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January 15, 2017

LED Market Analysis 2016- Manufacturers & Supplier Insights

 

LED industry in China is stuck with issues like price competition and supply-demand imbalance but analysis of the export growth (2015) among mainland factories revealed that LED lamp industry was one of the three that witnessed growth. Statistics prove the export value of lamps in 2015 increased 9% in comparison to last year. Products related to LED technology witnessed the growth of 25%. Referring to the 3% global economic growth in 2015, the development of LED industry took precedence over the global CIP (Consumer Price Index).

In addition to rising global sales, the brilliant story growth of LED industry is mainly written by the gradual maturity of LED technology which stimulated largely market demands for replacement. When the penetration rate of LED development reaches to a certain point, it will gradually slow down for the growth in future markets. Therefore, people in the field should grasp the great opportunity currently to extend their brands or market coverage.

If the market growth rate for universal lamps is about 5% during 2014 to 2019 years, LED will at least take about 2% growth rate. Referring to the fall in the price of products, the overall market growth for LED industry can reach to 30 to 40%. However, as universal lamps reach maturity, the change of industrial chains bring new challenges.

Shift in LED market focus

According to market research, it is estimated that market coverage of global lighting is expected to reach 1,287 billion US dollars in 2019, which means the compound annual growth rate can be up to 4.6% during 2014 to 2019, including 3 main sections, universal lighting, automotive lighting, and back lighting, with universal lighting is the main application, which approximately takes 80% of the overall market share.

Taking an overall view of market trend in lighting products, LED technology already became mainstream but upper stream and mid stream of LED industry only takes about 200 billion US dollars in the global output value. Obviously, it should be restricted to our future development if we do not extend business to the downstream, the terminal market for development. Hence, manufacturers plan to extend and develop their brands with focus on universal lighting.

LED market division

Terminal market of lighting can be divided into seven market segmentation namely:

  • Residential units and housing projects
  • Office spaces
  • Outdoor infrastructure
  • Shops and small businesses
  • Hotels and accommodation facilities
  • Industries and manufacturing hotspots
  • Buildings and commercial units

Among them, residential sector accounts for large market ratio in the world, which up to 38% for overall market value. Therefore, residential lighting can bring great opportunities in LED market. Smart homes have been around for years but it has limits for practical application to users, which brings difficulty to the function of “Internet of Things” (IOT). Hence, top quality LED tubes are still what people think when it comes to residential lighting.

Major lighting trends

First, LED market share keeps on increasing. As LED lamps can save more than 40% energy than traditional lamps, governments have put into place strict energy requirements to promote the market penetration rate of LED lamps.

Second trend is the rapid upgrade in technology. Big manufacturers like Philips and Osram can keep very high gross margin as initial lighting sources took higher threshold for production. But LED products compete fiercely, and consumers are having higher requirements to luminous efficiency, CRI and heat dissipation.

Third, prices of LED products are falling down, leading to the popularization of the products. Because LED belongs to electronic industry, it has become more cost-effective with the improvements of technology and wide markets coverage. Prices of LED products will also gradually come down.

Four is definitely the growth in the number of LED manufacturers. Manufacturers of LED are more than that of traditional lamps. In the past, only several thousands of manufacturers for traditional lamps in mainland China markets, but currently there are over 30k LED manufacturers. Lastly, the proportion for LED package applied for back-lighting or LCD is reducing, and the proportion of supply for universal lighting increasing.

China’s LED lighting market

LED lighting industry in China is rising rapidly and it is bound to be the leader in global market of lighting. The reason can be traced back to 70s and 80s when big chunk of Taiwanese in lighting field moved to the ancient town in Zhongshang city of Guangdong province. Industry insights estimate that mainland production output accounts for 70% in global lighting industry.

In the past, Mainland China’s production output for energy-saving bulbs accounted for 90% of the world in the times of energy-saving bulbs, therefore, overall lighting industrial chain in mainland was already developed to a status of maturity and highly concentration. Also, some official plans of semiconductor lighting were launched in mainland since 2012 by the government which led to LED industry development.

With the era of semiconductor lighting coming, several plans were launched, like urban landscape lighting (2013), Ten Cities Light project and cross-strait exchanges (2015). The market of lighting replacement is booming rapidly, which signals a good opportunity for mainland China LED industry.

Lighting industry and competition

As mainland China is the global lighting production base, it is at close distance from manufacturers to terminal markets. It is obvious that the market competition is fiercest and market concentration is the lowest. Nowadays, the mainland China is the 2nd large markets for lighting, only behind the USA. But it is expected that mainland China will increase its proportion of global lighting markets from its current 20% (2014) to 26% (2019).

Local Lighting market might even exceed the USA in future with its compound annual growth rate of 2014-19 expected to be about 10.8% (higher than the 5.3% of global growth rate). Therefore, the markets share of universal lighting in Mainland China is bound to be over 27.8 billion US dollars.

LED industry growth challenges

  • Lankness of super brand products and national chain sales channels
  • Poor industrial standards
  • Over-investment
  • Uneven qualified products
  • Lack of supervision

Lighting manufacturers in Mainland China have to encounter with quality or patent issues. They also have to compete with foreign companies and face the threat of patent restriction. However, they have the huge domestic market demand as a backup support.

Above factors dispersed the mainland market for LED lamps for a long time. On the contrary, market shares of lighting in the US benefits from their highly and widely concentrated sales pipeline which are well organized. National or multinational wholesalers are also in large scale.

Taiwan’s lighting industry

Manufacturers of Taiwan have a solid foundation, and have the advantages in Christmas lights and pendant lights. Taiwan’s LED manufacturers rarely take bold steps to establish brand or sales patterns since it is filled with different challenges to build up a brand.

LED manufacturers of China need to analyze their status in the lighting industry, and act upon markets & sales patterns. It is essential for them to keep lighting market dynamics in mind if they plan to become one of the best LED manufacturers and suppliers in China.

 

 

 

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