The shift from undersupply to oversupply in the LED market and the future market dynamics have become the pressing issues in the LED industry. LEDinside conducted an exclusive interview with Yansheng Chen, President of China Association of Lighting Industry, in which he provided his insights into the said issues.
China Association of Lighting Industry, founded in 1989, is one of the most important organizations in the Chinese lighting industry. The association has 1600 members, which are mostly traditional lighting industries. Chen has been the President of the association for the past twelve years. With this interview, LEDinside aims to dissect the lighting market and future trends from the perspective of traditional lighting.
Current State of Traditional Lighting Market in China
Chen stated that in general, the development of the traditional lighting industry in China is still stable. Although the overseas export of lighting products in 1H11 saw a decline compared to 1H10, the growth momentum begins to rebound in 3Q11. However, the financial performances of the companies differ depending on the types of products they manufacture.
For example, the bans against incandescent lights in other countries greatly benefit the Chinese incandescent light makers. The bans cause the manufacturers of other countries to terminate their incandescent light production and the consumers to stock. Hence, the incandescent light industry in China is booming more than ever.
In addition, halogen lamp makers also benefit from the bans against incandescent lights, because many consumers replace incandescent lights with halogen lamps and even equip the halogen lamps with the shell of incandescent light bulbs, making them more like traditional light bulbs.
As for the fluorescent lamps, due to the rise of rare earth prices, the manufacturers raise the prices of the lamps. The price increase was not received well by most clients, which in turn caused a dip in China’s fluorescent lamp overseas export in 1H11. The downturn persists until 3Q11.
Traditional Lighting’s Standpoint on LED Lighting
Considering the development of traditional lighting, Chen believed that LED lighting will slowly make its way into China instead of taking over quickly, and the efficiency enhancement and low price will play important roles in the process. Of course, the government’s subsidy policy will help, but eventually, it hinges upon the needs of the market and consumers.
The Chinese LED industry used to believe that LED lighting is able to fully replace traditional lighting, but the situation started to change since 2011. In the past, the traditional lighting industry recruits talents from the LED industry to help develop LED products. But now the major LED companies in China have been recruiting marketing and sales experts from the traditional lighting industry in order to increase their competence and strengthen their brands.
Chen stated that the LED industry is heading towards the right direction and the two industries should cooperate and reform, learning and benefitting from each other. In fact, it is quite understandable that the LED industry is heading towards the current direction, because, despite the change of light source, the LED and solid-state lighting is still lighting; the requirements still remain the same. At the end of the day, it still goes back to the basic demand of lighting.
Chinese LED Industry Facing Merger Trend
Chen further indicated that the Chinese government overselling the prospects of LED lighting propels too many manufacturers to enter the LED lighting industry. Case in point, the amount of LED companies in China is estimated at over 4000, twice as many as the amount of traditional lighting companies.
At present, due to the promise of LED lighting, many epi wafer, package, LED screen makers and even traditional lighting companies have set foot in the LED lighting industry. However, little of them manage to make profit yet. Instead, the most profitable companies in the LED industry are MOCVD equipment manufacturers and testing equipment makers. Even though some companies in upstream and downstream manage to make money, most companies are still struggling for profit.
Nonetheless, since the beginning of 2011, the investment fever has been fading considerably, which is a good thing for the industry. It becomes normal for the LED companies to go out of business or merge, as there are too many LED companies in the market. Looking at the future, the Chinese LED lighting industry should be headed towards mergers and resource consolidation in order for major and competitive lighting brands to form.
Perspectives from LEDinside
LEDinside noticed that the demand in the LED lighting market has not shown booming growth as expected and the overexpansion cause the LED industry to be in a state of oversupply. At present, the LED industry is at the merger and elimination stage. Even so, the annual growth rate of the LED industry still outperforms those of other industries. Due to LED’s high compatibility with assorted applications and the bans against incandescent lights to be imposed by countries around the world in 2012, the LED market will possibly see a sharp demand surge in the future.
The severe competition makes the LED companies reflect on their core competence and review the development path of the traditional lighting industry. Going back to basics will become the key for the LED players to outshine in the competition.