Local protection triggered chaos in China's LED industry

Economic reference report


In recent years, some local governments have intentionally opened up local markets to local enterprises in the development of the economy, or “locked” local markets in the form of investment-for-market, and local protectionism has a tendency to rise. The industry believes that if this "prince economy" is allowed to develop, it will inevitably lead to the convergence of industrial projects between regions and directly increase the "industrial bubble." This phenomenon is exposed in the development of the emerging LED industry.

Zhongweiguang Electronics Co., Ltd., headquartered in the High-tech Industrial Development Zone of Weifang City, Shandong Province, is one of the world's largest suppliers of LED street lamps. The company's startup capital and technology management team are mainly from the United States. Sun Xiqing, the chairman of the company, recently told reporters that he is confused about the blind development of the domestic LED industry: there is a “Great Leap Forward” pattern in LED project investment. At present, LED investment projects have received strong support in various places, and some local governments have even proposed to invest in the market.

Due to the fierce competition in the LED street lamp market, related manufacturers competed for price wars, and neglected the improvement of product quality, some emerging companies with technical strength were forced to switch to the European and American markets. Chen Xiaodong, vice president of China Micro-Optical Electronics Co., Ltd. said: “Weifang has taken the best road out of the pilot to support the development of Zhongwei. Currently, Zhongwei has installed 30,000 LED street lights in Weifang, which has made Weifang a global market. The first LED city. In 2008, Zhongwei sold and installed more than 50,000 LED street lights, becoming the world's largest supplier of LED street lights . Without the support of local governments, it is difficult to get a street light pole to the street lighting department. As local markets engage in local protection and restrict access, Zhongwei has to turn its attention to foreign markets."

According to reports , more than 200 components of LED products produced by Zhongwei Company are designed by themselves, and more than a dozen companies around them form supporting capabilities. However, Sun Xiqing, chairman of the company, said: "Because the domestic patent protection environment is relatively poor, although the company has more than 50 patents, it is no longer applied in China. Relatively speaking, the foreign market is more standardized, and the company has applied abroad. There are 5 patents . Unlike the domestic market, there is no obstacle for the company to deal with foreign countries. But such a good thing, it is a pity that the domestic can not be used first. The foreign market is quite standardized, and the market is easy to enter after obtaining the certification. Moreover, in the United States The 8 watt LED Lamp is subsidized by US$25, the actual price is about US$90, and the cost is US$35, while the cost of similar products is only US$10. At present, the company's products have obtained European certification and are applying for UL certification in the US. It is at the starting line with foreign counterparts, and the company has orders in Germany and Spain."

For local protection in the domestic market, China Micro has a deep feeling. According to reports, in the first half of this year, Zhongwei won a model road reconstruction project in Jining City, Shandong Province, but was eventually taken away by a Taiwanese company. Sun Xiqing said: "In the energy-saving plan provided by China and the United States, Jining City does not need to invest in street lamps, but only need to save the money saved to China Micro, and it can recover the investment in two and a half years. But even so, it is still lost. This opportunity." In Linyi, China and the United States encountered almost the same situation. After installing 1000 street lamps in China, Linyi said that it is impossible to use Zhongwei's street lamps, because the Inspur Group is going to make investments . Sun Xiqing said helplessly: "We have encountered such a very ridiculous competition. It is simply chaotic boxing. The investment in general LED projects is over 100 million yuan, but some enterprises have neither technology nor funds, but let the local government help. Building a factory. This has become a means of combating industry competitors."

The industry believes that to break the current local protection in the development of some industries, it is necessary to make the real technology-savvy enterprises have a living space and let the market rules fully play a guiding role. Take the LED industry as an example. Because there are no relevant supporting standards in China, the products are not tested by authoritative organizations, so they cannot get energy conservation and environmental protection certificates. Since there are no supporting standards, most of the more than 200 accessories used in a product are developed by the company itself.

Yu Xuejun, director of the Energy Conservation and Environmental Protection Division of the China National Light Industry Council, said: "Now all the places are engaged in LED. In fact, the quality of this product is uneven. Most domestic enterprises are mainly engaged in packaging, and the core technology is foreign. National policy projects should formulate industry standards as soon as possible to prevent a glimpse." Since October 2007, the relevant state departments have commissioned enterprises to develop LED standards. However, Sun Xiqing believes: " Because the southern enterprise responsible for setting standards does not master the core technology, the industry standards formulated by it have become a joke at the end of last year and are not representative of the industry level ."

In addition to strengthening the guiding role of market standards, the government also needs to make a difference. For example, the development of new energy in the United States has risen to the national strategic level, and it has now decided to spend 200 billion US dollars to subsidize LED lighting. But this industry in China has encountered obstacles from standards and industry practices.

What should the government do for the development of the LED industry?

There is always a process of evolution from disorder to order in any market, and an effective government hand will undoubtedly accelerate this process of chaos. The development of the domestic LED industry should also be the case.

The industry believes that to break the local protection in the development of the LED industry, it is necessary to make the real technology-savvy enterprises have a living space, so that the market rules can fully play a guiding role. Yu Xuejun, director of the Energy Conservation and Environmental Protection Division of the China National Light Industry Council, said: "Now all localities are engaged in LEDs. In essence, the quality of products is uneven. Most domestic enterprises are mainly engaged in packaging, but the core technology is foreign."

