China’s LED industry: Get big or go home

June 16, 2014 Leave a comment

China’s LED industry: Get big or go home

Staff Reporter

2014-06-11

Over 10,000 Chinese enterprises have jumped onto the LED bandwagon but up to 50% of them will be forced out in five to eight years, said Pan Wenpo, chairman of Guangzhou Guangya Frankfurt Exhibition.

Pan predicted that China’s LED industry will become increasingly concentrated, leading to the emergence of enterprises with annual sales in the billions of yuan over a five-to-eight-year period, according to Shanghai’s China Business News. He added that the industry’s annual output value will grow at an annual clip of 22%-25% and surpass 1 trillion yuan (US$160 billion) in five years, compared with 350 billion yuan (US$56 billion) in 2013. The forecast amounts to 420-430 billion yuan (US$67-$69 billion) this year, as the LED penetration rate could jump to over 80%. The industry will be dominated by enterprises with edges in branding, sales networks and technology, stressed Pan.

“The next two years will be a critical juncture for enterprises in the line, when they will have to carve out a share and form a strategic alliance with customers or become marginalized in the market,” remarked Cao Minda, director of the China business department at Everlight (China).

Faced with an influx of orders, Everlight, a leading LED assembly firm in Taiwan, is expanding the capacities of its plants in Zhongshan and Suzhou in China and in Taiwan. “With the constant price decline of LED assembly prices, many smaller firms are on the brink of closure,” noted Cao.

Everlight is forging a vertical industrial chain spanning upstream and downstream sectors by buying into leading LED-chip firms in Taiwan. They acquired WOFI, an established lighting firm in Germany, last year as a bridgehead for tapping the European market.

Opple Lighting is ready to go public, in order to raise funds to support its expansion. Wu Yiming, secretary to the board of directors, said that to sustain growth the company will step up efforts making inroads into commercial lighting and overseas markets. It has set up a number of overseas branches in places such as Dubai, he added.

Feshan Lighting is also foraying rapidly in the LED sector, looking to cash in on rapidly expanding demand, especially in the commercial lighting sector for the small-scale engineering market, said Xie Qing, market superintendent of the company. Small and medium firms in the line are facing a grim outlook, unable to keep pace with price declines, Xie added. LED tubes now fetch only 19.8 yuan (US$3.17) per unit, a far cry from 69 yuan (US$11) last year. Feshan Lighting stepped into the LED realm in 2011, which accounts for one third of its output value at present.

 

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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