Failing Firms Cloud China’s LED Lighting Vision

Released February 8, 2013


Many Chinese LED firms have gone bankrupt or are facing asset liquidation this year as falling prices and oversupply batter the LED industry, reported Reuters.

Just as over-investment and sagging exports dragged down Beijing’s solar panel and wind turbine champions, China’s much-hyped LED lighting sector, the largest in the world, is now facing a drastic shake-up.

The once-bright LED industry in China is facing a severe reshuffle because of blind investment expansions, stiffer competition and thinner profits, with added pressure from shrinking export orders.  

“Everyone is making LEDs these days. The industry is a mess,” Irving Pun, global marketing director of LED maker Civilight Shenzhen Semiconductor Lighting Co Ltd, said in an interview to Reuters.

Many LED companies were established by former electronics enterprises that flocked to the new industry without core technologies. The vicious competition and price slashing dramatically reduced profit margins, accelerating newer firms’ demise, said industry analysts.

Most companies, encouraged by generous government support, ignored basic factors such as supply and demand imbalances while investing large sums to increase capacity. The intense competition has halved prices over the past three years.

Beijing has set a target for LEDs to account for 30 percent of the domestic general lighting market by 2015, more than triple the current level. That would cut annual coal use by 35 million tons, according to official estimates. Lower costs and advances in technology are crucial if China is to meets its LED goals.
But domestic demand is weak. Despite subsidies and the promise of reduced power bills over time, Chinese households have been slow to switch to LEDs because they are still much more expensive to buy than conventional lights. Quality issues have also hurt consumer confidence.
Chinese LED makers currently rely heavily on foreign companies for chips, which account for half of the production cost of the lights. Bringing that technology back home would help reduce costs.

At least 20 percent of Chinese LED lighting firms may be forced out of business, according to industry experts and even some LED company officials.

“Many small LED lighting companies are suffering and may not see light at the end of the tunnel,” said Wei Li, board secretary of Dongguan Kingsun Optoelectronic Co Ltd, a leading Chinese LED street lighting manufacturer.

Category: Innovation