LED stands for Light Emitting Diode, a technology that offers numerous advantages over traditional light sources, such as high energy efficiency, long lifespan, durability, fast response time, and high reliability. From energy-saving lamps and traffic lights to LCD TVs, outdoor digital billboards, and scrolling subtitles, LED technology is now an essential part of our daily lives.
Due to its energy-saving and low-emission characteristics, the LED industry has been recognized as a key sector in China's national energy conservation and environmental protection strategy. Since 2009, the Chinese government has introduced various policies to support and promote the development of the LED industry. The "Twelfth Five-Year Plan" set clear goals, aiming for LED lighting to account for 30% of the domestic general lighting market by 2015, with an expected output value reaching 500 billion yuan. This favorable environment led to a surge in investments, making the LED industry a hot topic for investors. However, this rapid expansion also brought about overcapacity issues, leading to fierce competition, price wars, and even business closures.
In the past few years, many LED companies have faced significant challenges. For example, Shenzhen Daeyejie Optoelectronics, once a thriving factory with nearly 700 employees and annual output exceeding 100 million yuan, is now largely abandoned after shutting down in late 2022. Similar stories are common across the industry, as many firms struggled to survive due to overproduction and declining profits.
Gong Wen, General Manager of Shenzhen Jingtai Optoelectronics, described the situation as a marathon where only a few will reach the finish line. He pointed out that while many companies entered the LED market in search of the first-mover advantage, the reality was tough, with some failing or being forced out due to intense competition.
According to recent data from a leading LED research institute, the utilization rates across the industry vary significantly. In 2013, the utilization rate of sapphire substrates was around 36%, epitaxial chips at 51%, and packaged LEDs at 80%. Even in the final stage of lighting applications, the utilization rate was only 61%, indicating that the entire industry still faces overcapacity.
To address this issue, mergers and acquisitions have become a common strategy among LED companies. Li Zhongcheng, Chairman of Shenzhen Kangshuo Exhibition Electronics, noted that overcapacity is a widespread challenge. Industry experts predict that out of more than 8,000 LED enterprises in China, only a fraction may survive in the long run.
Shenzhen Dehao Runda Ruituo Display Technology Co., Ltd., one of the earliest players in the LED industry, has also experienced overcapacity, with up to 30% excess production capacity at one point. To cope, the company reduced shifts and later merged with another firm to expand its industrial chain, leveraging cost advantages and improving efficiency.
With the gradual phase-out of incandescent bulbs, the demand for energy-efficient lighting is rising. In 2012, Dehao Runda acquired a 20% stake in NVC Lighting, strengthening its position in the LED market. According to internal reports, the company remains a leader in display screen manufacturing and is optimistic about its performance this year.
Jingtai Optoelectronics has also taken steps to consolidate resources and improve its market position. By focusing on quality customers, products, and channels, the company has successfully secured over 30 million yuan in orders for its clients.
Although overcapacity remains a challenge, the overall LED industry has shown signs of improvement compared to previous years. Some companies are now experiencing tight supply situations, signaling a shift toward healthier market conditions. Industry experts believe that further integration and consolidation will help increase equipment utilization and enhance production efficiency, paving the way for a more sustainable future in the LED sector.
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