Xu Xianggang, executive deputy general manager of Shandong Huaguang Optoelectronics Co., Ltd. said that at present, the development of China's LED industry has entered a period of rapid development, and the formulation of relevant standards has lagged behind. At present, the LED industry does not have the relevant supporting standards, so that the products are not tested by the authoritative organization, so they can not get the energy-saving and environmental protection certificate . Take China Micro-Optical Electronics Co., Ltd. as an example. Because there are no supporting standards, most of the more than 200 accessories used in a product are developed by the company itself.

It is understood that since October 2007, the relevant state departments have commissioned enterprises to develop LED standards. However, Sun Xiqing, chairman of China Micro-Optical Electronics Co., Ltd., said: "Because the company responsible for setting standards does not master the core technology, the industry standards formulated by it are almost a joke at the end of last year and cannot represent the industry level at all. The energy-saving lamp index is still low. For example, the life expectancy is set at 8,000 hours, while the micro-product life is 50,000 hours; the temperature of the lamp housing cannot exceed 55 degrees, which is impossible."

In addition to strengthening the guiding role of market standards, the government also needs to make a difference. The upstream industry in semiconductor lighting belongs to industries with high technology content, high investment density and high risk. It needs the government's strong support to promote the development of the industry. For example, the development of new energy in the United States has risen to the national strategic level, and it has now decided to spend 200 billion US dollars to subsidize LED lighting. But this industry in China has encountered obstacles from standards and industry practices.

According to Sun Xiqing, the current domestic market share of street lamps is basically monopolized by two foreign companies, Philips and GE. This market network is deeply rooted, and the business people of these companies have inextricably linked interests with the street lighting management department. Traditional high-pressure sodium lamps are expensive to repair, but they are difficult to replace. He recently took the "Shangfang Sword" led by the municipal government to see the head of a street lamp in a city, saying that the LED lamp has a long life, and the other party is not interested in hearing that it is not necessary to change frequently.

Zhang Weiguo, director of the Institute of Economics of the Shandong Academy of Social Sciences, believes that China is now in the process of reforming a deep water area, but some local governments are vying for resources and looting projects, but GDP is a vision. It is necessary to reform the system and mechanism, combine short-term problems with long-term optimization, and break local administrative barriers to promote the process of regional integration development.

Market leadership is the basis for the long-term healthy development of the LED lighting industry. The government should guide and support policies, regulations, R&D investment, application demonstrations and standards. Ye Likang, deputy general manager of Xiamen Hualian Electronics Co., Ltd. believes that a good industry needs a good plan to guide development. It is necessary to plan the industrial chain layout in different application areas. Different regions should highlight different characteristics and avoid simple repetition for short-term interests. Construction will lead to vicious competition in the future; secondly, establish norms or standards from the perspective of demand, formulate quality assurance and manufacturing standards to meet the requirements.

Fortunately, China's "Electronic Information Industry Adjustment and Revitalization Plan" clearly stated that it is necessary to vigorously develop energy-saving and environmentally friendly LED lighting products. At present, the Ministry of Science and Technology has officially launched the "Ten Cities and Ten Thousand Miles" LED lighting application project nationwide.

Fan Yuxi, chairman of the National Semiconductor Lighting Engineering R&D and Industry Alliance, believes that after several rounds of demonstration applications, more complete LED streetlight specifications or standards will be developed, and LED lighting manufacturers will set higher technical thresholds and quality assurance thresholds. The price competition can be organized according to the market mechanism. He suggested that while accelerating the formulation of standards and norms, it is necessary to plan the overall chess game in the country, plan the industrial chain layout in different application areas, encourage technological innovation, and encourage the creation of a complete and competitive industrial chain.

On September 13th, the Shanghai government introduced a family to buy energy-saving lamps, only paying 20% ​​of the store price. After the rest of the payment was made by the government, the people who purchased the energy-saving lamps lined up a long queue. Zheng Tiemin, general manager of Shandong Inspur Huaguang Optoelectronics Co., Ltd. said that the government's policy determines the speed of semiconductor lighting promotion.

As early as 2008, Shandong Province has formulated the province's semiconductor lighting industry development plan, and proposed to build four bases in Jinan, Weifang, Qingdao and Binzhou, focusing on breakthroughs in silicon carbide substrate materials and blue-light diode industrialization, high-brightness LED epitaxial wafer scale. Three key technologies, including production, high-power LED tube manufacturing and packaging, and large-scale assembly line production, focusing on the development of four industrial clusters such as substrate and epitaxial materials, chip manufacturing, high-power light-emitting device packaging, and semiconductor lighting application products. Form an internationally competitive green lighting industry.

In recent years, Shandong has been engaged in more than 100 semiconductor lighting companies, covering a wide range of materials such as substrate materials, epitaxial wafers, chips, device packaging and application products. In 2008, the output value of semiconductor lighting industry in Shandong Province reached 15 billion yuan, and the semiconductor lighting industry has formed a relatively complete industrial chain. On September 17 this year, the Shandong Semiconductor Lighting Industry Alliance was established in Jinan to integrate existing resources and give full play to the overall advantages to further promote the rapid development of the semiconductor lighting industry in Shandong Province. The move of Shandong is worth learning from all over the world.

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