LED Industry: General Lighting Is Where the Opportunity Lies, Brand and Channel Building Are Key

　　The value share of the three segments—chips, packaging, and applications—is approximately 1:1:2. The domestic chip industry accounts for less than 10% of value, packaging about 20%, and applications over 70%, and this share is still rising. This matches the distribution of Chinese LED companies across the industry chain, but does not match the value composition of representative bulb lamps, reflecting the common domestic situation of emphasizing applications over R&D. The irrational MOCVD investment from 2009 to 2011 guided by the government cannot achieve immediate results; technological accumulation and breakthroughs require a process.

　　The general lighting field is where the opportunity lies. After the frenzied investment in MOCVD from 2009 to 2011, the chip industry will bear the pressure of overcapacity in the short term; the packaging industry has seen serious declines in gross margins and output share, with a clear trend toward vertical integration of the industry chain; the general lighting field is where the opportunity lies. The global lighting market is approximately USD 90 billion in size, with LED penetration currently at about 10%, leaving huge room for future growth.

　　Under policies banning incandescent lamps and supporting LED lamps, the markets of Japan, Europe and the United States, and China will launch successively. In 2012, Japan and the EU fully banned sales, while the US and China began banning the sale of 100W high-power incandescent lamps. Major markets began to launch one after another, and we can regard 2012 as the first year of LED general lighting. Major manufacturers such as Osram, Philips, and GE have successively launched 100W LED lamps to greet the arrival of the spring of LED general lighting. We expect the US to follow Europe in 2013, and the Chinese market to begin large-scale launch in 2014.

　　Brand and channel development is the key; at the current stage, brand development is more important than channel development.

　　Due to the diversity of downstream demand, similar to the traditional lighting market, brand and channels are the key to success or failure in the field of general LED lighting. Commercial lighting will start before residential lighting, and commercial lighting is characterized by specialization and customization. Lighting manufacturers should currently focus on project channels, improve their own ability to provide solutions, and establish a good brand and reputation within the industry; on the other hand, they should also make advance arrangements in retail channels to seize the upcoming opportunities. Brand showcase stores can be established in key cities, but high-cost proprietary channels should not be rolled out on a large scale; distribution and agency channels should be the main focus, achieving effective deployment while controlling costs and risks.