China's LED industry development is constrained by "six major factors"
Currently, China's LED industry still faces many difficulties, which have even become shackles restricting the sustainable development of the industry.
Expensive LED product prices make commercial application promotion difficult
The country launched the "Ten Cities, Ten Thousand Lights" LED energy-saving program last year, and 42 cities have been included in the program. However, with the exception of decorative LED lighting, which has gradually become popular, the vast majority of LED general lighting applications are still limited to government demonstration projects. The main reason for the difficulty of market promotion is the high price of LED lighting products. Since chips account for 30% or even more of the cost of LED products, and the high-end LED chips for lighting in our country mainly rely on imports, with relatively high prices, LED lighting products with the same illumination brightness are priced high and not very attractive to ordinary consumers.
Serious product homogenization, the industry lacks benchmark brands
China has a large number of enterprises in the LED industry and has made considerable overall progress, but enterprise scales are generally small, lacking leading companies. As most LED enterprises hand over early product R&D and main module production to solution providers, the LED entry threshold is lowered and market competition becomes fierce. Currently, there are 1,950 LED packaging enterprises in China, while the number of new LED application products launched by enterprises is less than 530; LED streetlight enterprises exceed 300, and products are basically at the stage of mutual copying and imitation. Homogenized competition has caused price wars everywhere, and with the lack of benchmark brands, enterprise scales are difficult to grow, and the industry lacks credibility. Cultivating leading enterprises and accelerating the construction of independent brands has become urgent.
Investment boom in the LED industry may trigger overcapacity
The promotion of policies such as the World Expo, Asian Games, and 'Ten Cities, Ten Thousand Lights' has greatly increased the demand of the LED market. Multiple cities and prefectures have developed the LED industry as a pillar industry. The prospects of the domestic LED market are optimistic. Investment, merger, and integration of upstream and downstream enterprises at home and abroad are accelerating. Traditional lighting enterprises, state-owned capital, private capital, etc. have also entered one after another, leading to an industrial investment boom. Taking the key equipment for upstream epitaxial wafer production, MOCVD, as an example, 300 imported units of equipment were installed in factories in 2010, and more than 1,000 units are planned to be imported nationwide in the next 3 years, more than 10 times that of 2008. Without scientific decision-making and reasonable planning of the LED industry layout, large-scale concentrated introduction of key MOCVD equipment may lead to a major explosion of low-end chip production capacity, making the LED industry repeat the failure of China's polysilicon investment boom in 2008 and 2009.
Lack of key technology and core patents
Patent technology is an important means for major global LED manufacturers to gain competitive advantages and maintain market share. The composition of domestic LED patent technology is imperfect, with most upstream patents held by foreign manufacturers. Technology is constrained by others, with over 80% of high-end chips coming from abroad or Taiwan, and companies unable to extend into the mid-to-high-end profit segments; due to a lack of fundamental patents, products are subject to patent blockades and export restrictions. Even in the downstream packaging and application sectors, where over 80% of China's enterprises are concentrated, the level remains relatively low-end. As LED technology continues to improve performance and reduce costs following Moore's Law, application areas have greatly expanded and market space has multiplied. Foreign LED enterprises with advanced R&D technology and strong brand image are 'attacking and occupying' the market. Domestic LED enterprises face the enormous challenge of further improving their technology and building their own patent defense system.
Industrial technology development outpaces standards and testing methods
For the LED industry to develop healthily, it cannot do without related technical and product standards. However, the rapid development of emerging industry technology has brought common challenges such as testing technology and standard formulation. Currently, products lack complete industry regulatory standards, and quality varies greatly, which has greatly dampened market confidence and enthusiasm. On the other hand, the LED industry has received great attention from the government, vigorously promoting product demonstration applications, resulting in a situation where standardization and quality evaluation methods lag behind technological development and market application. How to alleviate contradictions and break through bottlenecks is not only a new topic in standardization research, but also a new task within the scope of technical quality supervision.
Distorted industry development: Support policies yield half the results or even backfire
The LED industry is one of the strategic emerging industries that the country focuses on cultivating and developing. The state, as well as provinces and municipalities, have continuously increased their investment in supporting funds for technological research and demonstration projects, issued a large number of industrial support policies, and guided and supported the promotion of LED lighting products through pilot application projects. These measures have effectively driven the technological progress of China's LED industry. However, the next 5 years will be a critical period for LED to transition from the R&D and demonstration stage to the fully market-oriented stage. As industrial support policies, they need to be more systematic and tailored to the current state of industry development, and refined in terms of tax reductions at the consumer level, purchase subsidies, government procurement, as well as government grants and preferential loans at the R&D level.
In summary, the dilemma facing China's LED industry needs to be resolved from the perspective of industrial development strategy. This is because the LED industry, in addition to having the characteristics of an emerging industry, also involves two fields—semiconductors and traditional electric light sources—whose development follows inherent laws. If we merely pursue individual advanced technical indicators from abroad, even with huge investment, the various links of the industry may develop unevenly, the industrial chain may become disconnected, and due to malformation of industrial development, supportive policies may yield half the result with double the effort or even prove counterproductive.
Wan Gang, Vice Chairman of the National Committee of the Chinese People's Political Consultative Conference and Minister of Science and Technology, pointed out in his speech that innovative methodology work should be regarded as an important lever for the national "12th Five-Year Plan" science and technology work, providing methodological support for scientific and technological innovation. To develop China's emerging LED industry, there is an even greater need to apply innovative methods, clarify industrial development goals, explore paths of industrial development, understand the differences between China's industrial development level and that of advanced countries, and find rational and operable means and tools to enhance industrial competitiveness and catch up with and surpass international competitors.
The benchmarking method, first pioneered by Xerox Corporation of the United States in 1979, is a means of achieving system optimization through result comparison. It is used to identify and implement optimal solutions to improve enterprise performance, and is widely applied in enterprise management for performance evaluation. The Guangdong Provincial-Ministerial Industry-University-Research Innovation Alliance for Semiconductor Lighting Engineering organized research institutions in standards, testing, LED technology, etc., drawing on the benchmarking method, and took the lead nationwide in researching the "Semiconductor Lighting Product Evaluation Benchmarking System", which has been comprehensively promoted and applied in the Green Lighting City Demonstration Project in Guangdong Province, attracting widespread attention from the industry.
As an innovative method for research on emerging industrial technical standards, the "Benchmarking System" resolves the contradiction between the continuously expanding market demand for LED lighting and the lagging development of testing and evaluation technologies. It is of great significance for ensuring the smooth implementation of demonstration pilot projects such as the Ministry of Science and Technology's "Ten Cities, Ten Thousand Lights" program and the "Semiconductor Lighting Product Application Demonstration Project" of the Ministry of Housing and Urban-Rural Development, the National Development and Reform Commission, and the Ministry of Transport. Therefore, the China Civil Promotion Association is organizing and coordinating various resources to study the theoretical and practical issues in the development of China's emerging LED industry based on the Benchmarking System, to track and investigate new situations, problems, and ideas in industrial development, and to promote the sustained, stable, and healthy development of China's LED industry.
(Responsible editor: zhouboone)