A Competitive Situation Analysis of China’s LED Street Lamp Enterprises︱LED Outdoor Lighting III

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Although the development of LED street lamps is not as fast as expected, it still embraces a bright future. Optimistic about the outlook that LED street lamps are to replace conventional ones, LED enterprises are rushing to invest in LED street lamp R&D. Currently, there are over a hundred companies that launched LED street lamps, but most of them have not realized mass production. In contrast to the enthusiasm of LED street lamp makers, China’s LED street lamp market hasn’t taken off yet in 2009. According to industry research institute LEDinside, China’s demand of LED street lamps only reached about 200,000 to 300,000 lamps in 2009, therefore large scale promotion is only expected to start after 2012. Despite the promising outlook, faced up with insufficient market demand at present, how to make wise decisions poses a headache for all LED companies.

Intense Competition in China’s Domestic Market

In fact, enterprise investments in LED street lamps goes ahead of the market demand. In light of current investments, the overall production capacity surplus is expected in the next year or two. LEDinside estimates that China’s market will expand by 100% to over 400,000 LED street lamps, however, the planned capacity of LED street lamp makers has already surpassed the market demand many times. A number of relatively mature LED street lamp companies include: Dongguan Kingsun Optoelectronics, Weifang Aodevices, Zhejiang Edensun Technology, Shenzhen Bangbell Electronics, Shanxi Guangyu LED Lighting, Zhejiang Jingri Lighting Technology, Zhejiang Mingxin Semiconductor Technology, Shenzhen SED Industry, Shenzhen Huaye Group. While their sales volume of LED street lamps has already reached a certain scale, more companies thrive on sales of other products rather than sales of LED street lamps. Apart from those mentioned, there are quite a few large projects under construction or ready for construction: the 800,000 LED street lamp project of Zhengzhou Samost, the 200,000 LED street lamp project of Jiangxi Lattice Lighting, the 50,000 LED street lamp project of Jiangxi Lattice Power, and the 50,000 LED street lamp project of Guangzhou Lovely Lighting. With still more LED street lamp projects under planning, the competition in the LED street lamp market will become very stiff in the future.

Enterprises ought to expand the proportion of R&D investment

LED street lamp enterprises ought to raise the proportion of financial input for the R&D instead of rushing to establish production bases. Even though large factories of LED street lamps are built up today, LED street lamp sales is far from achieving good earnings due to the limited market; furthermore, a great deal of human, material and financial resources could be wasted in the repurchase and replacement of equipment because existing factories and equipment may be relatively outdated when the technology and market of the LED street lamp become mature years later.

Judging from the current market conditions, it is better to keep factories on an appropriate scale and save the money for LED street lamp R&D rather than set up huge factories waiting for large orders to come. With the establishment of standards for LED street lamps in China, as well as continuous improvement of its quality inspection, only companies with advanced technical know-how will be able to obtain large street lamp orders. Thus, LED street lamp enterprises are advised to invest more heavily in the R&D of LED street lamps.

Brighter prospects and higher profits in the global LED street lamp market

United Nations Climate Change Conference in Copenhagen has effectively raised the awareness of energy saving and emission reduction around the world, which will lead to brighter prospects in the global LED street lamp market. In fact, many Chinese companies have done well in the global market. For instance, Shenzhen Bangbell Electronics sells 70% of its LED street lamps abroad. Zhejiang Edensun Technology also sells a great proportion of its LED street lamps overseas. For Chinese companies, the price in the overseas market is higher compared to domestic trades, and so is the profit, with shorter payback period. Naturally, for sales abroad, especially in developed countries such as those in Europe and America, enterprises must boost their R&D input to ensure a stable quality of LED street lamps in different climates.

Conclusion

• It is inevitable to see overcapacity of LED street lamps in the next two years and the market competition will become very stiff.
• There are over 100 companies selling LED street lamps in the market, but most haven’t realized mass production.
• It is necessary to increase the proportion of the LED street lamp R&D instead of building up factories on a large scale.
• Export will become one of the most important sales channels for Chinese LED street lamp companies because of better profit guarantees.