2011 China Semiconductor Lighting Industry Annual Report
On November 10, Ruan Jun, Standing Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, released the '2011 China Semiconductor Lighting Industry Annual Report'. The report provides a detailed interpretation of the current state of the market and technology of China's semiconductor lighting industry, as well as the enterprise landscape. It also points out the problems existing in the development of the LED industry and, based on this, proposes development suggestions for Chinese LED enterprises.
Policy Guidance
The '12th Five-Year Plan for Green Lighting' is expected to be released
"This year marks the launch of China's 12th Five-Year Plan. Both the Ministry of Science and Technology and the National Development and Reform Commission, along with other relevant departments, have done a great deal of work around the low-carbon and environmental protection industry. Many LED-related policies are being formulated one after another, including the upcoming Green Lighting 12th Five-Year Plan." Ruan Jun, Executive Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, said that current national policies are all moving in a favorable direction. In particular, on November 1, the National Development and Reform Commission, the Ministry of Commerce, the General Administration of Customs, the State Administration for Industry and Commerce, and the General Administration of Quality Supervision, Inspection and Quarantine jointly issued the "Announcement on the Gradual Prohibition of the Import and Sale of General-Use Incandescent Lamps" (hereinafter referred to as the "Announcement"), deciding to phase out the import and sale of general-use incandescent lamps by wattage in stages starting from October 1, 2012.
As early as 2009, Australia ceased production of incandescent lamps, becoming the first country in the world to plan a complete ban on the use of traditional incandescent lamps. The United States, Canada, and EU countries subsequently issued bans on the sale of incandescent lamps. As a major exporter of incandescent lamps, China, taking into account its national conditions, issued its incandescent lamp ban somewhat later, but that day has finally arrived. This will undoubtedly play a role in promoting the entry of LEDs into the general lighting market. According to the reporter's understanding, when this announcement was first released, LED stocks hit the daily upper limit, showing that government policies have played a tremendous role in promoting industry development.
Technology Development
The gap with foreign technology is narrowing; high-power silicon substrate chips achieve a luminous efficacy of 120lm/W
Regarding the overall development of China's semiconductor lighting industry this year, Ruan Jun, Executive Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, pointed out: "During this year, the gap between China's LED technology and the international level has gradually narrowed, and certain progress has been made in applications. At present, China has achieved significant improvements in high-power silicon substrate chips, able to achieve a luminous efficacy of 120 Lm/W, with mass production realized in the fourth quarter. In packaging, the luminous efficacy can also exceed 130 Lm/W, in lighting applications. Last year, three ministries conducted bidding for LED lighting products, and both international giants and domestic enterprises felt it was difficult to meet the various indicators. However, looking back now, we can find that these indicators have a certain forward-looking nature and are relatively reasonable."
Reporters learned that Lattice Power is currently the only company in China to have industrialized silicon substrate LED chips. It has reached a level comparable to sapphire or silicon carbide substrate LED chips on the market, with electrical performance and reliability matching those of other world-class substrate LED chips. It has clear advantages in manufacturing cost and reliability. In 2011, the silicon substrate LED chip output of Lattice Power (Jiangxi) Co., Ltd. reached 19 billion pieces per year, making it one of the largest epitaxial material and chip manufacturers in China.
Patent Situation
The quantity and quality of patents have improved, but patent risks still remain
Patents are also the most-discussed topic in the domestic industry this year. As China's LED industry gradually develops and grows, "when the pig is fattened, it is time to slaughter it," the breaking point of an LED patent war is gradually drawing near.
谈及当前中国LED专利方面的发展，国家半导体照明工程研发及产业联盟常务副秘书长阮军指出：“在专利方面，国内专利数量与质量都有所提升，特别是发明专利，据粗略统计，过去5年，联盟所关注的70家LED企业申请专利1000多项，其中发明专利400多项。而且随着应用市场的不断发展，应用端专利申请占60%以上。当然，目前在LED市场应用中，仍存在产品可替换性、可控性、统一性等方面的问题。”
LED Output Value
China's Total LED Output Value Estimated at 157 Billion RMB
"In 2011, the LED industry has become increasingly complete, and the industry scale continues to expand. The total output value for this year is expected to reach 157 billion RMB. Of course, affected by the global economy, this growth rate is currently slowing down," said Ruan Jun, Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance. "Silicon substrates have already achieved industrialization capability, but there is insufficient mass production capacity for epitaxial sapphire substrates. Although media reports from last year to this year have indicated a large volume of sapphire—with planned sapphire investments of 30 billion yuan and a planned production capacity of 12 million pieces, with one MOCVD producing 30,000 pieces per year—the investment risk for sapphire substrates remains high."
"In terms of key materials and equipment, this remains a very important constraint on the development of China's LED industry. The growth in MOCVD quantity is still very rapid—300 units were installed last year, and now it has exceeded 600 units, doubling compared to last year. However, the planned volume is much larger, potentially exceeding 1,500 units. Recently, judging from the situation of some companies, this speed has already slowed down. Currently, the domestic epitaxial capacity and chip capacity are mainly concentrated in mid-to-low-end applications; it should be said that there is a risk of structural overcapacity," Ruan Jun, Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, added.
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Regarding the growth rate of LED packaging, Ruan Jun pointed out that, although affected by price declines and intense competition—with packaging companies facing pressure from declining profits—the LED packaging output value still grew by 14%. On the application side, driven by engineering projects, the volume of downstream application products has also increased to a certain extent.
