22 August 2011

China’s LED industry to grow 23% to $5.8bn in 2011

Buoyed by government support and increased penetration into new applications, China’s LED market will jump to $5.8bn in 2011, up a robust 23% from $4.7bn in 2010, according to the IHS iSuppli China Electronics Supply Chain Service from information and analysis provider IHS.

The LED market in the world’s most populous country is forecast to reach $6.9bn next year on its way to $11.1bn by 2015, equivalent to a five-year compound annual growth rate (CAGR) of 17.7%.

“Driven by markets including backlights for liquid-crystal display (LCD) TVs and street lighting, LEDs have become a hot item for manufacturing in China and also an attractive investment segment in the country,” says Vincent Gu, senior analyst for China electronics research at IHS. “Moreover, official government commitments to the industry appear to be paying off dividends,” he adds.

Exceedingly broad, the Chinese LED market covers a range of applications including LED displays, traffic signals, automotive use, LCD backlighting, handset key pads, digital still camera flashlights, decorative lighting, street lighting and general illumination.

Street lighting will be the biggest segment, reaching $1.5bn this year and reaching $1.8bn in 2012, it is forecasted. The LCD backlighting market is also headed for strong growth on the basis of the rapid adoption of LEDs for large-sized LCD TVs and laptops, generating $1.8bn in 2015, up from $713m in 2011.

A new demand driver for LEDs in the medium to the long term will be the general lighting market.

Given the global trend to reduce carbon emissions, China demand in the general lighting segment will be strong for LEDs, which offer low-power consumption and are environmentally safe. LED shipments for general lighting will make up 15.5% of the total LED market this year, IHS data shows.

Despite the current popularity of LEDs in China, the domestic LED industry is still in its infancy compared to its counterpart in thriving LED-focused countries such as the USA and Taiwan.

Some reasons why China trails in the field include lagging technological capabilities currently available in the country as well as a paucity of adequately experienced management teams and R&D engineers to lead the way, says IHS. Furthermore, the lack of Chinese intellectual property in core and upstream segments — such as in LED wafers — is a serious concern.

Still, China’s LED players enjoy ample funding from local and government sources, which should help domestic entities to capture the large Chinese end-demand for LEDs in the future. To date, local governments in China have subsidized at least 70% of the purchase price for metal-organic chemical vapor deposition (MOCVD) equipment employed in LED manufacturing — equivalent to $1.5m for each machine. Furthermore, tax and utility payment benefits are offered to encourage investments in the domestic LED industry, which is proving to be an additional advantage for local players.

See related items:

IMS lowers 2011 GaN MOCVD forecast by 24% to 833 reactors and upgrades 2012 forecast

China GaN epi production to grow 300% in 2 years

Asia driving near-term adoption of LED lighting

China developing supply chain after its LED sector grows 33.8% in 2010

Tags: LEDs MOCVD China LED market Street lighting

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