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It is true that many LED manufacturers have entered major markets around China. Yet their customers come more from local traders than local contractors. Where do these products finally go to? Who are the traders delivering to? The answer is surely the customers and dealers on the international market.
Lately complaints from LED oversea salespersons are often heard that the international market is getting tougher. It is also said that LED foreign sales made a lot of money a few years ago but during these two years it has become harder. Why it has become harder for LED businesses when the LED technology is maturing up and the market is expanding?
In our opinion, the reasons for a harder LED foreign trade are as follows:
First, the falling prices. Take single voltage 200V 16WT8 tube for example: its street price in the same period of 2010 was about RMB 115 and now it is RMB 70 together with promotional gifts. According to industry insiders, 16WT8 tube is one of the hottest products on the market. However, the market is obviously squeezed with so many LED manufacturers investing in this field.
Second, the shrinking sales. It is a fact that the market shares are climbing up. However, LED businesses are dramatically increasing; also, the LED package and application manufacturers have crossed over each other’s fields, the capacity has made an explosive growth. Clearly the market expansion doesn’t catch up with the capacity growth so many companies have begun to see shrinking sales. Take the international market for example, in light of recent LED light sources exports, orders from India are gradually on the rise.
Third, higher demand from the international market. Nowadays, buyers in the international market no longer simply have requirements on luminance and light quality. T8 LED tube market is mainly in Europe and North America. While The European market is popular with Chinese LED manufacturers, the North American market is less attractive. The major reason is that the North American market is very strict with UL certification. In Chinese market, many manufacturers are not willing to do UL certification because they think it is too expensive to have UL certification along with rapid replacement of LED application products from generation to generation. The cost of certification might not be recoverable. Due to such a “pass”, many businesses deliberately avoid the North American market from which a lot of orders are thus lost. In contrast, South Korean manufacturers are active in passing UL certification therefore have received many North American orders.
So far we are talking about the changes in the objective laws of the market. As a matter of fact, this is not the only factor to the oversea order shrinkage for many companies. The slim down for the international market has not only confounded many businesses but also aggravated the price war of LED and peripheral products on the Chinese market.
We can sum up the market changes of Chinese LED industry like this: LED, whether for lighting or other application products, is a great invention in the environment protection history of human beings. In addition to the already worldwide topic of energy crisis, the government has taken LED development into account for future plans as an encouragement. Since everybody knows that LED is a profitable industry, people of all trades have flown into the industry in the hope of finding their own pot of gold. No doubt LED has a huge market potential. Yet many LED manufacturers are carrying out short-term speculation strategy, whose products are certainly not mature enough. Meanwhile, thanks to the advantages of the scale and technology, there are still good-quality manufacturers who can obtain stable international orders and enjoy high gross profits. However, at current stage, many manufacturers do not put emphasis on solving product defects, which is why so many LED investments haven’t succeeded. In a word, the global market is not yet fully developed but the substantial capacity increase has exceeded the market expansion. Besides, relative LED industry rules and regulations haven’t been completely published by the Chinese government. It is expected that price subsidy or other related policies will come out in 2012. Since it is still 2011, the price war thus breaks out.
Price war is a fatal killer of the orderly industry development. For the same reason, many downstream traders hold a wait-and-see attitude. The international market is no exception. It has been predicted that the LED product price cut in oversea market is definitely not as drastic as in China. In fact, as consumers get familiar with LED and its products turn relatively mature, the increase of the international market capacity is quite considerable.