LED China's lighting market is moving towards maturity

The LED lighting market in China is moving towards maturity. People usually talk about the LED industry from upstream to downstream. However, with the maturity of the LED industry, the old logic that the upstream technological progress determines the possibility of downstream market applications gradually gives way to the new logic of the upstream market's prosperity and decline due to downstream demand fluctuations. Therefore, this article decides to sort out some phenomena that have occurred in this industry in the past year and a half in the order of downstream to upstream, so that when discussing this relatively complex industry, there will be better continuity and more in line with the internal logic of this industry. China’s LED lighting product exports are stalling. Now the quarter is almost over. Unlike the past two years, we have not waited for an explosive growth in full swing. On the contrary, whether it is from the export data or the monthly data disclosed by Taiwan's LED companies, there has been a significant decline compared to the same period last year. Especially for the export of LED lighting products, this indicator has experienced a year-on-year decline for several years**, with a decline of %. The monthly data has slightly improved, but it has not improved much. Is this an accident? I'm afraid it is not. In fact, we observe the year-on-year data for a longer period of time. With the rapid outbreak of the LED industry, exports are also quite prosperous in 2017, and year-on-year growth has been on an upward trend. Since the second half of the year, the year-on-year growth rate has been in a downward trend. The export performance in the first and second quarters of this year is just a continuation of this trend. As for when it can be reversed, it remains to be seen and confirmed. What is the cause of this decline? External cause: Insufficient demand. External cause 1: The RMB appreciated sharply against major foreign currencies during the year. Export pressure increased sharply. In the past year, the exchange rate between RMB and US dollar has been maintained at a fairly stable level. Did not feel the trend of RMB appreciation. However, the past year has been a period of super strong US dollar globally. In fact, because the US dollar has greatly appreciated relative to the currencies of other major economies, it is equivalent to the renminbi’s passive and large appreciation against other major foreign currencies. In other markets outside the dollar zone, Chinese companies’ exports have encountered severe price pressures. There are layers of implications: on the one hand, the strong RMB will force LED lighting export companies to no longer rely on cost advantages as much as they did in the past when participating in international competition. On the other hand, the excessively strong RMB makes China's manufacturing industry, including the LED lighting industry, face the pressure and challenges of **, and a moderate RMB depreciation is imminent. External cause 2: Affected by the downturn in the real estate market and fiscal contraction, domestic demand is weak. Under the current Chinese government's fiscal contraction policy, public lighting expenditures have been greatly reduced compared with the past. The real estate market, which played an important role in driving indoor lighting demand in the past, also seems to have entered an inflection point of growth. According to data from the National Bureau of Statistics, although the real estate construction area in the Chinese market still maintains growth, the year-on-year growth rate continues to decline, and the future potential indoor lighting market is greatly restricted. What is more obvious is that the sales area of u200bu200bcommercial housing has maintained a negative year-on-year growth rate, which has also adversely affected the demand for home lighting. Internal cause: The LED lighting industry is entering a stage of maturation. It is these two external factors that have led to the weak demand, which can not help but remind people of the situation in this industry every year. The LED industry is also facing the crisis of **, and a large number of enterprise capacity utilization Insufficient, the industry is in a serious oversupply situation, and several LED companies cannot sustain it and close down. However, in the second quarter of the year, the sudden explosion of LED lighting demand contributed to a major reversal of the industry. Will it be the same this time? In the second half of the year, LED lighting has been confirmed to the typhoon vent, that is, the LED bulb lamp has set off a wave of replacement in the home lighting market. However, this time, it may not be the same. The 'gap' phenomenon comes from the book 'Crossing the Gap' by Jeffrey Moore, a master of American technology industry research. In the book, Moore described a phenomenon in the technology industry: Unlike the traditional industry life cycle, there is a 'gap' phenomenon in the technology industry. The existence of the gap comes from the huge internal character conflict between the people who drive the needs of different stages of the industry's life cycle-the people who are brave to try new things in the ** stage, and the pragmatists in the third stage. Until the gap was overcome, the pragmatists finally agreed with the product, and when they started to buy and use them, the actions of the pragmatists, who occupied the vast majority of the population, would make this product usher in an explosion like sitting in a typhoon growing up. * Later, when most pragmatists and conservatives start to adopt it, the market penetration rate has gradually saturated, and the industry will gradually decline. Companies that compete in such a semi-mature industry have to repeatedly offer the deadly weapon of price wars. Just recently, Mulinsen, Foshan Lighting, and Teyoushi have reduced the price of .mi's T lamps to the price range below RMB, and the price of bulb lamps has already fallen to no bottom. It seems to be the industry's conventional strategy to maintain the growth of operating income now and for a long period of time in the future by trading volume up for price down. Therefore, the growth of the LED lighting industry in the next few years has been quite cautious, unless we have enough evidence to confirm that this industry can get rid of the current competitive model, or there is room for new industry growth* *application.