The lighting industry is already a major one in China, but there remains considerable potential for further growth to take place. The state-run National Development and Reform Commission has predicted that, by 2017, LED lighting will be worth almost $80 billion to the country’s economy, with the bulk of production split between around a dozen centers of manufacturing excellence. By this time, the commission believes, at least 20% of the lighting market will be taken by LED lights.
Environmental considerations are also a major factor behind the growth in demand for LED-based illumination. Traditional incandescent bulbs are being phased out in many parts of the world, including China itself – where bulbs rated at 60 watts or lower will be removed from sale in the next three years. Although the majority of this business will go to compact fluorescent bulbs, this is likely to be a short-term state of affairs. As prices drop, the efficiency of LED lighting will lead to it increasing its market share significantly.
The economic slowdowns and recessions which are affecting a large proportion of the Western world also provide a major consideration for buyers. Although China has not been entirely immune to these forces, the country’s economy remains much healthier than that of most of its Western rivals. That has allowed LED producers to keep up high levels of production in the knowledge that they will retain a high level of demand for their products in the medium term. In turn, that gives confidence to buyers that supplies will not suddenly disappear.
The China Association of Lighting Industry represents most of the producers of illumination in the country, although many of these are still more traditional manufacturers. Nevertheless, president of the Chinese lighting association, is convinced that the inherent advantages of LED lighting – in particular, the cost savings it offers in the longer term – will allow the technology to make steady inroads into the overall lighting market.
One potential concern for the big China LED lighting manufacturers is that the country’s government, having seen both economic and political advantages in controlling a large percentage of the world’s supply of LED lighting, might over-reach itself. There are now several thousand businesses in China producing LED components, many of which are uneconomic small companies that – in some cases – barely make a profit at all. As China’s headlong growth slows slightly, though, the smallest are steadily being picked off.
From a buyer’s point of view, this is probably going to be a good thing, at least in the longer term. Consolidation in the lighting sector should result in the emergence of fitter, more competitive companies that are less likely to fail. Stronger brand identities are also likely to be built up, which in turn should give confidence when Western companies are dealing with these entities. As the industry matures, there should be less speculative investment simply because a company has the word “LED” in its name.
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