Business | August 31, 2012
China LED market turns reasonable
Due to China’s strong policy support and huge market, Chinese LED market has always been a major focus of the industry.
Recently China’s annual solid-state lighting product subsidy bidding process results have been announced. According to LEDinside, the LED research division of TrendForce, the winning bidders’ product cost and price are much lower than those of the last bidding process, which indicates Chinese LED lighting products are improving. In the future, it will be inevitable for foreign firms to face challenges from Chinese companies. Subsidy Contributes to a Sharp Dive in RMB/W In terms of LED street lamp and tunnel light prices, the cost per wattage has come down to RMB 11, much lower than the average price of RMB 15-18 on the market. The much lower price reflected the effects of subsidies, because 30% subsidies will go straight to the winning companies. That is, considering most lighting products’ gross margins ranging between 20% and 40%, the subsidies can help the companies reduce their operation costs by 30%. That means as long as the companies can maintain their gross margin, they can greatly cut the product prices. As for indoor lighting products, the cost per wattage dipped to RMB 7, which is close to the sweet point for indoor lighting market LEDinside predicted before. With the help of subsidy, the cost for consumer will further plunge to RMB 5/W, which will greatly increase LED lighting market acceptance. Reasonable Bidding Prices Reflect Improvement in Cost Per Watt A lot of standards were established for this bidding process, and product compatibility (module, interface) was taken into account this time in order to simplify the products. A minimum of annual production volume was also set up to ensure winning companies’ high production. As a result, the bidding prices submitted by the companies were much more reasonable this time. LEDinside notes that with the new standards and rules, product efficiency became the key factor that affected prices as quality, design and energy efficiency were mostly on the same level. As for luminous efficacy, luminous flux of bid winner’s street lamps and tunnel lights were on a high level. The requested standards were 5400lm/9000lm/14000lm, and the luminous efficacy of all the bid winner’s products has reached the 75lm/W, with the average luminous efficacy hitting around 90lm/W. As for average luminous efficacy, those winning luminaire efficacies all reached above 100lm/W – Philips (China) 121W lighting fixture had a luminous efficacy of 115lm/W, the highest in the world. Product Efficiency Improving, Business Opportunities for China and Taiwan Firms Emerging LEDinside believes bid winners can use subsidies to increase LED industry development by improving end market’s penetration rate, which will help alleviate the current oversupply. Looking at the results, Chinese wafer and package makers benefited from the loose standards, since there is no strict limit in luminous efficacy and light source specification. With better price-performance ratio, Chinese companies are expected to see a growth in sales and acquire higher subsidy, which will stimulate the midstream and upstream sectors of Chinese LED industry. Taiwanese may benefit from it through offering China with wafers, packages and technological support. However, Taiwanese companies will face increasing pressure in the long run. The end of the bidding process sees market prices become more transparent, which will prevent certain manufacturers from submitting unreasonable prices or asking for a rebate. In sum, this bidding process will help increase LED product awareness and acceptance in the consumer market.
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