Looking back the year of 2014, consolidation and bankruptcy of enterprises in LED industry are not uncommon. To respond to rapidly changing market, many manufacturers take measures such as strategic change or reorganization. Chu Yuchao, an assistant manager of Department of Green Energy in Trendforce, indicated in “LED forum 2014” that the rise of manufacturer in Asia especially in China promoted the rapid changing of market and low price in lighting and eventually brought significant influence and reform to LED industry.
LED lighting drives market growth, replaceable products become main trend
Chu stated that the price competition in Asia market was quite intense, which made it difficult to maintain rapid and high growth. The scale of global LED packaging market in 2014 was about 14.6 billion dollars in a conservative estimation and its compound annual growth rate was only about 2.3% by 2018. However, LED lighting application shared a most part by virtue of 4.8 billion dollars annual revenue in 2014 and 12% compound annual growth, and took the advantages to be the key growth dynamics of LED market.
At present, the replaceable products, such as LED globe light, LED tube, occupied a highest proportion in LED lighting application. The encapsulated type also employed the medium-power as chief application in response to demand. In allusion to the trend of European and American factory that focused on high power before but now actively seek for ODM or OEM, Chu supported the view that the outcome of lighting market was a foregone conclusion and the manufacturers almost all developed towards the direction of low price.
LED mass production and standardized specification, fast grab the lower-middle market by low price
With the coming of cheap lighting time, the manufacturers continue to push forward the solution of cheaper price. Chu analyzed the reason why manufacturers could support the low price and steadily declined, including economics of scale production, automatic production, the appearance of new mode of operation etc.
From the LED packaging components market, it is easy to find that advanced lighting aims at all kinds of product category and designs different packaging to reach the optimization effect; whereas the middle and lower application develops with the LED specification standardized for attracting the manufacturers from China mainland, Taiwan area, Japan and Korea to take over the lower-middle market, among which the packaging size 2835 and 3030 are the favorites.
Taiwan, Japan and Korea manufacturers focus on the 3030 and take it as main application by equipping with the EMC holder. On the other hand, reducing the cost by LED components standardized and mass production, the 2835 possesses a high cost performance and becomes the main specification of China mainland. To compete with the China mainland manufacturers, Taiwan manufacturers added the specification of 0.5W from 1W to increase the market size of 3030.
Automatic production reduces cost by half, new mode of operation shocks the market
Another market trend is importing full automatic production line. Since the second half of 2013, some big assembly plants in China mainland began to import full automatic production line, which reduced cost by half. Nevertheless, the difficult to be standardized for the specification and solution of LED globe light or LED tube are different for every manufacturer, and the massive capital needed lead to a stagnation of full automatic production. Large plants in lighting industry always stay in the same. More and more shipping quantity, lower and lower cost.
The manufacturers of China mainland carry out a lot of new modes of operation to face the era of low price. For example, high prices can be solved through the way of e-commerce. Moreover, the mode of operation that components suppliers in China mainland form an alliance, make out copulate specification and decide the price by quantity would also cause a comparative impact to the market.
The situation of LED industry is severe resulting from the pressures brought by the rise of China mainland manufacturers. To gain supremacy from the price-cutting competition in China, or put into niche or emerging market, both need careful consideration and overall arrangement.
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