LED Investment Amount
In 2011, China's LED industry investment reached 120 billion yuan
Driven by the government, the LED industry has a broad market and promising prospects. From an investment perspective, the LED industry has become a major investment hotspot this year.
According to Ruan Jun, Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, the total investment in the LED industry last year was 30 billion yuan, and this year it has reached 120 billion yuan. These investment projects are mainly in the upstream and midstream of LED, with relatively dispersed investment distribution, serious homogenization of enterprise types and products, and a certain awkwardness of high input and low output. In fact, the investment pace has currently slowed down.
LED Enterprises
The top ten LED companies only account for 16.5% of the market share, and LED lighting companies have annual sales of less than 1 billion yuan
According to rough statistics, China has a total of about 5,000-6,000 LED companies. However, industry concentration is low, the scale is relatively small, and competition among enterprises is quite intense.
"Looking at the LED industry chain, there are roughly 60-80 upstream epitaxial chip companies based on incomplete statistics, but the number of companies with real scale is at most about 10, among which Sanan Optoelectronics has the largest output. Faced with intense competition and downward price pressure, industry consolidation is inevitable. Currently, domestic epitaxial and chip production capacity is mainly concentrated in low-to-mid-end applications, and there is a risk of structural overcapacity. Moreover, as we understand it, more than 80% of high-power lighting-grade chips currently rely on imports," said Ruan Jun, Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance. "In terms of packaging, there are currently many used for LED displays, and companies are mainly concentrated in the Pearl River Delta, Yangtze River Delta and other regions."
For packaging companies, this year can be said to be the most difficult. Under the pressure of price drops and intense competition, there have even been cases in the industry where packaging company owners have absconded. Other LED packaging companies are also seeking new paths, either adjusting their product structure to develop from SMD to high-power LEDs, or extending upstream and downstream for vertical integration.
"There are many application companies, with low entry barriers and small individual company scales. None of the domestic LED lighting companies has been able to reach annual sales of 1 billion yuan; companies with a sales scale of 500 million yuan are considered relatively large. Moreover, companies generally lack brands and channels," Ruan Jun pointed out. The concentration of the LED industry is very low. Although, in terms of manufacturing capability, many companies have become OEM/ODM suppliers for international majors, or important LED manufacturing bases, the top ten companies only account for 16.5% of the market share.
From the perspective of corporate listings, from the second half of last year to this year, domestic LED companies have been competing to go public. This year, six LED companies have already been listed, and one application company has just passed the review, entering the capital market.
Besides lighting, in terms of LED backlighting, the mid-to-high-end market is mainly occupied by Taiwanese and Korean companies, and the LED industries of Taiwan and Korea are gradually shifting to the mainland. According to the alliance's forecast, the market penetration rate of LED backlit TVs this year is expected to reach about 30%.
With the country's favorable policies for vigorously promoting the development of the LED industry and broad market prospects, foreign LED giants are also actively positioning themselves in the mainland market. The top ten global LED companies regard the Chinese mainland market as their key market and important stronghold. With the in-depth development of cross-strait LED industry cooperation, Taiwanese LED companies are also competing to enter the mainland market and set up factories there. In the future, the Chinese market will surely become the focus of competition among major players.
Forecast
By 2015, the global LED output value will reach approximately 500 billion yuan.
Regarding the prospects of the LED lighting market, Ruan Jun, Deputy Secretary-General of the National Semiconductor Lighting Engineering R&D and Industry Alliance, pointed out that the global LED output value in 2015 will exceed 400 billion yuan, reaching about 500 billion yuan, of which general lighting accounts for 44%, mobile phone backlight accounts for 23%, landscape lighting 15%, display 6%, signal indicator lights 2%, automotive lights 3%, and other applications 7%. By 2015, the size of China's LED lighting market is expected to reach 8 billion yuan. Not coincidentally, the research institute LEDinside predicts that by 2015, the size of China's LED lighting market will reach 7.6 billion US dollars, becoming one of the top three global LED lighting markets.
The two major LED application markets in the future will mainly focus on backlight and lighting. In terms of lighting, LED has developed rapidly in the past two years. Whether in product variety, application scale, or application fields, progress has been made. In addition to applications such as landscape, display screens, and road lighting, indoor lighting has become the mainstream this year, the general lighting market has begun to take off, and innovative applications in agriculture are also a major hot spot. Now the product structure has changed. Among them, indoor bulb lamps have a large output, accounting for half of the entire indoor lighting, while outdoor street lamps account for 75% of outdoor lighting. It is expected that the market penetration rate of LED downlights will exceed 30% in the future, and that of LED spotlights will exceed 40%. In addition, new LED lighting products adapted to integrated home decoration will also emerge.
Suggestions
Focus on integration capabilities and strengthen the application of distinctive products in segmented fields
Regarding the issues existing in the current development of China's LED industry, Secretary-General Ruan Jun summarized them as: "Patents are concentrated downstream, public platforms for R&D investment are lacking, enterprise concentration is not high, the standards system still needs to be improved, investment hotspots are too concentrated, and the market falls short of expectations."
The next few years should be the most critical period for the development of the semiconductor lighting industry. Which companies will emerge as winners? The "Report" also offers some suggestions: companies should focus on integration capabilities while also possessing unique products and technologies; they should have distinctive application products in certain niche application areas, system integration capabilities, strong brand influence, and market channel capabilities.