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Industry Data and Development Overview for China Solid State Lighting 2013

Author: Popularity: Time: 14/05/23from:

Industry Data and Development Overview for China Solid State Lighting 2013


2013 is the tenth anniversary of the China Solid State Lighting Project. Over the decade, solid state lighting (SSL) industry has made significant strides in China, and the decade is marked as a decade of distinguished achievements and leaping-forward development. The SSL industry in China has already taken into shape and established relatively complete industrial chain, accompanied with the preliminary formation of industrial agglomeration. A great number of key enterprises are thriving. The gap between domestic and international level in terms of key technologies for industry development is gradually narrowing. Exemplary application has gained a leading role worldwide; while the market for functional lighting is opening step by step. China’s SSL industry has become one of the fields where transformation and upgrading is taking place at the fastest pace in the global revolution of lighting industry, with the very foundation to facilitate transformation from development with large scale to development with strength.
 
In 2012, it was displayed how SSL industry in China experienced the post-financial crisis bottoming out and bouncing back, while 2013 it was witnessed another year of rapid development and changes since 2010. The biggest focuses for 2013 were global economic recovery, renewed demand for SSL application, as well as the intense release of national policies on energy conservation and environmental protection.In such context, the domestic and international markets for general LED lighting doubtlessly served as the most direct driving forces to fuel industry development in 2013. Technical breakthroughs pushed forward the continuous cost reduction. LED lighting was accelerating market penetration; while backlighting market was enlarging steadily. Innovative application is emerging one after another. Ranging from the epitaxial chip producing in the upstream, to the package manufacturing in the mid-stream, to the application in the downstream, the whole SSL industry in China was enjoying a significantly higher growth rate than that of 2012, with a substantial increase in export. At the same time, 2013 was also a year of intensifying competition in which industry integration continued to deepen; adjustment of industry layout accompanied ever dropping price; and expansion of investment and production coexisted with business shutdown.
 
I. Overall industry scale expanded steadily, with outstanding performance in lighting application
 
In 2013, the SSL industry in China has reached an overall scale of RMB 257.6 billion Yuan, with a 34% increase from the 2012 level of RMB 192 billion Yuan, making 2013 another year of rapid growth for SSL industry since 2010. Among the total output value, the LED epitaxial chip producing section in the upstream reached RMB 10.5 billion Yuan; packaging section in the mid-stream shared RMB 40.3 billion; while the application section in the downstream exceeded RMB 200 billion, reaching a total value of RMB 206.8 billion Yuan (see Figure 1).
 

 
Figure 1: Industry Scale for Different Sections of SSL Industry in China 2013
(Source of Data: CSA Research)
 
In 2013, the output value of LED chip production totaled RMB 10.5 billion Yuan, with a 31.5% increase. However, with the release of manufacturing capacity for MOCVD reactors as a result of investments during 2010 – 2011, the production had a 61% rise which greatly surpassed the growth rate of output values. The output of GaN-based LED chips accounted for 65% of the total volume; that of quaternary compound chips (in which InGaAlP-based LED chips are dominating products) took up to 25%; and the yield of other chips such as GaAs-based ones accounted for 10% (see Figure 2).
 

 
Figure 2: LED Chip Product Mix in China 2013
(Source of Data: CSA Research)
 
The large-scale investment boomin MOCVD equipment starting from 2009 began to cool down in 2012 and 2013 witnessed rational growth of MOCVD investment. By December 2013, the quantity of MOCVD reactors in China reached 1090, with an increase of 110 units from that of 2012. The incremental units were procured by listed companies that have relatively abundant financial resources. China-made MOCVD reactors also appeared in the incremental units. With regard to regional distribution, more MOCVD reactors were primarily located in Jiangsu and Anhui, taking up to 44% of the total number of MOCVD reactors in China (see Figure 3).
 

 
Figure 3: Regional Distribution of MOCVD Reactors in China 2013
(Source of Data: CSA Research)
 
In 2013 it was also saw that the rising of LED package manufacturers and the industry scale of packaging reached RMB 40.3 billion Yuan, with a 26% increase from that of 2012 as RMB 32 billion Yuan. The SMD output accounted for 51.9% of the total volume of LED packages, turning SMD into the dominant module type of packaging. Lamp was following SMD with the proportion of 38.4%; while COB took up to 7.7% (see Figure 4).
 

