Tuesday, January 6, 2015

Chinese Government Clamps down on Local Government LED Subsidies

Source: http://www.ledinside.com/news/2014/12/chinese_government_halts_led_subsidies
December.23, 2014 - 16:14 — judy.lin

“Large LED manufacturers will be speeding up expansion plans, and enter a last production expansion peak,” said Roger Chu, Research Director, LEDinside. "The new subsidiary regulations will raise the bar for future subsidiary applications, and prevent potential new players from entering the market," said Figo Wang, Senior Analyst, LEDinside China.

The Chinese central government’s policy to terminate LED industry subsidies will be extended to local governments, according to a latest Chinese-language UDN report.
... analysts noted the reduction of subsidiaries in the LED industry would benefit the LED market, as uncompetitive LED players are removed from the industry. This perspective was also shared by other industry players that believed the policies will aid the Chinese LED market to eliminate manufacturers without the technology capacity. An LED package manufacturer even projected 85% of Chinese LED epiwafer companies will become insolvent without government subsidies.

Our thoughts on above:
The high level of subsidies for LED industry has definitely led to a hugh take up rate for LED lighting. This might seem a good thing for both sellers and adopters of LED as it lowers electrical consumption. The subsidy is probably also the catalyst that made the price of LEDs fall drastically over the last 2 years.

As LED lights become cheaper, it also made it easier for any seller (specifically those without know-how and lacks resources to build it up) to enter the market. While many of us only see the successes of people / institutions implementing LEDs; we as a top specialist in South East Asia also notice an alarming defect rate /  failures from people buying from cheap sources. Things can be cheap and good, but we should first learn to value the worth of an LED. 

The hugh amount of subsidies had resulted in a depressed price level, which might not be achievable with existing demand. The previous situation may have contributed to the hugh disparity in quality and performance of the LEDs. Removing the subsidy should lead to a more stable quality supply of LEDs in time to come.

Managing Director for IASPL

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