China LED Encapsulation Industry Overview, 2011-2020

LED industry is one of the new strategic industries that enjoy great support from Chinese government. The market penetration rate of LED products increased significantly from 11% in 2012 to over 30% in 2015 with the driving of government policies. In the early 2015, Chinese government first promoted the development of LED exterior lighting through municipal engineering procurement. It will stimulate further growth of commercial lighting, civil lighting and interior lighting through means such as government open tender and terminal consumption subsidy in the future.

From Oct.1, 2012, China started banning the sale of bulbs of over 100 watts with tungsten. In 2014, 60-watt bulbs were prohibited. According to The Road Map for China to Phase Out Incandescent Bulbs, from Oct.1, 2016, China will prohibit the import and sale of incandescent light bulbs of over 15 watts. It means that the incandescent light bulbs will stop being produced and used. Therefore, the lighting appliance industry in China will experience a comprehensive transformation and upgrade, which will greatly promote the demand for LED.

The LED industry in China started late, of which most manufacturers started from the downstream encapsulation and gradually entered the upstream production of epitaxial wafers. At present, there are relatively seldom domestic enterprises in LED upstream and midstream, which leads to high industry concentration rate of epitaxial wafers and chips. However, there are many enterprises involving in downstream encapsulation and application areas,  which seldom can form scale effect with low industry concentration rate and rather fierce competition. As the cost of China LED encapsulation is lower than that in developed countries, together with numerous preferential policies for the LED industry, large-scale foreign LED manufacturers invested and established plants in China in recent years, which led to the transferring of the international encapsulation industry towards China.

The LED industry clusters mainly concentrated in areas such as Yangtze River Delta, Pearl River Delta, Bohai Economic Rim, Fujian and Jiangxi, of which the Pearl River Delta is the most concentrated area with approximately 50% of China’s LED encapsulation enterprises with the largest encapsulation industry scale. Many manufacturers and agents of encapsulation materials and equipment concentrated in this region with the most perfect support.

The market size of China LED encapsulation industry was CNY 61.5 billion, increasing by 19% YOY in 2015. LED lighting encapsulation market is the major driving force of the industry scale growth. The small size backlight field and small pitch display have no significant influence on the entire encapsulation market.

The emerging market brings new business opportunities for Chinese export enterprises. For example, there is a significant growth of USD 2.48 billion in Russia LED lighting market with a penetration rate of about 32%. It is estimated that the market size of LED lighting will be USD 5.07 billion and a penetration rate of about 44% in 2016. In south-east Asia, with regards to major countries such as Thailand, Singapore, Malaysia, Vietnam, Indonesia and Philippines, the LED lighting scale was about USD 1.1 billion and had a LED penetration rate of 25% in 2014. It is estimated that south-east Asia will be a new export growth point of China LED lighting manufacturers in the next few years.