 
Figure 4: LED Package Product Mix in China 2013
(Source of Data: CSA Research)
 
The development of packaging section in 2013 was not only manifested in the growth of product output value and amount, but also effected in the progressing of packaging technologies in which mature technologies were robustly advancing and merging technologies booming. Processes and technologies for COB packaging, eutectic EMC packaging, and gold-free wire packaging became potential points for breakthroughs in next step cost reduction and reliability improvement. In addition, in terms of product specifications, the manufacturers shifted from their previous focus on units with large power to the highlight of enhanced proportion of units with medium power, which was directed by the application demands.
 
The SSL application section in China reached an overall scale of RMB 206.8 billion Yuan in 2013. Despite the impacts of lasting price drop, SSL application section managed to become the fastest growing link in the entire SSL industrial chain, with an overall growth rate of 36%. The general lighting market grew evidently in 2013. With a growth rate of 65% and output value of RMB 69.6 billion Yuan, general lighting products accounted for 34% share of the total market, rising from the 28% share in 2012. Due to the quick rolling out of tablet computer and the ever growing penetration rate of LED-backlit LCD television, backlighting kept booming in 2013, with around 35%growth rate and output value of RMB 39 billion Yuan (see Figure 5).
 
In addition, notable growth was reported in emerging application domains such as automotive lighting, medical lighting, and agricultural lighting. Driven by such applications, an increase rate of over 25% was realized in emerging application areas besides the conventional areas of general lighting, backlighting, landscape lighting, display screens, and signaling. Optical communication, wearable electronics, and applications in aerospace should be noted as highlights in LED application in 2013.
 

 
Figure 5: Composition of SSL Application Domains in China 2013
(Source of Data: CSA Research)
 
II. Technologies developed with a high speed, creating gigantic space for innovation
 
The gap between domestic and international level of key SSL technologies was gradually closing in 2013. The luminous efficacy of commercial white-light LEDs reached 140 lm/W (compared with the 120 lm/W in 2012); while that of commercial power Si-based LED chips (with independent intellectual property rights) was 130 lm/W. China-made production-oriented MOVCD equipment (48 to 56 chips) was put into trial operation. China has become a most significant production and export base for LED packaging and application products globally.
 
In 2013, the China-produced LED chips took up to 75% in application fields(see Figure 6). In the application field of small and medium power chips, home-made LED chips boasted big strengths for competition. However, imported chips still dominated the high power lighting field such as street lamps.
 

 
Figure 6: Trends for China-made LED Chips in Application
(Source of Data: CSA Research)
 
SSL industry still has gigantic space for innovation in the future. At present, SSL technology is still in the phase of high-speed development, and there is no determined technical approach for the future product with luminous efficacy above 200 lm/W. Moreover, new technologies are emerging, such as glass-based technology for LED epitaxy, technology for package-free white light chip, and technology for chip-on-flex (COF).LED products have not been finalized, and techniques like specification-led LED product interface and accelerated test are stepping up paces in development. With the development of information intelligentialize, innovative applications beyond lighting are flourishing. LED optical communication and wearable electronics are the cases in point. As the first breakthrough in the third generation of semiconductor materials, SSL technology will take the lead in boosting the use of third-generation semiconductor materials in energy conservation and emission reduction, information technology, and military defense.
 
III. Listed companies made good performance, nevertheless profits continued to shrink
 
In the first three quarters of 2013, listed companies in LED business that offer A-shares have achieved total operating revenue of RMB 13.558 billion Yuan, with a year-on-year growth rate of 19.44%. The realized operating revenue for the third quarter was RMB 5.05 billion Yuan, with a year-on-year growth rate of 19.85%. In a horizontal comparison, LED category has the third fastest growth rate of overall operating revenue among the 25 listed industry categories (industry classification of Shenyin & Wanguo Securities), 10.28% higher than that of the A shares as a whole (see Figure 7). In vertical comparison, the entire LED industry exhibited a high-speed growing trend since 2013. A 20% growth rate was maintained during the first three quarters, which is nearly 10% higher than that of the same period in 2012. Benefited from the expanded market of downstream application, LED industry came out of the low times in 2011 and 2012, and started a new round of ascending period.
 

