Are LED factories ready to grab the 5 trillion yuan business opportunity hidden in the "haze"?

If you want to see from a thousand miles away, you will reach a new level of "haze". With the rapid development of social economy, smog seems to have become an inevitable product of the development of the times and has become a city's "growing pains". "Combating smog" has become an important issue in the current government work. Wu Xiaoqing, Vice Minister of the Ministry of Environmental Protection, pointed out that investment in environmental protection during the 12th Five-Year Plan period will be nearly 5 trillion yuan. This investment is 24 times the annual output value of green energy in Taiwan. Therefore, energy-saving and environmental protection-related industrial chains in Taiwan, including LED, are all gearing up to mainland China.

However, this huge business opportunity has also attracted competition from mainland China, as well as European and American benchmark companies.

Mainland China has the largest LED industry chain in the world, and also has sweet and attractive domestic demand business opportunities. In 2014, Guangdong Province alone will complete the contracting project for two million LED street lights, and 10 cities under the jurisdiction of Fujian Province also have bids for 300,000 to 500,000 LED street lights.

Taiwanese companies want to seize the domestic LED market in mainland China, mainly through the following channels: first, participating in public tenders such as street lamps of local governments; second, using Everlight’s own brand model to directly attack the consumer market.

However, neither path is easy to follow. The first way is that the mainland usually stipulates that to participate in the bidding, you must set up a factory and invest in the province and contribute tax revenue. If not, the whole lamp must be imported and 17% domestic sales VAT will be levied. Just the "setting up a factory" must have deterred many Taiwanese businessmen, not to mention that the charging method is to repay in installments, and is amortized year by year according to how much electricity bills are saved. The risk of Taiwanese businessmen collecting debts is too high. As for the second way, we need to win over more than 6,000 LED manufacturers in mainland China, spend a lot of money, and make a name for ourselves in the market.

Although it is full of challenges, in the eyes of Xiao Hongqing, secretary-general of the Taiwan LED Industry Alliance, who has been mediating the cross-strait lighting industry for more than 20 years, Taiwanese businessmen must have two tricks if they want to have a place in the mainland Chinese market.

The first step is to find out the bidding qualifications of the other party before grabbing the public tender; a well-known listed company in Taiwan once complained to Xiao Hongqing that in order to win the street light tender of Ejian Province, it spent a year and assisted the "demonstration district" many times. In the end, it was not even qualified to bid because it did not set up a factory in the local area.

Faced with similar tenders, Xiao Hongqing’s suggestion is that Taiwanese companies must cooperate with local system operators and act as pure product suppliers. Subsequent system maintenance, payment collection, etc., will be fully handled by local operators.

The second move is to attack the consumer market by playing the "function" card, and launch user-friendly healthy lighting before mainland Chinese companies even think of it, including automatic dimming over time (such as white light during the day, yellow light at night), automatic lightening and darkening based on motion sensing, etc., instead of just emphasizing "performance" such as power saving and long life.

Such a suggestion comes from the estimate of Chu Yuchao, associate director of LEDinside of TrendForce, that the output value of the domestic LED market in mainland China will increase by 40% in 2014 compared with 2013, which is the fastest growing year after the financial tsunami. The annual growth rate of LED shipments in mainland China is actually as high as 80%. In other words, the rapid price decline of LED products will continue in 2014 and seriously offset the annual growth rate of output value.

“Taiwanese businessmen want to engage in a price war with mainland Chinese businesses. If the second place goes against the first place, they will never get a bargain.” Xiao Hongqing believes that Taiwanese businessmen in the mainland Chinese market can only do things that mainland Chinese businesses have not yet thought of or cannot do.