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An Analysis of Chinese LED Lighting Market Development and Competition Situaatio

收藏本信息编号:4242 发布时间:2012-08-21 截止日期: 地区:

Manufacturers all resort to vertical overall strategic layout for the capital and technical barriers to entry for LED lighting industry on the Chinese mainland are rather low, the management cost of supply chain is high and the market is going regional. In this way, LED lighting industry on the Chinese mainland gradually shook off the old image of small size and low quality, presenting an industrial competing momentum in groups. See Figure 4.
The proportion of LED lighting over overall application market has been increased, which becomes the key to future industrial growth. Therefore, LED component manufacturers consolidate their capacities to the lower reach one after another, and build up their own capacity to supply LED lighting light source and application products. Such strategic layout of LED component manufacturers will not only help manufacturers control the lower reach, but also assist groups to transform from component production to brand sales, and to become lighting brand manufacturers by seizing the opportunity for growth of LED lighting market on the Chinese mainland, and thus increase added value of the enterprises.
For traditional lighting manufacturers, LED lighting has become the one with the greatest potential in the lighting market, while there is still much room for reducing its costs and improving the technology. Lighting manufacturers consolidate to the middle and upper reaches of LED industry, with an aim at ensuring stable supply of LED component and the production capacity of customizing encapsulation. In addition, they wish to break away from the former industrial position of low-class lighting and cheap lamp production, but to consolidate advanced technical capability and brand and channel from upper to the lower reaches of LED lighting industry, to build up power in the Chinese market that could compete with international lighting giants.


Taiwan and Japanese enterprises tap LED lighting market on the Chinese mainland, facing challenges from technology spillover, localization and market protection
LED lighting market of the Chinese mainland expands rapid, attracting Taiwan and Japanese manufacturers. Japanese manufacturers speed up expansion of production and channel of LED lighting on the mainland. Matsushita electric works estimates focuses their overseas market development in China. It is expected that by 2015 the lighting product shops it establishes on the mainland will increase to 5, 000 and cover second and third tier cities, adding up the total revenue from lighting products in China to 3 billion RMB, five times larger than that of 2009. Based on its production center in Shanghai, NEC aggressively enters the mainland LED lighting market, and is expected to open 50 shops before April 2013.
As for Taiwan, in the past LED component industry and lower reach of LED application industry of the Chinese mainland formed a highly complementary industrial chain and pattern. Taiwan provided high-quality LED components, and the Chinese mainland produced such application products as backlight and lighting modules. This resulted in the fact that 60% of Taiwan LED components were introduced to the mainland market. With rapid development of LED industry on the Chinese mainland, the cross-Straits cooperative pattern on industrial chain has met great challenges. The competition among LED manufacturers across the Taiwan Straits has intensified increasingly in terms of technical capacity, production capacity, resource and market. The cooperative and competitive relations between the two sides have been under swift changes.
Taiwan LED manufacturers realize that LED industrial competitions across the Taiwan Straits have transformed from those for production elements to control of supply chain and market. Therefore, since 2011, they have shifted their focus on the Chinese mainland from expansion of production capacity to attention to strategic cooperation between channels and groups. For instance, Liteon and Crystal Electronics invested a new plant with mainland home appliance giant Konka, Unity Opto Technology worked with mainland panel producer BOE Technology and TCL on supply cooperation, Harvatek and TCL jointly invested an LED encapsulation plant in Huizhouo, Huaxing and PTIC signed a cooperative agreement on supply of LED lighting products, and Everlight Electronics made a joint investment in establishing a plant with mainland color TV assembly giant AOC and lighting manufacturer Shanghai Yaming, etc.
Taiwan and Japanese enterprises come to an understanding that the key to developing Chinese LED lighting market are channel and brand. They have taken independent development and cooperative development patterns respectively and faced different challenges. Despite their advantages of superb technology and international brand, Japanese LED lighting manufacturers will find themselves restrained when they face local governments or Chinese state-owned large enterprises. Moreover, China’s intellectual property rights protection system, finance and tax system, product specification and class system are not complete, plus historical and cultural factors, Japanese enterprises will be trapped in high operational risks, which prevent them from further input. Though enjoying advantages of the same cultural and ethnic roots, as well as favorable policies from the mainland, Taiwan LED lighting manufacturers still cannot digest the risks of technology spillover and establish long-term and stable cooperative relationship with the mainland for their “shallow-disk” technology edge.


Taiwan and Japanese need new cooperative mode to tap the Chinese mainland market
Taiwan and Japanese enterprises have successful experience in industrial cooperation and mutual complement in the past. Facing the huge business opportunity and risks of LED lighting on the Chinese mainland, Taiwan and Japanese LED lighting industries enjoy the niche and incentive for cooperation. But in reality, no matter the vertical cooperative relation the both sides used to rely on in the past or the currently promoted parallel cooperative relation for promoting products, Taiwan and Japanese manufacturers seem to be hard to find a common ground for cooperative actions on LED lighting market on the Chinese mainland.
“Channel” and “brand” are key components to developing LED lighting market on the Chinese mainland, which both Taiwan and Japanese enterprises are short of in their operations on the Chinese mainland. Therefore, even Taiwan and Japanese work together, using advanced Japanese technology plus Taiwan’s excellent cost control and capability of technical application to manufacture “high quality” and “inexpensive” LED lighting products catering to the market demand, the enterprises will still find it extremely difficult to launch success sales on the Chinese mainland. When cooperation of the both sides does not help tap Chinese market, Japanese enterprises will lose their interest in working with Taiwan manufacturers.
Despite the poor feasibility of cooperation between Taiwan and Japan, the cooperation among Taiwan, Japanese and the Chinese mainland could be a new direction. Making good use of the manufacturing power of Taiwan manufacturers and their policy support, together with the market and sales channel of mainland manufacturers, as well as technical support and production innovation from Japanese manufacturers to Taiwan manufacturers, it will work like three departments of marketing, manufacturing and R&D in one enterprise. However, the relation among manufacturers under such cooperative pattern will become even more complicated. Plus the fact that Taiwan and the mainland have not signed any investment protection protocols, it makes it harder to execute the idea.
Despite unfavorable factors, some manufacturers have attempted such operation, bringing a trace of hope for the possibility of cooperation in LED lighting market among Japanese, Taiwan and the Chinese mainland. The alliance consists of Toyoda Gosei Co., Taiwan Epistar Co. as well as NVC Co and Yankon Co. of the Chinese mainland. Toyoda Gosei plays the roles as the guide of advanced epitaxy technology and establish factories with Epistar for development of advanced technology and patent authorization; Epistar plays a role as high-quality LED manufacturer, which takes advantage of the close and cooperative and supply relation with lower reach manufacturers of the Chinese mainland and sign strategic agreements with them to enter the mainland market; while NVC and Yankon, with their brands and channels, tap Chinese regional lighting market. It is believed that such close multinational and cross-regional corporate cooperation will appear gradually in LED lighting industry in East Asia.

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