 
(from left to right as below:)
Real Estate; Optics & Photo-electronics; LED (21 companies); Electronics; Information Service; Comprehensive Area; Construction & Building Materials; Household Electrical Appliances; Medicine & Biotechnology; Light Manufacturing; Business & Trade; Financial Services; Transport Facilities; Entire A-Shares; Non-ferrous Metal; Chemical Industry; Textile & Clothing; Food & Beverage; Transportation; Public Service; Extractive Industry; Agriculture, Forestry, Husbandry, and Fishery; Information Equipment; Machinery; Catering & Tourism; Ferrous Metal
 

Figure 7: Growth Rate of Operating Revenues for Listed Companies in All Categories during the First Three Quarters in 2013
(Source of Data: CSA Research)
 
In 2013, the dilemma of “increased revenues vs. non-increased profits” still trapped LED enterprises. In the first three quarters, listed LED companies have realized accumulated profit of RMB 2.033 billion Yuan, with a 0.72% year-on-year decrease. The accumulated profit had experience negative growth for 6 consecutive quarters; while the net interest rate for the entire LED category was falling since 2012. The first three quarters of 2013 witnessed a net interest rate of 12.5%, decreasing by 2.3% from that of the same period last year (see Figure 8).
 

 
Figure 8: Accumulated Growth of Operating Revenue and Total Profit for Listed LED Companies
(Source of Data: CSA Research)
 
IV. Prices continued to fall, while LED penetration in lighting market accelerated
 
As a result of technology-push and fierce competition among manufacturers, prices of LED products continued to slide down in 2013.
 
The price for LED packages dropped by 20% on average, among which medium power packages were most affected. Take 0.2 W products as an example. In the beginning of 2013, the price was RMB 0.15 Yuan per unit; while the current price dropped to RMB 0.1 Yuan, with a cut of more than 30%. With regard to packages of 1W and above, market competition was not as fierce as that of medium power products; therefore the decrease was relatively small, only dropping by 15% for the whole year.For small power units of 0.1 W and below, the space for price cut was already tiny and the decrease rate was less than 20%.
 
Viewing from the price index, the price of LED lamps was approaching the acceptance tipping point of the mass market. According to CAS’s analysis of pricing trend of LED bulbs based on data collected from Taobao.com and other networks, the average price per watt has dropped from 8.73 Yuan/W to 5.78 Yuan/W during the recent 7 months (see Figure 9), with a decrease rate of 38.4% and its further shrinking price gap between incandescent light and CFL.
 

 
Figure 9: Pricing Trend of LED Bulbs in Taobao.com
(Source of Data: CSA Research)
 
China had produced over 0.81 billion LED lighting products in 2013, among which 0.4 billion units were consumed by domestic market. The penetration rate of LED lamps in domestic market reached 8.9% (see Figure 10), which is nearly 5% higher than the 2012 level of 3.3%. The growth in commercial lighting was especially conspicuous. According to incomplete statistics, the present penetration rate of LED lamps in commercial lighting has exceeded 12%.
 

 
Figure 10: Penetration Rate of LED Lamps in Domestic Market (Quantity)
(Source of Data: CSA Research)
 
V. Investment rebounded; merger and acquisition sped up
 
Investment in SSL industry has left the low tide in 2012 and began to recover in 2013. The planned projects in SSL industry amounted to RMB 20.82 billion Yuan in 2013, which rose by 15.9% from the 2012 level of RMB 17.96 billion Yuan. With regard to the regional distribution of investment, Jiangsu Province has the largest LED investment, accounting for over 30% of the total investment. Anhui, Hubei, and Sichuan in central China closely followed, taking up to 14.8%, 14.5%, and 13.5% respectively. In terms of investment scale, small and medium sized investments remained the mainstream. Large-scale projects with investment amount over RMB 0.5 billion Yuan only took up to 11.3%; medium sized projects with investment amount between RMB 0.1 billion Yuan and 0.5 billion Yuan accounted for 45.2%; and small scale projects with investment amount below RMB 0.1 billion Yuan was about 43.5%.
 
Viewing from the investment distribution in LED industry chain, investment of 2013 mainly concentrated on associated industries and application. Compared with 2012, the proportion of investment in associated industries surged from 21.5% to 47.7%, becoming a heated link to attract investment in the chain. However, the proportion of investment in application declined from 50.2% to 23.1%. In addition, investment in research, development, and test also increased (see Figure 11). Generally speaking, investment in 2013 became more balanced and rational.
 

