The LED lighting market in China is expected to double in size from 9.6 percent to 18 percent of all lighting used in the next four years, according to a recent growth forecast from Lux Research. This growth will be spurred by falling prices, increased government policy support and energy goals, as the country seeks to compete with neighboring competitors in Taiwan and South Korea, which also have similar comprehensive policies boosting LED manufacturing and implementation for economic growth and utility energy cost-savings. Both residential and commercial segments will drive LED lighting to a compound annual growth rate (CAGR) of 24 percent, outperforming the relatively low 5.6 percent CAGR for the overall lighting market including consumer electronics. As a result, China’s LED lighting market revenue is expected to double from $3.1 billion to $7.4 billion in 2017, according to Lux.
What's more, the Chinese residential LED market will grow from $23 million in 2013 to $310 million in 2017, a CAGR of 92 percent, which is the highest among five market segments, as average selling prices fall the fastest, from $6.02 per fixture in 2013 to $3.13 in 2017. This is the key for LED lighting to really takeoff globally, as high prices over other cheaper yet less energy-efficient alternatives have held the market back in recent years. Products such as the $10 60-watt equivalent LED bulb replacement for incandescents from companies such as Cree have put pressure on competitors in China and elsewhere. China’s end-product market is spread amongst thousands of players. Interestingly enough, the top 50 suppliers account for only 33 percent of the market and the top 10 comprise only 18 percent. Thus, industry consolidation is likely over the next five years, just as in the case of the bloated solar market several years ago in China and globally.
In 2013 the Chinese LED packaging market appears to have exceeded global performance. LED lighting is still the largest application sector, accounting for 42 percent of the 2013 Chinese LED packaging market, according to LEDinside. Due to the rapid growth in demand for LED commercial lighting in China, Chinese manufacturers of LEDs for lighting applications such as MLS Lighting and CF Lighting have achieved enhanced performance. High-quality domestically-produced chips have elevated the competitive position of China’s LED packaging industry, with vertically integrated chips capturing almost 80 percent of the Chinese market in 2013.
The penetration of gallium nitride-on-silicon (GaN-on-Si) wafers into the LED market is forecasted to increase at a CAGR of 69 percent from 2013 to 2020, when they will comprise 40 percent of all GaN LEDs manufactured, according to a report this month from IHS Inc. GaN-on-Si LEDs are expected to accelerate the adoption of LED lighting even more due to the use of less expensive silicon substrates over commonly-used sapphire. In 2013, 95 percent of GaN LEDs were estimated to be manufactured on sapphire wafers, while only 1 percent were produced on silicon wafers. The growth in the manufacturing of GaN-on-Si LEDs between 2013 and 2020 will steal market share from both sapphire and silicon carbide wafers.
Repurposing manufacturing facilities to accommodate the shift toward GaN-on-Si LEDs is generally accepted to require minimal investment. However, the transition from IC to LED manufacturing is not trivial, amid the use of a common substrate, as many IC companies lack the critical expertise for complex single-crystal epitaxial film growth that is typically beyond the scope of semiconductor fab processing. Thus, contributing to failed endeavors for traditional silicon semiconductor oriented companies such as Applied Materials and Micron. Nonetheless, converting IC fabs to LED production does allow for some benefits such as the use of highly depreciated process equipment and facility infrastructure.
The US lacks comprehensive policy support for building a strong LED lighting infrastructure to compete with China and other Asian markets and continues to lose out on potential job creation, economic growth, energy cost-savings and manufacturing-export benefits.
