Overcapacity set to blight China’s LED industry
May 24, 2013 Leave a comment
Overcapacity set to blight China’s LED industry
Staff Reporter 2013-05-23
The same overcapacity issues that rocked China’s solar power sector now threaten to take their toll on the country’s LED industry, the Chinese-language Beijing Business Today reports. A recent announcement by the Shenzhen city government that it will suspend its 2009-2015 plan to develop the local LED industry has sparked concerns that it may soon suffer a similar fate as the photovoltaic industry, with the solar sector seeing a capacity utilization rate of 60%. When the Shenzhen government first revealed its plan in March 2009, it declared the city would become an global base for the industrial development, research and manufacture of LED products. In the same year, 44.3% of China’s’s LED businesses were based in Shenzhen, with a further 24.7% in other cities in the southern province of Guangdong. Luo Qi, general manager of Zongke Optoelectronics Equipment, a Shenzhen-based LED company, said that he was yet to be received confirmation concerning the government’s suspension of its investment plan, though it is not a surprise as the industry has already encountered a series of operational difficulties, with high costs and excess inventories resulting in overcapacity. According to market research website gg-ii.com, over 80 LED enterprises in Shenzhen closed down last year alone. Chen Yansheng, deputy chairman of the China Association of Lighting Industry, also forecasts that more companies will face economic difficulties in the near future due to the expected increase in companies within the upstream LED chip manufacturing industry this year. Last year, several LED companies recorded a significant drop in their sales and net profit, with LED chip maker Elec-Tech International recording a net profit of 168 million yuan (US$27.4 million), down by 57% from the previous year. Luo said his company’s orders had steadily declined from October and so far this year, the volume of orders has fallen by 40%-50%, compared with the same period last year. He Zaihua, a senior researcher at CI Consulting, said the key to resolving the overcapacity crisis is in the hands of those in the LED sector and the government. Companies must take active measures to expand both the overseas and domestic markets, while trying to expand their core technology research and development at the same time, he added.
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