LED Industry Restructuring Takes a Turn: Mass Market Yet to Boom
Driving along Diezi Lake Middle Avenue in Nanchang, hundreds of LED streetlights illuminate the road, and the entire road looks exceptionally beautiful under the glow of 178 LED streetlights.
Internationally, LED has become the most fashionable and eco-friendly green lighting product in the lighting industry.
In early November, the National Development and Reform Commission announced the "China Roadmap for Gradually Phasing Out Incandescent Lamps." The once-familiar traditional incandescent lamps will be gradually phased out of the market within 5 years, replaced by energy-saving and eco-friendly energy-saving lamps. The introduction of this policy has greatly excited the developing LED industry.
The LED industry seems to have successfully shaken off the shadow of an industry reshuffle. In Nanchang, there are already dozens of LED manufacturing enterprises, and more industry giants are continuing to enter this industry.
Industry Reshuffle Takes a Turn
At this "critical moment" of overcapacity in the domestic LED industry, the incandescent lamp phase-out roadmap and the possible RMB 8 billion LED lighting subsidy to be released early next year have once again given the LED industry a glimpse of new "dawn".
Earlier this year, several LED lighting companies found that the continuous rise in the prices of rare earths and phosphor powders directly led to an increase in the price of energy-saving lamps, making it possible for LED lighting to replace energy-saving lamps. Both overseas and domestic markets of LED manufacturers may see explosive growth.
A staff member of Jiangxi LatticePower Co., Ltd. told reporters that the company's products are mainly exported abroad, and the domestic LED lighting market is also mainly concentrated in government procurement, some high-end hotels, office buildings, etc. Many LED application companies still receive most of their orders from government projects.#p#Page Title#e#
"Conservatively, the number of LED companies that have closed down this year has exceeded ten percent. Among them, more than 100 are packaging companies and 300 are luminaire companies, most of which are small businesses," Zhang Xiaofei, president of the Gaogong Industry Research Institute, told the media. If calculated based on the MOCVD quantities planned by domestic LED companies at the beginning of the year, the resulting production capacity is roughly more than ten times the current market demand, and the capacity of already operational domestic MOCVDs is also about four times the existing market demand. Overcapacity will naturally lead to industry consolidation.
Just as the domestic LED industry faces a "critical moment", the incandescent lamp phase-out roadmap and a possible 8 billion yuan LED lighting subsidy measure to be released early next year have given the LED industry a glimpse of new "dawn".
"The penetration rate of LED lighting in the domestic market is still very small. One of the reasons it has not been launched in large volumes in the mainland market is the price, which is often more than ten times that of incandescent lamps and is still difficult for consumers to accept," said a staff member of Jiangxi LatticePower Optoelectronics Co., Ltd.
Looking back at the "modern history" of Chinese lighting fixtures, one can see that it took more than ten years for energy-saving lamps to replace incandescent lamps. For LED lamps costing tens of yuan to replace incandescent lamps and enter ordinary households, the time required may be even longer.
Reporters learned that phasing out incandescent lamps is an important step in China's implementation of the Green Lighting Project, and the development of energy-saving lamps—especially LEDs—will gain good opportunities. LED lamps have attracted attention from all sectors of society due to their features of energy-saving and environmental protection, small size, low power consumption, long lifespan, high brightness, and low heat. #p#分页标题#e#
As incandescent bulbs gradually exit the market, with government policy support for the LED industry and continuous investment from related enterprises, it is a foreseeable future that green lighting will enter countless households.
Against the backdrop of the nation's strong advocacy for energy conservation, emission reduction, and a low-carbon economy, the LED lighting industry is developing rapidly. Currently, China has initially formed four major semiconductor lighting industry clusters — the Pearl River Delta, the Yangtze River Delta, the Northern Region, and the Jiangxi-Fujian Region — and an initial industrial chain comprising epitaxial wafer production, chip fabrication, packaging integration, and LED applications has taken shape.
At the Electronic Information and Semiconductor Lighting Industry Cooperation Promotion Conference of the 2nd World Low-Carbon and Eco-Economy Conference & Technology Expo, domestic and foreign green lighting enterprises have been racing to invest in Jiangxi, with both Nanchang and Ji'an proclaiming the bold slogan of "Building an LED Industry Base" to seize the broad future market for LED green lighting.
Green Lighting Settles in Nanchang
In 2009, Nanchang was approved by the Ministry of Science and Technology as one of the first batch of 21 national pilot cities for the "Ten Cities, Ten Thousand Lamps" semiconductor lighting (LED) application project. The support from the national, provincial, and municipal governments for Nanchang's LED industry has continued to grow.
Zhang Huogen, General Manager of Jiangxi Chenda Technology Co., Ltd., said that the company started building a factory in Nanchang Xiaolan Economic Development Zone last year with an investment of 200 million yuan, mainly engaged in the R&D, production and sales of LED lighting products. This year, the company specifically relocated its headquarters from Shenzhen to Nanchang, attracted by Nanchang's support for the LED industry.
As incandescent lamps gradually exit the market, LED lighting will gradually replace the traditional lighting market. Can Nanchang successfully leverage the "East Wind" of the "Ten Cities, Ten Thousand Lamps" demonstration project, utilize its existing technological advantages and market position, accelerate new product R&D, and achieve greater accomplishments in the field of LED application products?
