Solid government backing is fueling the expansion of China's LED industry, with subsidies granted to manufacturers, particularly those specializing in packaging. This year, more than $10 billion has been poured into the sector, value of which is forecast to hit $78.5 billion by 2013.
Recognizing the segment's pivotal role in the economy, Guangdong province has lined it up as one of the major emerging strategic industries. LED's market scale is projected by the Guangdong LED Development Plan to reach $18.8 billion next year before surpassing the $47 billion mark in 2013.
Makers are complementing government efforts to boost the line with R&D advancements. During the 11th Five-Year Plan, more than 1,000 patent applications were approved and at least 40 homegrown technologies gained international recognition. These innovations were highlighted at this year's 26th Universiade Shenzhen. The event showcased 1 million locally developed special LED chips, nonlinear lenses and control systems. The last operated 23,880 sets of intelligent lighting.
China's LED lighting exports, which were valued at $18.5 billion in 2010, are projected to grow 40 percent by year-end, while LED output will be worth $28 billion. The country's global share will hit 50 percent by 2015 before climbing to 75 percent in 2020.
The forecast is a 7 to 9 percent annual growth rate globally in 2010-15, according to China's Electronics Industry Information Network. The lighting source and equipment sectors will be valued at $16.3 billion and $40.7 billion, respectively.
The industry, however, is not without challenges. LED chips face oversupply and weak demand, prompting local makers to put off expansion plans. This year, the global stockpile is at 100 billion units, with orders amounting only to 89 billion units. The surplus will rise to 21 percent in 2012 should production continue to increase.
In response, most companies have suspended MOCVD equipment purchases. The shortage of engineers and technical experts has likewise forced suppliers such as Elec-Tech and Sanan to scale down production.
Government subsidies stimulated MOCVD equipment acquisition amid increasing LED application. In 1H11, many manufacturers ramped up procurement to avail of the policy. Financial support, however, has now been restricted to control inflation. The city of Yangzhou in Jiangsu province, for instance, terminated grants in July. Jiangmen, Guangdong province did the same due to lack of funds. MOCVD installations in the country were at 330 last year.
LED backlights are the growth boosters, although many TV makers have lowered their requirement to 50 percent given the cost gap between LED and CCFL. As a result, the TV application base has slipped 26 percent, with usage volume at 17.5 billion units only, according to LEDinside.
Orders from the PC market have likewise declined. Industry watchers project global deliveries of laptops will rise less than 10 percent by year-end, lower than the previously anticipated 12 to 15 percent. Demand from the mobile phone sector is also expected to remain sluggish amid efforts to prevent the spread of counterfeit handsets. These have resulted in lower chip costs and output, forcing some companies to cut capacity utilization to 50 percent.
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