential Rate
Falling prices and a move toward quality keep Chinese suppliers booming
2013/05/30 | By CENSIndustry executives believe that after a decade of sizzling development, the output of mainland China's light emitting diode (LED) lighting industry will skyrocket to RMB50-75 billion (US$8-12 billion at RMB6.2:US$1) One of the major reasons behind this spectacular growth is that an increasing number of the mainland's heavyweight lighting manufacturers have integrated locally made LED chips and packages into their products. They explain that they have begun turning to the mainland's leading chipmakers for some items with higher price/performance ratios, although they still depend on Taiwanese suppliers for high-end devices.
Another reason for the surging growth is the rapid drop in the life-time cost of most LED lamps, which this year is expected to fall below that of traditional lighting. According to industry executives, LED light bulbs, projection lamps, and recessed lamps already have a lower life-time cost than traditional lamps.
Thanks to the continued improvement of LED technology and the ongoing decline in LED manufacturing costs, plus better arrangements for the development of industry standards, product testing, and certification as well as more active government policies, LED lighting applications are projected to grow at a relatively high rate in China up to 2015. In terms of lighting fixture unit numbers, LED is forecast to grow to an estimated 30% of the mainland's lighting market in that year.
While the mainland's LED lighting industry was plagued by slipping profits, excess capacity, and anti-dumping attacks in 2012, its market there has been recovering since the beginning of this year. Strong evidence of this recovery was provided by the substantial number of local and overseas LED lighting heavyweights that participated in the LED China 2013 show, held in Guangzhou in March.
Still, Chinese LED-lighting manufacturers are worried that substandard products supplied by some among them will erode consumer confidence in the long run and hamper the more widespread use of the new light source by households. In late 2012, the mainland's quality authorities, including the General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) and the State Administration for Industry and Commerce (SAIC), found that only 51% of the LED lighting equipment inspected during several spot examinations met national standards.
Most of the mainland's LED manufacturers have now become aware of the importance of quality to their sustained growth, and have adjusted their attitudes accordingly. And, in addition to developing improved technology and reining in costs, this year they are also focusing on, service, distribution channels, and differentiation.
Competition Moving Toward Two Poles
Shenzhen Fu Sheng Yuan Lighting Co., Ltd., which was established in 2006, is one of the mainland's LED lighting manufacturers with a consciousness of quality. “The competition is moving toward two poles: low pricing, and branding,” said the company's chairman, Cai Yahui. “Low-end manufacturers that depend on a low-pricing strategy will soon be weeded out, whereas high-end manufacturers with a branding and technology strategy will survive.”
Cai made the statement when his company shifted emphasis from exports to the domestic market in 2012 in response to rampant price-cutting competition. He realized that it was about the time to leave the low-end market for the high-end market, and that lamps with intelligent control would replace conventional lamps.
To assure consistent quality in his intelligent lamps, Cai spent RMB15 million (US$2.4 million) to equip his company with the mainland's first automated production lines for his own “BCX” brand LED light tubes, an investment that cut production costs by half while doubling output. Now, three automated lines crank out 30 million LED light tubes a year. Automation has brought in more orders than ever and has kept the company ahead of competitors.
Branding, Cai conceded, is usually a long and tortuous process. “Many manufacturers here have a hard time shifting from overseas markets to the local market,” he explained. “And many of them have even left the industry entirely following the unsatisfactory results of a branding campaign. We plan to spend five years or so to make our brand name recognizable to consumers.”
Cai's branding talk is backed by Pan Wenbo, the founder of the Guangzhou International Lighting Exhibition, which is now in its 18th year. “Although the number of exhibitors was down to 2,400 this year, from 2,900 in 2011 and some 2,600 in 2012,” he said, “the branding section has continued expanding over the past three years. This suggests that local LED manufacturers are becoming more responsible than before and are increasingly ditching the irrational price-cutting strategy.” This year's show was held on June 9-12.
In addition to participating in trade shows at home and overseas, the company is promoting its products on the Internet. Wang expects this year's sales revenue to show an increase over 2012's RMB20 million (US$3.2 million).
Shenzhen Sun Lighting Technology Co., Ltd. is an LED-lighting manufacturer with design, R&D, manufacturing, and marketing operations, and a strong R&D team that enables the constant rollout of new products that meet custom needs and international standards. The company adopts Taiwanese- or American-made chips, depending on customer request.
Thanks to the use of fully automated SMT, plug-in lines, and quality chips, Shenzhen Sun Lighting's lighting products always deliver uniform light. According to the firm's president, Wei Liqiu, shipments of his quality products are worth around US$400,000 a month.