LED Lighting Industry Develops Rapidly in China's Coastal Provinces

Different provinces have varying advantages and stages of LED development

By JENNY WU

The LED lighting industry is developing rapidly in mainland China, where it has already set up integrated supply chains encompassing substrate and epitaxy processing in the upstream sector, chip-making and packaging in the midstream sector, and system applications in the downstream sector. The development is most striking in the coastal provinces of Guangdong, Fujian, Zhejiang, Jiangsu, and Shandong.

Guangdong, the mainland's biggest LED producer with revenues of RMB280 billion (US$44.8 billion at RMB6.25:US$1) in 2013, is leading the LED industry advancement that emerged following the doldrums of 2012.

Two Growth Factors

Two factors lie behind the brisk growth and increased operating efficiency of Guangdong's LED industry: increased acceptance of LED lighting thanks to improved technology that has driven prices down, and the wide use of LED lighting in public work projects that has inspired acceptance of the lamps in the private sector.

In 2013 the production of LED lighting fixtures, backlights, and packaging in Guangdong increased 44.3%, 36.31%, and 31.14%, respectively, boosting the industry's revenues there by 28.41%, to RMB65.2 billion (US$10.4 billion).

Guangdong's LED industry has amassed up to 50,061 patents pending, accounting for 26.63% of all patent applications by China's LED industry. Over 10,000 of the pending Guangdong applications are for invention patents, suggesting that manufacturers there are waking up to the need to protect their products by patenting them.

The province has also made a landmark breakthrough in developing crucial manufacturing equipment for the LED industry, facilitating the development and commercialization of core technologies using home-made manufacturing equipment.

Although orders from Europe and America (the province's two biggest markets for LED products) were down in 2013, Guangdong's LED industry received increased orders from developing markets, including Southeast Asia, Russia, and Africa, that year. As a result, Guangdong's exports of LED products continued growing in 2013, to RMB68.8 billion (US$11 billion).

Guangdong also leads other provinces in LED lighting demonstration projects and in integrating LED lights into public work projects, helping to reduce carbon dioxide gas emissions. As one of the province's top three strategic industries slated for priority development, LED lighting is being emphasized in all kinds of public work projects there.

Although it was a relatively late starter in the LED industry, Fujian has developed the industry quicker than many other provinces and now enjoys a solid technology and industry bases. Starting out in Xiamen, the industry has spread to Fuzhou, Quanzhou, and Zhangzhou.

Like Guangdong, Fujian initially installed LED lighting at government agencies and state-owned enterprises to deal with set guidelines for greenhouse gas reductions and punitive electricity prices. Later on, the province boosted consumer adoption of LED lamps through demonstration projects for indoor lighting.

The Fujian provincial government plans to announce a list of quality LED makers and limit purchases of LED products by local governments to those suppliers, thereby guiding the industry away from underselling competition and toward an emphasis on quality and branding.

Supply Chain

The LED industry in the province has established a supply chain covering the sapphire-substrate, expitaxy-wafer, packaging, and application sectors. The industry generates annual revenues averaging RMB30 billion (US$4.8 billion).

Zhejiang is also among the mainland's first-tier LED provinces, but the scale of its production lags far behind that of Guangdong.

The province's LED industry has suffered an oversupply situation since 2012, causing a large number of LED makers to close down. Many traditional-lighting manufacturers there, however, have made considerable progress in developing the production of LED lamps after jumping into the industry during those chaotic times. Some are moving into the end-user market by opening R&D units in Shenzhen, Guangzhou, and Shanghai, where most of the mainland's advanced LED technologies are developed and where the latest information on LED development can be collected.

As in several other provinces, Zhejiang's LED industry has built up an integrated manufacturing capability that allows it to complete epitaxy processing, chip making, packaging, and application on its own.

Over the past two years, Zhejiang has implemented an LED industry strategy that differs somewhat from the other provinces. Initially, the provincial government demanded that all public sites in the province, such as marketplaces, stations, airports, and office buildings, use LED lighting. Later on, the government began systematically assisting the leading players in each sector of the industry to create an environment of benign competition. Finally, manufacturers in the upstream, midstream, and downstream sectors of the industry were helped to form an alliance.

Although Jiangsu is ranked among the mainland's most economically advanced provinces, it is far behind Guangdong in the development of the LED industry and its LED lighting market is currently dominated by Guangdong-made products. For instance, Guangdong's Kingsun Optoelectronic Co. and NVC Lighting Technology Corp. are filling most of Jiangsu's demand for LED streetlights and commercial lights, respectively; their dominance, however, is being eaten away by Jiangsu's homegrown Jiangsu Sunlight Optoelectronics Co. and Nanjing Handson Co.

Jiangsu's LED industry is briskly developing in the Wujin High Tech Zone, Yangzhou LED Lighting Industrial Park, Yancheng Optoelectronics Industrial Zone, and Nantong Optoelectronics Industrial Zone, all of which are energetically luring LED makers to open shop in line with the provincial government's policy of reducing greenhouse-gas emissions, creating jobs, reinvigorating the economy, and boosting tax income.

Late Entrant

The Shandong Provincial Government has designated LED manufacturing as an emerging strategic industry with the aim of facilitating the development of complete supply chains. The industry is concentrated in the areas of Jinan, Qingdao, Weifang, Weihai, and Binzhou.

Although a relatively late entrant, Shandong's LED industry has built up advantages and self-sufficient R&D capabilities in some areas, such as landscape lighting, streetlights, display screens, high-power packages, high-brightness epitaxy wafers and chips, and LD epitaxy wafers. Also, Shandong is among the mainland's leading provinces for SiC-substrate as well as high-brightness red and blue LED technologies.

Compared with other LED-manufacturing provinces, Shandong lags in production scale for several reasons. First and foremost, the province's LED manufacturers are still small and have not yet formed significant industrial clusters. Second, its industrial supply chain is in its infancy, with a lack of integration between the upstream and downstream sectors. Third, a shortage of capital has hamstrung the industry's R&D in basic technology and product applications. Finally, collaboration is insufficient among the industrial, academic, and research circles.

Industry executives feel that Shandong should make full use of its established advantages, foster bellwether companies, enlarge industrial clusters, inspire joint-venture investment, facilitate collaboration among industry, academia, and research institutes, and coordinate integration of the upstream, midstream, and downstream sectors.