Sunday, April 25, 2010

China LED Street Lamp vision and market development 2009-2012 (十城万盏)

2009 is China’s entry point for LED development, LED adoption and early experimental volume manufacturing. From what we can see the support of China Government as a national policy as to push for LED implementation nation wide, China is well aware that by year 2020, it will be the World No.1 Consumption of crude oil and energy consumption in the world. There is a need for China to adapt the new technology in order to save the energy and to reduce emission.
National Energy Resource policy
Being a developing country, we need to have along term vision in preservation on the energy resource as national policy. Or there will be no competitive edge of manufacturing cost amongst all countries in the world as China will be forced to import oil of mega tons. Though we can not see many solid encouragement plans, minute implementation road map nor advice to the industry enterprisers from Beijing government on how to go for LED, we can see that this is an essential topic in all kind of energy consortiums and LED seminars nation wide as part of the preliminary promotion approach and direction. 2009 Will be an early step into the LED era and this is an experimental prelude for electronics industry to migrate into the LED industry.
Street Lighting in China
China has issued ordinance and recommendation for street lamp implementation as part of the national energy campaign so called “ 十城万盏” “Ten City Ten Thousand Lamp” for the year 2009. LED is one of the biggest topics amongst the Green industry. Solar by Silicon has been blamed for his huge electrical and water consumption during the manufacturing process and this has been going into a cold down stage before next move. I have visited a lot of factories in the China, many of them involve whole LED line manufacturing from Chip to lighting modules, building their own LED tubes, Illumination lamps, direct replacement for the CFL tubes and Light Modules.
Replacement for CFL tubes
There is direct replacement built with High Power LED with SMD solder reflow onto the main board. Most of the Sothern region has been building LED replacement CFL tubes in the past 5 years though in small scale at an experimental and research level, however, more and more people with solid experience in Lighting and electronics industry followers and expert transference from some of the Taiwanese LED factories will establish new factories in the Northern Region of China.
However there are a lot of road block :
1. Lack of standardization on the Lighting specification and hard to buy off.
2. First installation price is still High for the end users, especially to short-termism.
3. Reliability in large scale road installation is still a query.
4. Fog penetration and lighting coverage is still a challenge.
5. Internal competition on CFL product, the CFL supplier is also some of the LED makers.
6. Manufacturing Process is yet mature for Hi Power LED manufacturing. We understand that only one company* has such kind of process capability to build Hi Power LED using new technology in a full line solution provider.
7. This is still hard for the building construction and lighting firm to use the LED to replace traditional Incandescent lightings in a large scale.
A lot of LED, LED display billboards can be seen in Shanghai EXPO, despite, a lot of Government exhibitor of China still using the awful incandescent lamp in many of the interior lighting designs. Is it a bit ironic to the Government?
Through 2008 Olympia games, 2009 60th National Celebration and Shanghai Expo; LED has been revealed and this is in fact a very effective promotion for LED itself to all the public.
There are a lot of price and technology competitors in the LED makers in China, after years of Copy cat production, we have seen hundreds of K2 LED makers in the market, and their price is just faction of the original K2 of Lumields. Apparently they look the same, they function the same, but they might not perform the same. Who know who can sustain the light performance over the next 50,000 hours!? In such market environment, Lumileds has to drop K2 production.
In many of the LED applications, low quality copy cat K2 were being used, after a few thousand hours, some of the LEDs did not light up at all or went dim due to premature aging before the life cycle is terminated.. Partly due to the failure of external electronics circuitry, but most of the failure is the using of low quality LEDs why has bad heat dissipation capacity.
Some of the European installation such as the Dutch City halls has to replace them again after two years of usage as many of them fail to light up. Hong Kong MTR Airport Express interior LED illumination has almost 10% failure on those 5 mm Vertical LEDs in side the light modules this gives bad impression on the LED and hardly persuades the end customers to use LED widely.
IC manufacturer
Many large IC manufacturers are interested converting their exiting wafer equipment to run LED. As partly they are so keen to go into this profitable market and on their other hand IC seems not going to experience such a high growth rate as LED in coming 5 years.
Shortage of Manpower
Insufficient technical support in the LED factories, we have seen a lot of small factories is in fact running by merely 1-2 people who has been either previously working from some of the bigger LED firm and they had hard time to find the right people for LED production line maintenance, There is difficulty to find the right people, who understands the manufacturing process of LED. There is no way to run a factory without proper skillful technician.
Remuneration for engineers
There are a lot of head hunting activities in these hot LED market in China. Some of the technicians are offered for RMB$10,000 a month in some of the North East Region, some of the middle manager’s salary is in the range of RMB$20,000-50,000 per month if they are capability to manage the LED manufacturing house. This will drive the market to short term instability as the high labour cost will lose out come of the competitiveness for the LED Company to the large LED houses.