 
Figure 11: Comparison of Investment Structure in LED Industrial Chain 2012 – 2013
(Source of Data: CSA Research)
 
With the rapid development of SSL industry in China and strong policy support in 2013, some LED enterprises that have strengths in financial resources, technical capacity for research and development, channels, and brand awareness began to seek partners, expecting to mutually reinforce each other in a win-win approach and create leading companies in Chinese (or even the global)SSL industry that will occupy certain shares in the global SSL market.Over the year, industry consolidation not only covered upstream, mid-stream, and downstream of the industrial chain, but also involved mainland, Hong Kong and Taiwan of China. Resources were aggregated to industrial giants through acquisition, strategic alliance, and cross-shareholding. Technical and patent barriers were quickly broken down to foster breakthroughs in industrialization. San’an Optoelectonics Co., Ltd. completed its strategic alliance with Formosa Epitaxy Inc. in June 2013; it also acquired Luminus Devices, Inc. through its wholly owned subsidiary at the cost of USD 22 million as well as 151 patents owned by Luminus worldwide, which further improved the global layout of San’an.
 
From the perspective of overall SSL industry development,for companies with advantages to stand out and join in global competition in the next three years, it is critical whether they can timely consolidate financial resources, technical strengths, and channels to seize market opportunities, speed up market layout, and become bigger and stronger.Otherwise, they would be kicked out of the market. The business shutdown since 2012 was the result of market selection.
 
VI. LED exports maintained strong performance; Europe and America became major markets
 
In 2013, China still had trade deficit in the field of LED device import and export. The quantity of imported LED appliances reached 75.9 billion units, whose total value amounted to over USD 5.3 billion; while the quantity of exported units were 60.5 billion, with total value of USD 2.8 billion. The import and export data for the three consecutive years showed that China’s LED device import has always outnumbered the export, where large trade deficit existed. However, such situation was improved in 2013, as trade deficit began to show a trend of gradually narrowing down.In addition, the average unit price for imported LED device and exported device were 7.0 cents and 4.6 cents respectively in 2013, partly reflecting the fact that the mainstream of China’s exported LED device consisted of middle- and low-end products (see Figure 12).
 

 
Figure 12: Comparison of LED Units Import and Export in 2013
(Source of Data: Chinese Customs, CSA Research)
 
In 2013, the quantity of China’s exported LED lighting products doubled from the 2012 level,reaching 0.41 billion units and accounting for half of China’s total production volume. The exported values also increased by 71% from the 2012 level, reaching USD 5.5 billion. The proportion of exported LED bulbs was nearly 48%, while that of LED spotlights exceeded 15% (see Figure 13).
 

 
Figure 13: Structure of Exported LED Lighting Products in 2013
(Source of Data: Chinese Customs, CSA Research)
 
With regard to exporting regions, China’s exports to Europe and America exhibited ultra-high-speed growth and the growth in Asia was slower. The European Union was the largest exporting market for China’s LED lighting products, accounting for 28% of the total exports; while North America was the second largest market, with its proportion exceeding 18%. Exports to Japan took up to nearly 9%. In addition, led by BRIC countries, the emerging market was also an important target export region for China’s LED lighting products, accounting for 8% of the total exports. Russia became a fastest growing exporting market (see Figure 14).

 
Figure 14: Structure of Exporting Market for LED Lighting Products in 2013
(Source of Data: Chinese Customs, CSA Research)
 
VII. Forecast of LED Industry Development in 2014
 
In 2013, the SSL industry in China has recovered integrally; and functional LED lighting market opened up quickly to usher the spring of LED lighting. In 2014, LED industry in China will maintain the rising momentum of 2013 and kick off a new round of growth. It is expected that China’s SSL industry will sustain the high-speed growth, with an anticipated growth rate of 40%. With the thorough opening of application market, in epitaxial chip production section, the accumulated production capacity brought by recent years’ investment will be gradually released, resulting in substantial rise in output volume and value in 2014. The growth rate for output value is anticipated to reach 35%. The packaging section will have more fierce competition. With an anticipated growth rate of 20%, it will provide platform to more new packaging technologies and processes to compete. However, the evolution of LED packaging technology always focuses on the reduction of end-use costs. In application section, with the advantage brought by “made-in-China”practice, the output value is expected to surge by over 50%.
 
In lighting application area, with countries’ further implementation of phase-out plans of incandescent lamp, 2014 will witness the exponential growth of LED lighting. The opening of Chinese LED application market will accelerate penetration. The overall penetration rate of LED lighting products is expected to reach 20%. Intelligent lighting will make outstanding achievements with the development of smart cities. Innovative application such as wearable electronics, optical communication, plant light will become new directions.

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