On the 1st of this month, Chen Long, general manager of Taizhou Huaqiang Lighting Equipment Company, returned from Hong Kong in a happy mood. Because the company has confirmed its intention to cooperate with South Korea's Seoul Semiconductor, the world's fourth largest LED chip manufacturer. It is reported that Huaqiang Lighting, which mainly produces LED terminal products, will jointly build a chip production base in Taizhou with Seoul Semiconductor.
The LED lighting industry experienced rapid expansion from 2009 to 2010 and troughs from 2011 to 2012. The industry is currently picking up. Recently, eight departments including the Provincial Economic and Information Technology Commission issued guidance on the development of LED lighting to cultivate a 100-billion-level industry through market application. Reporters surveyed in southern Jiangsu and central Jiangsu found that market expectations are improving and the LED lighting industry is becoming hotter, but the shortcomings that restrict development are not lengthened, the status quo of lack of core technology remains unchanged, and it is difficult to upgrade the industry.
A billion yuan subsidy will end up making wedding clothes for others
Since the last century, civilian lighting has gone through three stages, from incandescent lamps to fluorescent lamps to LED lamps. Compared with its two "predecessors", LED lights save more power and have a longer lifespan. It has become a trend to replace them. A small light can bring huge business opportunities between switches. To replace all 4 million street lights in Jiangsu with LED lights, the lamp holders will cost 6.4 billion yuan. Including lamp holders, wiring, etc., the total investment will be 16 billion yuan. In Nanjing, street lights, public places and outdoor landscape lighting have all been replaced with LED lights, with an investment of up to 50 billion yuan.
The good prospects have attracted investors, and local governments cannot restrain their impulse. The chip is the core component of LED, and MOCVD is the key equipment for manufacturing chips. "Since 2010, MOVCDs have been subsidized by various localities, with a maximum of 10 million yuan per unit." Yin Yimin, deputy director of the Wujin High-tech Zone Management Committee, revealed that companies blindly order in order to obtain subsidies. Shanghai Sapphire took a fancy to the high subsidies in Yangzhou, registered Longyao Optoelectronics in 2010, and planned to launch 50 MOCVD units. However, it withdrew from the market in 2012 due to poor management, and more than 10 MOCVD units were sold at less than 30% of the original price. In 2012, 10 LED chip manufacturing companies were put into operation in the province, with more than 220 MOCVD units, accounting for 1/4 of the country. The capacity utilization rate that year was less than 60%. It was not until the second half of last year that the capacity utilization rate reached 90%, which was higher than the 70%-75% excess warning line.
Jiangsu’s LED industry is concentrated in Suzhou, Wuxi, Nanjing, Yangzhou, and Yancheng, and subsidies for MOCVD are mainly at the municipal level. "The development path of LED is similar to that of photovoltaics. In the early stage, it was promoted by the government and subsidized upstream equipment, which caused a surplus at a certain stage." Liu Naitao, general manager of Changzhou Laidun Optoelectronics Technology Company, said frankly that if the government does not stop its "hand" in time, it will lead to a more serious surplus.
At present, various regions have stopped subsidizing MOCVD, and Yangzhou, which took the lead in taking the lead, spent 1 billion yuan on this. "Yangzhou's LED industry has mostly front-end links. After the chips are ready, they are sent to other places for packaging and finished products. It does not have a strong impact on the local industrial chain, and the tax revenue is not retained. It is spent on wedding dresses for others!" When communicating with reporters, the city's leaders reflected on the policy impulse of the year.
Shifting from subsidized production to subsidized consumption, the LED market heats up
According to statistics, among the lighting lamps in Jiangsu Province, incandescent lamps account for 40%, fluorescent lamps account for 55%, and LED lamps only account for 5%. The promotion of LED lights in Nanjing is slightly greater, accounting for less than 10%, incandescent lamps account for 20%, and fluorescent lamps account for 70%. LED lights that save electricity and save money have been on the market for 6 years. Why are their performance so unsatisfactory? In addition to the slow market promotion of LED lights and low social awareness, price is an important factor. For a bedroom of 20 square meters, the lamp holder fee for installing incandescent lamps is 5 yuan; the lamp holder fee for installing fluorescent lamps is 50 yuan; and the lamp holder fee for LED lamps is 80 yuan.
