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Expanding LED lighting sector in Shenzhen faces overcapacity

The last installment in this three-part series tackles the challenges faced by makers.

Shenzhen represents more than 70 percent of Guangdong province’s lighting products. The bulk of the latter’s LED light shipments of $3.81 billion between January and August 2011 came from the city. The area offers a growing range of bulbs, tubes and luminaires for different applications, including industrial.

Makers are generally optimistic about the future of the line. Riding on the strong LED sector in general and the trend for energy-efficient and environment-friendly products, many expect sales to continue on the upswing. In fact, they forecast export volume to increase at least 10 percent in the months ahead. Amid intensified competition and financial instability in key destinations, most are exploring new markets in South Africa, India and other areas.

Despite the positive outlook, suppliers are bracing for challenges. The huge sales potential and attractive government incentives have encouraged more companies to join the line in recent years. The influx of newcomers has resulted in overcapacity, which is fueling a price war. Many of the new entrants have weak technological capability and are therefore unable to ensure product quality. Their only leverage is rock-bottom quotes, a situation that exacerbates competition based solely on prices.

Another challenge is the growing homogenization in the line and the absence of an industry standard. This is compounded by the lack of core technology or makers’ inability to acquire and apply it. More than 80 percent of manufacturers in Shenzhen import LED chips. Locally available ICs are unsuitable for high-power LED lighting. These fall short of the required level of luminance efficiency, stability and reliability.

To encourage suppliers, China continues to implement preferential policies in the industry. Efforts are under way to put in place comprehensive and integrated standards.

Shenzhen is one of five cities recognized as key bases for semiconductor lighting. The industrial cluster will include facilities for R&D, D&D and trading. The local government has declared total support for the ensuing testing, communication and intellectual property service platforms.

Guangdong’s government offers up to $7 million in subsidies for related projects. The National Semiconductor Photoelectric Products Testing Laboratory aims to ensure manufacturing processes are up to international standards.

In 2005, the national government laid out plans to invest substantially in an LED base in Shenzhen, eyeing the Guangming Hi-Tech Park in Bao’an as the location. About $150 million will be infused initially into the development of the 3 million square meter site.

The project hopes to boost the country’s output of lighting products for residential and commercial use, low-consumption devices in traffic lights, and large displays for main thoroughfares and public areas.

For their part, makers of LED lighting devices are gearing up to pursue restructuring and quality upgrades in coming months. Besides growing their export markets, companies are expanding the domestic base, motivated by government projects to adopt power-saving lighting alternatives.

Click here to read the complete article on Global Sources.

Note: This article "Expanding LED lighting sector in Shenzhen faces overcapacity" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through e-magazines and trade shows

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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