China starts LED lighting subsidies; still very few details available
China's central government will subsidize the qualified LED lighting companies in order to lower the selling price, which will eventually benefit the end-users. It seems to be a good sign for LED companies in China, however it continues to be a long wait for any more specific details
Recently China’s central government announced the bidding program for LED lighting products to encourage LED lighting applications on 28th February, 2012 (https://www.sdpc.gov.cn/tztg/t20120228_464014.htm).
According to the program, it will subsidize the qualified LED lighting companies in order to lower the selling price, which will eventually benefit the end-users. The bidding packages include both indoor (down lights, PAR lights) and outdoor (street lights, tunnel lights) products. It seems to be a good sign for LED companies in China, however it continues to be a long wait for any more specific details.
There have been many rumours about China LED lighting subsidies since last year, such as the possibility of 8 billion RMB (about US$1.2 billion) for purchasing LED street lights or other outdoor lighting through to 2015. To Chinese die producers, this might not help much though in my opinion. Currently outdoor products mostly use imported dies from international companies like Cree. It’s widely acknowledged amongst industry insiders that Chinese companies don’t yet have the technical capacity to produce high quality multiwatt die. From a technical side, Chinese manufacturers still need time to catch up. However I personally think the supposed inability of Chinese manufacturers to produce these products has also been overstated a little. I think often within China the purchase decision to go with Cree or another foreign manufacturer (e.g. Lumileds, Osram) for street lighting or other general lighting is also really a “safe” decision. With quality considered important in both central and local government projects, if the products fail the purchaser or specifier can point to the fact that they chose an internationally recognised LED/lighting manufacturer with a stronger reputation.
I also believe Chinese companies cannot depend too heavily on subsidies. Firstly, the current information is very vague and little detail has been provided. It doesn’t make sense to base a business plan on rumours. Other factors are also important, such as making relationships with the decision makers responsible for government projects, which will be a very important part of the LED market in China and may require complex processes to win.
From our monthly tracker on LED lamp retail price, we see LED lamps price decline quickly in China market as more and more companies join in the battle, but the LED penetration rate is quite low compared to other technologies, like CFL. For example, while LED lamps and very widely available online, you do not normally find one in a supermarket in China.
The below table is from IMS Research’s lighting report. In 2015, 9% of all sockets in China will have LED lamps installed with growth of 95% (CAGR) while 16% of sockets will have a CFL installed.
Compared to developed regions like Japan and North America, implementation of additional government subsidies, while it shouldn’t be depended on too much, is needed to accelerate LED adoption in China. The higher cost when compared to incumbent technologies and the lower purchasing power of residents are is the main reasons for this. Environmental awareness also needs to be strengthened among citizens.