LED lighting market is short-lived?

Since the beginning of this year, the market demand for LED lighting downstream applications has continued to grow faster than expected, directly driving the mid-stream packaging and upstream epitaxial chip capacity to be quickly digested, and some companies have even had a rare order queuing phenomenon last year. In all links of the industrial chain, the 24-hour production capacity of many enterprises has been fully opened. However, there are still situations in which the supply of products falls short of demand. So, what are the reasons for such a fierce market demand? How long can this wave of market last?

The whole industry chain is hot market

"With the decline in the price of LED lighting products, the company's sales have also seen an explosive growth." Li Xuliang, Chairman of LED lighting application company Qinshang Optoelectronics Co., Ltd., said: "At present, the company is producing at full capacity in 24 hours, but it still can't meet customers. Demand needs to outsource some of the production process."

The rapid growth of the downstream lighting market has brought a large number of orders to mid-sea packaging companies. “Package orders in the first few months of this year have brought our production lines to full capacity, mainly due to the increasing demand for downstream applications in the domestic market.” Luo Jing, deputy general manager of marketing for packaging company Zhejiang Zhongzhou Optoelectronics Co., Ltd., said, “This year Since then, traditional lighting companies have stepped up their efforts in LED transformation, including NVC, Hongyan, and Delixi, which have all issued large orders to the packaging plant."

The mid-stream packaging companies will gradually transfer the market's profitability to the upstream. “After May this year, the industry experienced a major turnaround, which was not expected by the entire industry's entrepreneurs and experts.” Zheng Tiemin, general manager of Shandong Inspur Huaguang Optoelectronics Co., Ltd., an epitaxial chip manufacturer, told China Electronics News "reporter. “Everyone would have thought that a turning point in the industry would happen in 2014, and the result is now very clear signs of supply shortage.”

"There are two main reasons behind this phenomenon." Zheng Tiemin said, "First, there is an important relationship with the start-up of the indoor lighting market, and secondly, because domestic LED lighting companies, especially upstream companies, are underemployed," Zheng Tiemin said. From the second half of the previous year until last year, due to the reduction of product profits and oversupply of the market, domestic manufacturers generally started under-employed, and equipment basically did not operate at 100%. The market's supply and demand are balanced; this year's market demand suddenly increases, but the equipment needs to be fully started. In a process, production capacity could not keep up for the time being, so there was a situation where supply was in short supply.

Wang Haibo, vice chairman of China Lighting Association and director of Institute of Electric Light Source Materials at Nanjing University of Technology, also agreed with this view. “On the one hand, the market conditions were not good some time ago. Enterprises in the middle and lower reaches of the industry chain, including the circulation sector, basically all set their own sales and did not dare to have inventory. For example, the chip makers generally operate at less than 50%.” Wang Haibo accepted "China Electronics News" reporter said in an interview, "On the other hand, but also because of the cost-effective LED lighting products have the basic conditions for market sales, has been accepted by ordinary consumers, after all, its price is not much more expensive than energy-saving lamps."

Chen Yansheng, chairman of China Semiconductor Lighting/LED Industry and Application Alliance, also believes that the cost-effectiveness of LED lighting products is an important reason for the rapid growth of the market. “As the price of LED lighting products decreases, the cost performance of these products continues to increase, and the degree of acceptance in the market continues to increase.” Chen Yansheng told the “China Electronics News” reporter. “From the domestic market, LED lighting products were mainly used in projects. , Such as hotels, shopping malls, parking lots, etc. Currently, there are more and more household consumers using LED lighting products, and the increase in retail sales of dealers naturally drives manufacturers to increase production.From the perspective of foreign markets, the demand for LED lighting products It has also maintained growth, and the growth momentum has been evident since last year."

Rationally Considering the Rapid Growth of the Market

The continuous and rapid growth of the LED lighting market has led to two views in the industry. First, it is expected that the explosive growth period of the LED lighting market in the coming years will come earlier. To this end, a number of LED companies have recently stated that they are expanding their production, many of whom are new players. Another pessimistic view is that this is only a temporary phenomenon and the market will soon oversupply again.

"I think these two viewpoints are too extreme," said Wang Haibo. "Like the speed of building roads that cannot keep up with the growth rate of automobiles, the speed of market development will never be equal to the speed at which production capacity will increase. LED lighting products are so modern and high The efficiency of the production system is even more so, not to mention that we are not without production capacity, but the production capacity was not fully open before, so the argument of explosive growth is naturally not established.At the same time, the market share of LED lighting products is very small, and the potential market is still very large. The penetration of coastal cities into inland cities and rural markets requires a process that is understood and accepted by consumers. This level of consumption also determines that the growth of the LED lighting market will not be a flash in the pan.

"I also do not agree with the market's 'explosion' or 'outbreak' argument." Chen Yansheng stressed, "Although the current market conditions are good, but the company's throbbing mood or pressure should be pressed. LED lighting products cost-effective is improving the market from the good The downstream of the industrial chain promotes to the middle and upper reaches. The rapid growth of the downstream market allows the midstream packaging companies to gradually recover from underemployment to capacity. However, the situation of upstream epitaxial chip companies is not always very good. Small-scale enterprises may not be able to benefit from them, so they should Look at the current situation both positively and negatively."

"On the one hand, the number of LED lighting manufacturers in China is too large. After large quantities of powerful companies enter the market, they will suppress the growth momentum of small enterprises and promote industrial integration. This is a positive influence." Chen Yansheng said, "The other On the one hand, although market demand growth is a normal phenomenon, it is not normal to suddenly increase too quickly. For a certain company, it is possible to double the sales volume, but for the entire industry, this growth Is it sustainable or is it a problem, then will the blind production bring pressure problems? After the product reaches the dealer, can it still be sold to consumers?”

"From the perspective of the law of market economic development, this round of hot market is temporary, but it will continue for some time. With the increase in capacity utilization, the market will continue to supply from the oversupply to supply, maintaining a dynamic balance." Zheng Tiemin said “We are delighted to see that the domestic LED lighting civil market is starting up, not only the urban market, but also in many townships and large sets of LED lighting products have also appeared.” Zheng Tiemin stressed that the concept of “encircling the cities in rural areas” is also suitable In the LED lighting market, only after the rural market, which occupies a major market share, started, will China's LED lighting usher in a true spring.