Analysis of the current situation of the Chinese LED market: how to avoid technical risks?
After a long period of gestation and preparation, LED has reached the time of explosive growth. For Chinese LEDs, the problems to be faced are not only the growth pressures in front of them, but also the limitations from the status quo of their own industries. The lack of core technology, overcapacity, overheated investment and other situations have caused China's LED industry to face development bottlenecks. As the domestic market is saturated, more and more LED companies have begun to explore overseas markets. For a time, exports have become a new direction for the development of the LED industry. However, blindly relying on exports does not allow the LED industry to achieve long-term development and increase the research and development of core technologies. Strengthening mergers and acquisitions in the low-end sector can truly solve the structural overcapacity crisis in the LED industry. According to media reports, Shenzhen's LED industry companies have accounted for nearly half of the country. In March 2009, the Shenzhen Municipal Government issued a plan, proposing to build Shenzhen into an important R & D and production base for the LED industry nationwide and globally. By 2015, the industrial scale will exceed 130 billion yuan. At that time, the plan was regarded as a blueprint for many cities to make relevant plans. However, the Shenzhen Municipal Government recently abolished the “Notice on Printing and Distributing the Development Plan of Shenzhen ’s LED Industry†in the form of a “Government Bulletinâ€. The plan has been abolished for more than 4 years. Although the document does not disclose the specific reasons and details, it is directly related to the development trend of the industry, especially overcapacity and overheated investment. It is understood that since 2012, overheated LED upstream investment has caused a rapid price drop, and downstream companies have fierce competition, resulting in the closure of some companies. This situation continued until this year. Most LED companies lack technology, and core parts such as chips are highly dependent on imports. Enterprises have no R & D strength, rely on plagiarism, and fight price wars, making the originally non-standard market even more chaotic. Coupled with government support, it not only cannot solve the problem of overheated investment in the industry, but even has an adverse effect. The various governments in the LED industry have been doing their own thing in the past few years, which has buried hidden dangers for today's overcapacity. Data show that in 2009, LED upstream chips were still in short supply, and by 2011, there was already a clear oversupply. Like other emerging industries, the LED industry's overcapacity is actually structural, mainly manifested in the downstream low-end product surplus, while the upstream high value-added products are insufficient. In addition, more and more domestic companies are focusing their attention on the LED industry, causing serious industrial structure imbalances. The data shows that there are more than 4,000 domestic manufacturers engaged in the LED industry, and the current LED industry structure is in an unbalanced form. Although the overall output value of LEDs in mainland China reached 205.9 billion yuan in 2012, 159 billion yuan belonged to downstream terminal applications, accounting for 77.2%, while the output value of upstream LED chips was only 7.2 billion yuan, accounting for 3.5%. This phenomenon has caused traditional sales agents to be optimistic about the prospects of the industry and strive to enter the LED field, but hesitate between low-end products and high-end products. Due to insufficient demand in the domestic market, many LED manufacturers began to explore overseas markets. It is understood that as major countries and regions in the world have introduced policies and regulations to phase out incandescent lamps, LED lighting has ushered in more and more room for development. The EU and Japan banned incandescent lamps in 2012, and the United States and Canada phased out most incandescent lamps from 2012 to 2014. Data show that the penetration rate of LED lighting in the Japanese market in 2015 may reach 73.8%, and the output value of South Korean LED lighting in 2015 may reach 7.8 billion US dollars, which is 5.6 times that of 2012. In 2015, the global LED lighting market will reach 44.2 billion US dollars, with a penetration rate of 38.6%. The industry pointed out that blindly relying on overseas exports is not the future development direction of the LED industry. So, how should the LED industry develop? He Zaihua, a senior researcher at CIC Consulting, believes that to resolve the structural overcapacity crisis in the LED industry, it is necessary to start from both the enterprise itself and the government. From the perspective of the enterprise itself, on the one hand, it is necessary to actively expand the domestic market, on the other hand, it is necessary to strengthen the research and development of core technologies while strengthening mergers and acquisitions in the low-end sector.
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