This type of government leading developing mode has been questioned by many experts and insiders. They generally thought that the excessive government support will give birth to the dependency of domestic LED manufacturers. They will be keen to project biddings rather than promote innovations in products and market. In fact, this tendency is obvious. Many LED manufacturers would like to apply projects under explicit state policies to enjoy the subsidies. In Mr. Wu’s opinion, LED high bay lighting is a big direction. But in most conditions, local governments became more and more utilitarian. “lighting is easy, maintain the lighting is not so easy.”

 

Fallen upstream.

“In LED lighting area, we should be alert every moment. Otherwise, the government subsidies will be in foreign companies’ back pocket.” One office from material section of MIIT said to reporters. In his point of view, there are two main reasons for the government substantial supports in this field: 1. The urgent needs for energy saving; 2. The huge economic potential in global LED lighting market. However, Chinese manufactures are in the lowest position of the entire industrial chain, especially for indoor LED lighting products. Normally, LED industry chain can be divided into three parts: upstream, midstream and downstream. Upstream is chip manufacture, epitaxy manufacture and equipment manufacture. Midstream is chip package. Downstream is LED street light applications manufacture. Upstream LED chip manufacture has been monopolized by Cree, Philipslumileds and Nichia. And chips for LED low-end products have also been controlled by chip manufacturers from Taiwan. Currently, the cost of LED chip is occupied more than 60% of the entire LED lamp cost. When domestic LED companies successfully listed, they had to face up the fact that developing upstream market, inventing their own LED chips. In accordance to the national regulations, large LED enterprises should bear responsibility of independent innovations of LED core technologies. Whether these listing LED enterprises can hold seats in LED upstream market is still anyone’s guess.

 

At present, our manufacturers of indoor LED lighting products are concentrated on midstream and downstream. LED package and LED applications manufacture have relatively low-barrier, leading to the fierce competitions from domestic LED company. Profit is increasing reduced. Nowadays, most sophisticated LED chip technology is held in the hand of foreign companies. This technologies are protected by patent right. Domestic manufacturers have to pay for them. “We have become workers for foreign companies.”

However, crises of energy-saving lamps have become chances for LEDs. It is a controversial topic that whether indoor LED lighting products can finally replace energy-saving lamps. The industry is generally of the view that LED lights and energy-saving lights are two independent products within two distinguished stages of lighting development. They may coexist for a long time. Hong Wu, chairman of Shanghai Lighting Society indicated that energy-saving lamps will not be replaced by LED in next three years. “In 2011, we estimate that this process will cost us at least 10 years, now it seems not.” Mr. Wu also said that if judged by the strict international LED standards, most of the LED lamps currently on the market are unqualified, especially for indoor LED lighting products.

 

Restrictions from core LED chip technologies reduce the quality of domestic LED products, which has become an obvious weakness of Chinese LED manufacture. Cooling problem of high LED lighting products and more reliable and more efficient fluorescent powder are two main technical difficulties for international LED lighting industry. According to the current technology level of China, replacing energy-saving lamps (less than 10W) by LED lighting techniques should have no problem. But for energy-saving lamps with power consumptions more than 10W, LED shows its incapability.

 

LED is an artificial spawning baby. The main factor of artificial spawn is government support policies rather than materials. The State Council executive meeting held on 16^th May determined the implementation of encourage consumption policies of energy-saving household electrical appliances. Central government funding for these subsidies will total 26.5 billion yuan, in which 2.2 billion yuan are for promotion of LED and energy-saving lighting products. This is the third favor from central government to LED industry this year. In one of previous documents indicated that Chinese government will spend nearly 40 billion yuan on purchasing LED street lights and provide 30% subsidies for providers. At local level, Pearl River Delta, Yangtze River Delta and Fujian Province have become the LED investment hot spots. Local governments issued all kinds of incentives to LED industries. As the largest LED manufacturing base, Guangdong was typically cared for by local government.

Since the beginning of the year, LED lighting products have become the new darling for policy and fund. Support policies and subsidy programs keep emerging. LED lighting business started to revive from the global economic depression. However, behind the seeming recovery, LED lighting industry still has many cannot-be-ignored problems: lacking of upstream chip technologies, domestic LED lights manufacturers either fluctuate in low profit downstream or produce low quality LED chips. Therefore, indoor LED lighting products can hardly go further. Some LED companies only rely on support policies, impeding the market adaptability.

 

According to the industrial measure criterion, only when the market penetration of one product reaches 10%, it can be defined as the “take off” of this product. Presently, the penetration of LED high bay lighting products in Chinese market is only 2%. Lacking of core technology yet being artificial spawned raised concerns about LED lighting industry.

Subject to the core technology:

“Traditional energy-saving lamps will be replaced by LED lighting techniques finally. Either in energy saving aspect or in environment aspect, LED street light is better. The shapely raised rare earth prices in 2011 sped up this process.” Said Bujun Cai, assistant manager of WinNews Technology Co., Ltd. LED lighting industry is growing, but we cannot judge just from currently intense investment. Both LED lighting technology and widely used energy-saving lamps are national promoted energy-saving products, aiming to completely replace traditional filament lamps. In 2011 Chinese government released the first filament-lamp-replacing blueprint to ban the sale and import of ordinary filament lamps with power consumptions more than 100W. This plan will be implemented from 1^st October, 2012. In the second step, filament lamps with power consumptions more than 15W will be banned to sale and import from 1^st October, 2016. But the government tends to promote indoor LED lighting products as equivalent techniques.

 

The price increase of RE materials in 2011 caused the government’s tendency to LED. Both LED lighting technique and energy-saving lamps need to use RE (rare earth) phosphor materials, but the consumption of RE materials of the former is only 1/1000 of the later. Hit by skyrocketing RE materials prices, many energy-saving lighting manufacturers were forced to close. On the other hand, this price-raising storm also led to the sharply quality reduction of energy-saving products. Unqualified rate is closed to 50%.