May 15, 2011. The LED lighting industry is still highly fragmented with many start-up competitors. As the technology matures, industry consolidation will occur, and there will be a flight to quality and to established brands. Multinational and local LED lighting manufacturers, such as Philips, Osram, Toshiba, Kingsun and Neo-Neon are among the many strong contenders for market dominance in their home and overseas markets, with new competition continuing to emerge from both local and global players in related industries.
Three key factors help this growth.
Active government involvement is one key factor. Favorable legislation and incentive programs encouraging LED lighting purchases fall into various forms. Firstly, there are measures to lower the end-consumer price such as utility rebate programs. Then there are programs and policies that offer manufacturers direct subsidies to lower R&D and manufacturing costs or that guarantee them bulk orders from the government, so they will be able to achieve economies of scale. In this way, manufacturers have the incentive to lower their prices and broaden the market. In countries such as China and S. Korea, government initiatives have very clearly helped spur the industry’s recent growth.
As governments and industry players help to establish local LED-specific lighting standards, purchases are expected to rise as end-customers have better quality assurances of guarantees on long lifetimes and high-energy savings.
In most countries, high competitive intensity among a small number of large lighting players can lead to situations where aggressive pricing is the chosen tool. This helps to promote innovation as brands try to differentiate themselves from the competition and gain first-mover advantage in local markets.
From market attractiveness analysis conducted by M-Brain (formerly Global Intelligence Alliance) in late 2010, it was seen that different market conditions in large Asian countries affect the development of local LED manufacturing brands.
Development of LED lighting industry in large Asian countries
|Country||Primary market drivers|
|Japan||Favorable government environment & consumer product-oriented price competition|
|China||Government incentives & high competitive intensity|
|South Korea||Government incentives & regulations|
|Taiwan||Government incentives & regulations|
|India||Government incentives & regulations|
LED lightning will be a sector that construction players and property developers are watching across Asia Pacific.
Green technology, products and services is where many see potential for growth today, as they become increasingly vulnerable to the rising cost of raw materials, stiff global competition and economic instabilities around the world. A global industry poll amongst 32 senior executives in the construction and property development in November 2010 by M-Brain (formerly Global Intelligence Alliance) showed that over half believe that demand for energy/power efficient products/services will grow between 10% and 20% in 2011-2012.
Japan is a good example of how the LED Home lamp market can develop rapidly if key conditions are met.
Government legislation supports the adoption of energy-saving technology. Its 2012 ban on household use of incandescent lamps and stringent energy conservation laws have created a favorable regulatory environment for lighting industry players to promote LED technology. Japan is also much further along in establishing LED-specific lighting standards, such as the JIL5004 “Lighting for public buildings”.
Today, Japanese brands such as Toshiba, Panasonic and Sharp are among the local market leaders, and have high ambitions to lead the global LED lighting market.
Although China is the largest market in Asia, its current market penetration is still quite low and its future growth potential remains high.
There are many incentive programs in China for LED lighting manufacturers. These include the Project 863 and “10 thousands lights in 10 cities”. Older, non-energy efficient lamp technology is being discouraged, with usage of incandescent lamps scheduled to stop after 2018.
Local players across the entire LED lighting value chain are competing fiercely in the huge China market, with over 1,000 LED lighting suppliers and also over 1,000 upstream LED chip and packaging players.
South Korea and Taiwan
Both South Korea and Taiwan are known for being very strong manufacturing centers in the IT and electronics industries, both of which are closely related to the LED lighting industry. Both have favorable regulatory regimes with bans on incandescent lamps in 2012 and several incentive programs.
Korea’s initiatives include its “2012/30%” program, while Taiwan has various programs in place, such as the replacement of streetlights with LED lights. Both have already started drafting LED-relevant lighting standards for local players to follow.
Korea’s biggest companies such as Samsung & LG are in the lighting market and are looking to compete globally. Taiwanese LED chip and packaging manufacturers are moving downstream to sell lighting end products directly and have already made moves to play in the global LED lighting market.
The Indian LED lighting market has lagged behind its neighbors previously, with a greater focus on cheaper and more mature technologies such as CFLs (Compact Fluorescent Lamps).
However, regulatory support has been building recently with various programs at state and national levels either subsidizing or encouraging LED lighting. The national government is also starting to organize the drafting of LED-specific lighting standards.
A small number of local and multinational companies, such as Bajaj and Surya, dominate India’s lighting market, but the LED lighting sector is much more fluid, with many new entrants.
Indonesia is still very much focused on older energy-saving lighting technologies like CFLs and does not have a supportive regulatory environment for LED lighting yet.
Construction players and property developers are most likely to find the local supply pool for LED lighting most active in Japan and China for the time being.