Is the Chinese LED Market likely to bottom out in 2016?

It is true that revenues in the Taiwanese LED industry decreased in 2015, but the Chinese LED industry still enjoyed growth, largely thanks to an increasing demand for LED lighting.

There are some interesting facts

1.LED light tubes are cheaper than fluorescent light tubes?

A price war has been going on since 2015 for these products. It can be said that Opple fired the first shot of this war when they cut their prices significantly, but it is now clear that multiple players have joined the field of battle as well. As an example, Local brand’s ex-work price for a T8 LED tube is 10RMB, while Philips’ fluorescent T8 lamps costs approximately  12RMB, and I have even heard of prices as low as 6RMB.

2.Consolidation is coming to an end?

Mainly due to economies of scale, mid-to-small LED manufacturers are being hit the hardest from these price wars. The local news stated that 4,000 LED manufactures closes in 2015, and from what I have seen, most of these are small factories with low quality and inefficient processes. I still see mid-size players merging or being acquired by top LED suppliers and I expect the consolidation to be done by the end of 2016, which should lead to a healthier demand-supply situation in 2017.

3.Does China still represent bad quality?

“Made in China” has usually been synonymous with low price and low quality. However, I have found that the industry is transitioning away from this. As an example, most LED packagers used to believe the quality of Sanan Opto’s LED chips to be bad, and opted to use Epistar’s chips instead (especially when they were looking at high power or super high power LEDs). It appears that this reputation is changing, as more and more LED packagers are choosing to use Sanan Opto’s chips.

There are two main factors for this transition:

1)The most obvious, is that time has allowed Chinese manufacturers to become more adept with the production process

2)Some top Chinese LED packagers are aggressively looking to export their products by purchasing US or EU companies with useful IP.

The major benefit for consumers here is that as quality of these products has increase, while the overall cost has not.