In view of the vast LED market, how will Nanchang plan its layout to advance the LED industry and illuminate the path of green lighting development?
It is understood that Nanchang is one of the earliest cities in China to develop the LED industry. After years of effort, Nanchang's LED industry has developed many unique advantages, such as having internationally leading core technologies and R&D teams with independent intellectual property rights, and has established a basically complete industrial chain.
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Currently, the Nanchang High-tech Zone has gathered 15 semiconductor lighting enterprises of a certain scale, with an annual production and sales of more than 10 billion sets of semiconductor light-emitting products, accounting for more than 25% of the national market.
In 2009, Nanchang was approved by the Ministry of Science and Technology as one of the first batch of 21 pilot cities under the national "Ten Cities, Ten Thousand Lights" semiconductor lighting (LED) application project. National, provincial, and municipal governments have continuously intensified their support for Nanchang's LED industry.
Professor Yu Lixin of Nanchang University believes that the LED industry chain has gradually matured in Nanchang and enjoys very broad market prospects. Nanchang has particularly significant advantages in urban roads and landscape lighting, with usage volumes even surpassing those of coastal cities.
It is reported that by the end of 2011, Nanchang will fully complete the LED streetlight retrofit task, fulfilling the city's commitment to the national ministries of demonstrating and promoting the application of more than 18,000 LED streetlights. By 2012, landscape lighting will be completed for 100 high-rise and typical buildings in the urban area and the Honggutan New District. By 2016, the demonstration application of LED energy-saving streetlights and tunnel lights will reach 100,000 units. #p#分頁標題#e#
However, journalists visiting several lighting fixture markets in Nanchang found that the current LED lighting market is a confusing mix, with products of widely varying quality. LED fixtures range in price from tens to hundreds of yuan, and consumers unfamiliar with the lighting industry are simply unable to judge product quality. Since the general public is more concerned with price discounts, they are likely to end up with inferior products, thereby losing confidence in LED lighting.
In order for LED green lighting to be more readily accepted by the market, industry experts say the market must be further standardized. The government should intensify market regulation, introduce corresponding industry standards, establish an access mechanism for LED lighting products, and require merchants to implement the three guarantees (repair, replacement, and refund). Through market supervision of product quality, a favorable market atmosphere can be created to promote the healthy and orderly development of the LED industry.
Yu Lixin stated that due to high prices, LED lighting fixtures are not widely accepted by the public. To seize the market, enterprises must continuously strengthen R&D, break through technical constraints, and strive to reduce costs.
Making LED Accessible to the Public Still Requires Effort
To achieve the true democratization of LED, costs must be reduced to a range acceptable to ordinary people. This requires LED companies to focus on developing the market while also doing sufficient work on product technology, and even more importantly, requires government support.
"Although industrial investment is currently very active, there is still a process before LED becomes popular. At present, those adopting LED are mainly some government-led demonstration projects. It may take another 10 to 15 years before it truly moves toward the mass-market indoor lighting market," said the head of a company engaged in LED application promotion in Nanchang. #p#Page Title#e#
According to the "China's Roadmap for Phasing Out Incandescent Lamps" released by the National Development and Reform Commission, from October 1, 2012, the sale of incandescent lamps of 100 watts and above for general lighting is prohibited; from October 1, 2014, the sale of incandescent lamps of 60 watts and above for general lighting is prohibited; from October 1, 2016, the sale and import of incandescent lamps of 15 watts and above for general lighting is prohibited.
"Whether LED lights can become a replacement for incandescent bulbs mainly depends on whether the cost of LEDs can be reduced and whether the market price can come down," said an industry insider.
Currently on the market, a 3-watt LED bulb costs around 30 yuan, and an 18-watt LED tube costs around 200 yuan. The market price of LED lights is several times that of traditional light sources, and the high price has become an obstacle to the popularization of LEDs.
According to a home appliance chain store in Nanchang, an LED bulb sells for an average of around 100 yuan, while energy-saving lamps cost only a little over ten yuan each, and salespersons in the market generally recommend using energy-saving lamps.
Product prices have limited the broad market for LED production by enterprises, becoming a barrier preventing LEDs from entering ordinary households. In addition, high costs and high technology have become another obstacle for enterprises to transform into LED production.
In an interview with reporters, Yu Lixin revealed that currently 90% of LED companies are operating at a loss, because many domestic manufacturers are too eager for quick success, production enterprises lack core technology, and invest very little in innovation and R&D. To truly make LEDs affordable for the general public, costs must be reduced to a range acceptable to ordinary people, which requires LED companies to focus on exploring the market while also doing sufficient homework on product technology, and even more so requires government support. #p#分頁標題#e#
In addition, industry experts have pointed out that the frenzied development has exposed industry defects. The LED industry is facing bottlenecks such as core technology constraints, lack of standards, and capital stagnation. The idea of simply replacing incandescent bulbs must also change.
However, some experts have chosen to remain optimistic, believing that with the continuous advancement of R&D, the luminous efficacy of LEDs is increasing at a rate of about 20% per year, and therefore the cost will also decrease at a rate of 20% to 25% per year.
If we can change a light bulb; if we can change traditional thinking, then we can change the whole world. To achieve the complete phase-out of incandescent bulbs and successfully promote energy-saving lamps, this process cannot be accomplished overnight. LED still has a long way to go.