Taiwan technology transfer
There are a few Taiwanese commonly has been announced plan to invest and run company with the local China factories, partly the Taiwanese as quid pro quo with local labor resources and cost benefit in China. China will be likely to take this as a learning process on the Taiwan LED manufacturing technology. Taiwanese LED makers are good at vertical integration. This is because they have been the strongest on LED manufacturing since the 80’s. The have all the experience in bonding process, equipment selection, process control and material vertical integration and staff management.
However under this relation, the China side may take a few years time to pick up the process know-how, Chip knowledge and manufacturing experience on LED from The Taiwanese.
Understand oneself
To understand one’s capacity is the prime factor to win the market, China LED factory should understand themselves on their level of technology capability. They are the third tier of the technology. The Western world has been dominating the technology and they have earned good reputation on LED as a branding. Their LED is being used as industrial standard. European and American LED are enjoying the highest selling price through stable quality and good reliability. However, this technology will sooner be coming less prominent after a few years and there are more and more Taiwanese and Chinese Companies would, on their other hand, with the maturity of the bonder equipment, and the total solution where company* is selling to the LED makers, the company can slowly developing their own recipes in the LED manufacturing with best cost performance in order to survive and to make profit.
Major Investment in China
Epistar and Liteon will set-up a new production line in Chang Zhou for LED assembly.
UMC will start a LED assembly factory in Shan Dong, with initial investment of USD$1.6M, the first installation will be some MOCVDs.
2010 vision
The technology maturity and scale of the vertical integration would drive the price of LED lower and such continuous move will push LED into an enormous market in 2010.
From what we can see that 2010 will be the having 300% growth as comparing with 2009, all the front and back equipment supplier shipment indicates that the market is very hot in 2009, Those Big Company like Aixtrons and Veeco who representing the unsurpassed leading quality equipment in front is working out way to increase their capacity to meet the new equipment demand.
Internal Competition.
With the ASP drop of 15% a year, more billion dollar investment multinational company announced to invest on LED in China, inevitably more competition will force the collaboration of smaller individual or smaller scale manufacturers to merge to further invest in order to survive in such harsh price competition. If there is no technology differentiation amongst those smaller companies, or there is not sufficient scale in vertical integration nevertheless, this will be soon be eliminated at the price war. However this only will happen after a few years when there is more or less a full picture of the LED market, price and players are stabilized.
CFL Supplier
The LED manufacturing cost reduction programme in order to debut themselves as leader in CFL and LED as well in the world wide market. On the other hand CFL is improving their performance. The mercury contamination of a CFL would contaminate tons of water at the end of the tubes. This will push the LED to be a prominent replacement for CFL as faster speed. Philips and Osram as the World’s largest CFL suppler will not hand off on the producing the best reliable, powerful LED at a reasonable competitive price for the market. In order to differentiate their cost advantage over the China Supplier. Being manufacturing in Malaysia, they might have to plan for serious cost reduction, adoption of new manufacturing Process, working with world leading LED equipment manufacturer for special powerful LED manufacturing Equipment.
Supplier performance on their 6” wafer will becoming dominant in the wafer epitaxial growth, There will be a lot of impact on the challenge on the LED sorter equipment.
Technology support
China Will remain the world largest LED manufacturing centre Tomorrow as it is today.
There is a need for government support in the research and development of LED.
There should have certain Optoelectronics and LED courses in Universities and technical institutes of China.
Ten Cities and Ten Thousand LED lamps
There are 222,000 LED Lamps installed in 2009, and there will be 1120,000 street lamps in 2010 and 2011. the Number is VERY small in the Cities of China but we can see there is a Tremendous Growth 500%... This is a index for us to work into these LED market. The Only concern is if we have the right food chain in supporting this kind of growth Rate.
Attached the Cities plan for the LED street lamp installation, being the first LED City Tian Jin was overtaken by Wei Feng in Shan Dong by number of installation. Wei Feng is the World Famous Kite City as the world Kite Competition is held in Wei Feng every April. 
Vision for LED market 2010-2012
The market will continue to be hot as we are in the last Quarter 2009 and Q1 2010.
Back light will be the major contribution. The next hot driver for LED is the street lighting and indoor illumination lighting. We would see that there will take time for China to establish this market momentum, viewing that The major players in the world is investing huge amount of money in the factory set-up in China. This will create certain chain actions to lead and bring the local manufacturers to participate.
The year 2010 will be another years, more LED products will be found in the shelves in Supermarket. More people will be alert of the benefit of using LED in money saving and reduction of emission. The Whole life cycle would be speed up at, ASP will drop more abruptly. Bigger investment plan would be seen in China for LED manufacturers.


* denotes the World Largest Semiconductor Equipment Supplier : ASM assembly Automation LTD. Located in Singapore and Hong Kong.

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