Mainland LED market status and competition

The outdoor lighting market has also become one of the major producers of LED modules in the world. The growth of China's LED industry is strong. The average annual growth rate of output value between 2006 and 2011 reached 30%. Since 2009, the industry has accelerated its expansion, and the output value in 2011 has grown to 156 billion RMB. However, the industry is unevenly developed and highly concentrated in the downstream. In the application and packaging part, the output value of the application in 2011 was 121 billion yuan and the package output value was 28.5 billion yuan, while the epitaxial/grain output value with a relatively high technical threshold was only 6.5 billion yuan. Over-expansion of industry, disruption of market order, and industry restructuring Since 2009, the Chinese government has launched a number of preferential measures for the LED lighting industry, such as MOCVD machine purchase subsidies, R&D investment subsidies and deductions, and investment and factory approvals. And so on, attracting many manufacturers and industrialists competing to enter the LED industry or LED application industry, its industrial expansion in recent years makes Asia's existing LED manufacturers feel threatened.

Taking Epistar as an example, manufacturers in Yangzhou, Jiangmen, Wuhu, Hangzhou and other high-end subsidy measures led to the expansion of LED epitaxial production capacity. By 2011, the number of new MOCVD machines in China has reached more than 400 units. , accounting for nearly 60% of the world's new installations, has become one of the major countries in the global LED epitaxial manufacturing, exacerbated the oversupply situation of the global LED industry, indirectly led to the sharp collapse of LED module prices. However, some manufacturers, in addition to absorbing high government subsidies, have also attracted large amounts of money to flow from the capital market to the Chinese LED industry. On the contrary, the overall industry's operating conditions are deteriorating, and the company's asset return rate is rapidly declining. What is more, some companies invest capital into real estate investment and development to a certain extent, and the practical operation of the LED industry is limited. The world's largest LED component application market, policy support LED lighting market rapid growth LED module production end of a huge change, did not affect the development of LED component market in mainland China. China is the world's leading production base for consumer electronics and lighting products, making it the world's largest LED module application market. In 2011, it consumed approximately 35% of the LED components in the world. In China's LED market applications, there are four major application areas: public landscape lighting, electronic product backlighting, display/billboard, and general lighting. Since 2008, China has set up decorative lights for streets and squares to promote LED decorative lighting, which has enabled the LED landscape lighting market to grow rapidly.

In 2010, through the government's “Ten Cities and Ten Thousands” demonstration program, LED street lights, tunnels, parking lots, and gas station applications were promoted. Inspired by the government's subsidy measures, the lighting-related application market has grown rapidly. In 2011, general-purpose lighting increased sharply from 14% to 25%, becoming the largest application category. General lighting and landscape lighting together account for about 50% of the application ratio, and the display lighting Has become the most important LED application market in mainland China. It is estimated that with continued assistance from government policies, the market recognition model for general lighting and landscape lighting in China will continue to show a high degree of growth. [NT: PAGE] LED lighting localization market characteristics remain unchanged, industrial development towards the regionalization and grouping of the lighting industry is basically the existence of light source globalization, lighting in the localization of industrial characteristics. In addition, China's LED market opportunities in recent years, mainly from the government public construction and demonstration projects, the general residential and industrial and commercial lighting and other indoor lighting market share is still low, so that China's LED lighting industry has gradually formed a special regionalization and grouping strategy layout. Although China is a centralised leadership system, local governments are highly competitive in economic and industrial development. LED lighting also has the potential for huge market potential and the characteristics of energy-saving industries. It is also an area that every local government forces must fight for. In particular, provinces and cities with more economic strength in the coastal areas, such as Guangdong, Zhejiang, and Jiangsu, have spared no effort to foster and protect local LED lighting manufacturers. Under the thinking of local governments to nurture the development of local industries, market protection measures are significant. If they fail to obtain the support of the local government, LED lighting manufacturers will be difficult to conduct cross-provincial market layout, making LED lighting manufacturers in China have a distinctive local color. And gradually formed a competitive state of regionalization and separatism. China's LED lighting industry, capital and technology barriers to entry, high supply chain management costs, coupled with the regional characteristics of the market, the relevant manufacturers inevitably take the same vertical strategic layout, making China's LED lighting industry gradually get rid of the past small model, low quality The industrial landscape has formed a large-scale group-based industrial competition. Problems faced and solutions The proportion of LED lighting in the overall application market has gradually increased and become the key to the future growth of the industry. LED component manufacturers have been integrating downstream and establishing their own LED lighting source and application product supply capabilities. This strategic layout of LED component manufacturers is not only focused on improving the future level of understanding of future downstream outlets, but also helps the Group to step into brand sales from component manufacturing. With the opportunity of LED lighting market growth in Mainland China, it will transform into a lighting brand manufacturer and improve its business. additional value. For traditional lighting manufacturers, LED lighting has become the most promising product in the lighting market, but the cost and technology still have a lot of room for improvement.