Most people are reluctant to spend dozens of yuan more to replace a lamp. To start LED lamp consumption, "big households" need to take the lead in demonstrating. Since last year, the state has launched a subsidy policy for large users such as factories, shopping malls, and public facilities, providing a 30% subsidy for the purchase of LED lights listed in the bidding catalog. Affected by this, the LED lamp market is heating up. In the first three quarters of this year, Nanjing Henderson Technology’s LED lamp sales doubled, with sales increasing by 30%. From subsidizing production to subsidizing consumption, the government has changed its thinking and is trying more market-based methods. This year, Huaqiang Lighting undertook the Taizhou street lamp renovation project, investing 150 million yuan in 60,000 LED lamps. Compared with fluorescent lamps, the investment in LED lamps is 120 million yuan more, but it can save 30 million yuan in electricity bills every year.
Different from the past, Taizhou’s lamp replacement this time is “trying out” contract energy management - Huaqiang bears all the investment. During the 8-year contract period, 90% of the annual electricity savings from the city’s street lamp management office will go to Huaqiang; when the contract expires, the LED lamps can still be used for 4 years, and all assets and energy saving income will go to the street lamp management office. Huaqiang recovered its investment in six years, with a comprehensive rate of return of about 30%, while the government saved financial costs through "instalment payments".
Zhang Jinguo, director of the Energy Conservation Department of the Provincial Economic and Information Technology Commission, said that based on current market demand, the output value of Jiangsu's LED industry is expected to grow by an average annual rate of 25% during the "13th Five-Year Plan", reaching 112 billion yuan in 2020.
The LED industry has three "shortcomings" and the risk of expansion is high
According to the laws of industrial development, the LED market concentration will become increasingly high. There are more than 30,000 manufacturing enterprises in the country, and Jiangsu accounts for 1/10. Han Ping, a professor at the School of Electronic Science and Engineering of Nanjing University, said bluntly that Jiangsu’s LED lamp industry chain is complete, but there are not many influential terminal brands. Among the more than 30 first-tier brands in the country, only three or four from Jiangsu are shortlisted, and the one with the highest annual sales is only 500 million yuan.
The reporter found that there are three "shortcomings" in the LED industry: the lack of core technology, MOCVD comes from Europe and the United States; the technical level and product quality of downstream enterprises are uneven; the scale of enterprises is small and the industry concentration is low. Sources from the Provincial Economic and Information Technology Commission revealed that Jiangsu's small and medium-power LED lamps have reached international standards, but the gap between high-power lamps such as street lamps is not small.
Based on the same amount of light, high-power lamps are twice as expensive as low-power lamps, and 20% of domestic demand for LED lamps is for high-power lamps. There are hundreds of companies in Jiangsu producing high-power lamps, but most of them import packaged core components from abroad and then simply assemble them domestically, with low added value. This year, the national high-power lamp market demand is 3 billion yuan, and Jiangsu accounts for 1/10, 80% of which depends on imports, and the market at home is unable to capture it.
Xu Zhiwei, vice president of Suzhou Dongshan Lighting Technology Company, said frankly that thousands of downstream companies in the LED industry use the same materials and control systems to produce the same products and sell them to the same customers, which will inevitably lead to price wars. Zhou Ming, chairman of Henderson Technology, said that market competition has intensified and companies are "exchanging price for volume", resulting in a decline in LED lamp prices. The reporter visited Nanjing Red Sun Decoration City and found that the price of LED T8 tubes was about 20 yuan, which was only 1/9 of the price two years ago. Recently, Dongshan Lighting registered a company in Hong Kong and is preparing to integrate resources to tackle core technologies and seek differentiated development.
Although local governments no longer subsidize equipment, the improvement in market conditions has made some companies act impulsively. This year, the number of upstream enterprises in the province's LED industry will increase to more than 20, with more than 350 MOCVD units, and will reach 375 units by the end of next year. Coupled with the improvement in equipment production efficiency, production capacity will double that of 2012. Han Ping reminded that industry consolidation and reshuffle are inevitable, and small businesses may face the risk of insufficient production.
To build a 100-billion-dollar industry, we need to strengthen our "heart" and take a new path. The guiding opinions on the development of LED industry in our province propose to raise the entry threshold, guide the reorganization and integration of enterprises, and avoid blind expansion and low-level duplication of construction. At the same time, we will strengthen technological research and make the luminous efficiency of core devices and the quality of application products reach the international advanced level by 2020.
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