LED industry can not rely too much on exports

China's LED industry is facing the bottleneck of development: the lack of core technologies, excess capacity, investment overheating and other conditions. With the increasingly saturated domestic market, more and more LED companies have begun to open up overseas markets. However, relying solely on exports does not allow the LED industry to achieve long-term development, increase the research and development of core technologies, and strengthen the merger and reorganization of low-end areas can really solve LED industry structural overcapacity crisis.

According to media reports, Shenzhen's LED industry has accounted for nearly half of the country's total. In March 2009, the Shenzhen Municipal Government issued a plan to propose Shenzhen to “build an important R&D and production base for LED industry in the country and even the world”. By 2015, the industrial scale will reach over 130 billion yuan. At that time, the plan was considered as a blueprint for many cities across the country to formulate relevant plans. However, recently the Shenzhen Municipal Government repealed the "Circular on Printing and Distributing the Shenzhen LED Industry Development Plan" in the form of the "Government Gazette." For the plan to be abandoned for more than four years, although the document did not disclose the specific reasons and details, it is directly related to the development trend of the industry, especially overcapacity and investment overheating.

It is understood that from 2012 onwards, investment in the upper reaches of the LED has caused a rapid decline in prices, and the competition among downstream companies has become fierce, resulting in the closure of some companies. This situation continues until this year. Most LED companies lack technology, and the core parts such as chips are highly dependent on imports. Enterprises do not have R&D capabilities and rely on plagiarism and price wars to make the market even more confusing. Coupled with government support, it will not only solve the problem of overheated investment in the industry, but even counterproductive. Local governments have been devoting themselves to the LED industry in these years, which has laid a hidden danger for the current overcapacity. According to statistics, in 2009, the upstream LED chip was still in short supply, and by 2011, there had been a clear oversupply. Like other emerging industries, the overcapacity in the LED industry is actually structural, mainly due to the surplus of downstream low-end products, and insufficient upstream high value-added products.

In addition, more and more domestic companies have set their sights on the LED industry, causing serious imbalances in the industrial structure. Data shows that there are more than 4,000 LED industry manufacturers in China, and the LED industry structure is in an imbalanced state at this stage. Although the overall LED output value of mainland China reached 205.9 billion yuan in 2012, 159 billion yuan was used for downstream terminal applications, accounting for 77.2%, while the upstream LED chip output value was only 7.2 billion yuan, accounting for 3.5%. This phenomenon has caused traditional sales agents to be optimistic about the industry's prospects and rush to enter the LED field, but at the same time it is still between the low-end products and high-end products.

Due to the lack of demand in the domestic market, many LED manufacturers began to open up overseas markets. It is understood that with the world's major countries and regions have introduced policies and regulations to phase out incandescent lamps, LED lighting usher in more and more room for development. In 2012, the European Union and Japan completely banned the use of incandescent lamps. The United States and Canada phased out most incandescent lamps from 2012 to 2014. The CSC Research report shows that in 2015, the penetration rate of LED lighting in the Japanese market reached 73.8%, and the output value of LED lighting in Korea reached 7.8 billion U.S. dollars in 2015, which was 5.6 times that of 2012. In 2015, the global LED lighting market will reach 44.2 billion U.S. dollars, with a penetration rate of 38.6%.

Insiders pointed out that blindly relying on overseas exports is not the future direction of development of the LED industry. So, how should the LED industry develop? He Zuhua, a senior research fellow at China Investment Consulting Group, believes that addressing the structural overcapacity crisis in the LED industry requires starting from both the company itself and the government. From the perspective of the company 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 areas.