Lighting manufacturers integrated into the upper reaches of the LED industry, in addition to ensuring the stable supply of LED components, as well as the manufacturing capabilities of custom packaging requirements, but also hope to get rid of the past low-level lighting and low-cost lamp manufacturing industry, integrated LED lighting up and down The high-level technological capabilities and brand channel capabilities have established the strength to compete with international lighting manufacturers in the Chinese market. Taiwan-Japan companies deploy LED lighting market in mainland China, facing technological spillovers, localization, and market protection challenges The rapid growth of the LED lighting market in Mainland China has attracted Japanese and Japanese companies to actively deploy. Japanese manufacturers have accelerated the expansion of LED lighting production and channel deployment in mainland China. Panasonic Electric is expected to focus on China's overseas market. It is expected that the number of lighting stores established in mainland China in 2015 will increase to 5,000, and will extend to second- and third-tier cities, making China's overall lighting business revenue will reach RMB 3 billion yuan, 5 times more than in 2009. NEC entered the mainland LED lighting market with its production base in Shanghai and expects to reach 50 stores by April 2013.

As for the Taiwan region, the LED module industry in the past and the LED downstream application industry in Mainland China have formed a highly complementary industrial chain supply model. Taiwan provides high-quality LED modules and various applications such as backlighting and lighting modules in mainland China, resulting in Taiwan. Up to 60% of LED component exports are concentrated in the Chinese market. With the rapid development of the LED industry in Mainland China, the cross-strait industrial chain cooperation model is facing strong challenges. Cross-strait LED manufacturers are increasingly competitive in terms of technological capabilities, production scale, resource acquisition, and market mastery. Their competitive relationship is rapidly changing. LED manufacturers in Taiwan have realized that the cross-strait LED industry competition has shifted from the competition for factors of production to the supply chain and the market. Therefore, starting in 2011, the focus of the layout of China's mainland has shifted from the expansion of production capacity to focusing on channels and Strategic cooperation between groups. For example, Lite-On and Jingdian Electronics jointly established a new joint venture with mainland appliance manufacturer Konka, Dongbei strengthened with the supply of mainland panel maker BOE and TCL, Hongqi and TCL established a joint venture in Huizhou to establish an LED packaging plant, Huaxing and China Putian Group Signed a cooperation agreement for the supply of LED lighting products, billion light with the mainland TV manufacturers TPV and lighting manufacturers Shanghai Yaming joint venture set up factories. [NT:PAGE] Taiwanese and Japanese companies recognize that channels and brands are the key to the development of the LED lighting market in mainland China, and they have adopted independent development and local cooperation development models, but they also face different challenges. Although Japanese LED lighting manufacturers have superior technologies and international brand advantages, they are difficult to display in the face of local governments or large state-owned enterprises. In addition, China's patent protection, financial and taxation systems, and product specifications and other systems are incomplete. Coupled with historical and cultural factors, Japanese companies’ operating risks remain high and it is difficult to safely invest in them. Although LED lighting manufacturers in Taiwan have the same advantages of the same type of literature and political dividends on both sides of the Taiwan Straits, they have the advantages of shallow disk technology and are unable to withstand the risk of technological spillovers. They have also established long-term and stable cooperative relations with mainland China. Taiwan and Japan Need a New Cooperation Model to Open up the Mainland China Market The Chinese Taiwan region and Japanese companies have already had successful experiences of cooperation, mutual benefit, and complementarity in the past. In the face of the huge business opportunities and risks of LED lighting in mainland China, the LED lighting industry in Taiwan and Japan should have the niche and incentives for cooperation. However, in fact, regardless of the vertical division of labor cooperation relationship that has traditionally been used in the past or the current strong push for product-level division of labor and cooperative relations, in the face of China's LED lighting market, Taiwan-Japan manufacturers seem to find it difficult to find a cooperative foothold. “Channel” and “Brand” are the key elements for the development of the LED lighting market in mainland China, and both of these are the inadequacies of Tairi’s current operations in the Chinese mainland market. Therefore, even if Taiwan and Japan cooperate in the use of Japan’s advanced technology, coupled with Taiwan’s excellent cost control and application technology capabilities, LED lighting products with market demand of “good quality” and “cheap” will be produced without the help of channels and brands. Successful sales in mainland China are quite difficult. When the cooperation between the two sides does not help the development of the Chinese market, Japanese companies are not willing to cooperate with manufacturers in the Taiwan region of China. The feasibility of cooperation between the Taiwan region and Japan is low. Trilateral cooperation between the Taiwan region of China, Japan, and China is a new direction that can be tried. It can make good use of the advantages of manufacturing capabilities and policy support of Taiwanese manufacturers and cooperate with market channels and marketing channels of Chinese mainland manufacturers. To jointly develop the market, Japanese manufacturers provide Taiwanese manufacturers with technical support and product innovation, just like a company's marketing, manufacturing, and R&D. However, such a cooperation model has complicated relationships among manufacturers, and Taiwan and China have not yet signed an investment protection agreement, making it difficult to operate. However, there are still manufacturers that have actively carried out similar layouts, making the possibility of cooperation between the three parties of the Taiwan region of China, Japan, and China to create an LED lighting market. This alliance consists of Japan's Toyota synthesis, Taiwan's Epistar photoelectricity, and China's NVC Lighting and Sunshine Lighting. Among them, Japan's Toyoda Gosei acts as a director of high-order epitaxy technology, and establishes a joint venture with Taiwan's Epistar to conduct high-end technology development and patent licensing; Taiwan’s Epistar is playing a role as a high-quality LED producer and plays with China’s downstream The supplier's close cooperation relationship has gradually signed strategic agreements to lay a foundation for the domestic market; while China's NVC Lighting and Sunshine Lighting act as brands and channel distributors, and quickly expand its market position in China's regional lighting market. It is believed that such a model of close cooperation among transnational companies should emerge in the LED lighting industry in East Asia.