LEDinside: Vietnam’s LED Lighting Demand Boost Caused By the Establishment of Factories And Infrastructure

According to a survey regarding the Southeast Asia market by LEDinside, a division of the global market research company TrendForce, judging by the overall dynamic of the LED industry around the world, it can be seen that the western market is experiencing a saturation and the price wars in the China market are rather heated-up; thus, many manufacturers are eyeing on other regions, such as Southeast Asia, South America, and the Middle East. Among those ‘new lands,’ Vietnam attracts a great number of international investors with its low labour cost. As the per capita income in Vietnam is rising, it would further boost the domestic demand for LED lighting. LEDinside expected the market in Vietnam reached USD 348 million in 2016 with a penetration rate of over 40%.
 
The Vietnam Market Scales Up Rapidly With A Penetration Rate of Over 40%
Among the major Southeast Asian countries, the market in Vietnam has been growing at a rapid pace, with an annual growth of over 60% over the period from 2013 to 2015. By 2016, the LED lighting market in Vietnam has reached USD 348 million with a penetration rate of over 40%.
 
In the era of traditional lighting, Vietnam each year consumed around 200 million traditional light bulbs, especially power-consuming incandescent light bulbs. Over the last few years, the traditional lighting market has been shrinking, while the LED lighting one is scaling up. The growth of LED lighting penetration rate is expected to speed up and it is estimated to reach up to 51% by 2018, considering the implementation of government subsidies and the rising demand will drive the market to expand.
 
New Investment Keeps Pouring Into Vietnam In Light Of Low Resource Cost And The Growing Economy
Vietnam ranks 14th on the list of countries with highest populations around the globe with a population of 94 million people, half of which are citizens under 30. Among them, the working age population takes up to 60%, which provides a substantial labour force and a relatively lower labour cost in Asian countries. Vietnam possesses a land resource of 34.77 million hectares. During the time between 2011 and 2015, about 30.99 million hectares of land has been developed, 130 thousand hectares of which was for industrial use and priced at a wide range between USD 30-100 per square meter per year. In addition, the Vietnamese government has been focusing on stabilizing social and political orders, recuperating the economy and the stock market, and developing the infrastructure. Therefore, by 2020, Vietnam will be estimated to have invested up to USD 150-160 billion into infrastructure establishment, according to the Ministry of Planning and Investment of Vietnam.
 
Low cost of land resources and labour force, establishment of infrastructure and the fast-growing economy and political stability transformed Vietnam into a place where attracts international investors from the fields of electronics and home appliances, especially major Korean electronics manufacturers that attempted to make the most of the advantages Vietnam has to introduce their production lines. Overall, Samsung has invested over USD 12 billion setting up R&D centres and bases producing various items, including smartphones, batteries, electronic components, display screens, and home appliance. Currently, about half of Samsung’s phones are made in Vietnam. On the other hand, LG poured in Vietnam USD 3 billion on the investment of the production of OLED display modules, smartphones, TV sets, and other appliance. Seoul Semiconductor and Lumens also stepped in Vietnam with investments of USD 300 million and USD 20 million respectively.
 
In terms of the LED lighting market in Vietnam, it is currently under the control of both local suppliers, such as Dien Quang, Rang Dong, and Duhal; and light makers from western countries, such as Philips, Cara, and Eurolight. Still, there are plenty of room for more investment in the whole LED lighting supply chain as local Vietnamese manufacturers mainly focus merely on light fixture assembly at the downstream.
 
Key to Success: Opportunities Emerge When Right Strategies Ride Over Challenges
While Vietnam appears as a ‘pool of opportunity’to international lighting manufacturers, a few of challenges are lying ahead of Chinese manufacturers who come to explore the Vietnam market. Firstly, it requires linguistic talents to break the language barrier for further business development and factory management as English doesn't prevail in Vietnam and the Chinese population in the country declined after communization in 1975. Also, most of the demand in the market are lighting projects, particularly lighting setups for newly-built factories or government bids. Hence, it is crucial to collaborate with local lighting factories or to build assembly plants so as to bid for more projects.
 
Despite all that, Chinese manufacturers still hold more advantages once entering the LED lighting market in Vietnam. The governments of China, Japan, and Korea got their hands in to assist Vietnam with infrastructure establishment and meanwhile introduce their supplier and developer companies to the market. Those units dealing with foreign affairs own more financial and human resources, and thus are more influential in assisting international companies to explore the local market. With support from those governments, it is easier for overseas lighting manufacturers to win local government bids. In addition, the language barrier is not as hard to break as expected for China actually holds talents capable of languages of emerging markets. For example, located in Nanning, Gaungxi University for Nationalities provides Vietnamese language programmes. After one year of studies, students are able to work in Southeast Asian countries.
 
Overall, as a fast-developing emerging market, Vietnam provides a good environment for LED lighting business investment and market exploration considering its economy, infrastructure, and resources serve as a solid foundation. What is more, the consuming ability of Vietnamese citizens is rising, and the domestic demand thus started to grow, after China and Thailand. At the early exploring stage, corporations can advertise their products through partner distributors’ promotion. After that, they could cultivate the popularity of their brands with help from the government or get access to local channels through M&As to succeed in the expansion to the local market. (Author: Terri/ LEDinside)

LEDinside 2016 Southeast Asian Lighting Market Report
Release Date: March 2016
Language: English
Format: PDF
 
Chapter One: Report Structure and Key Factors
Chapter Two: SEA Market Macroeconomics
Chapter Three: Lighting Market Scale and Trend Analysis
Chapter Four: Manufacturers Introduction and Strategies Analysis
Chapter Five: LED Lighting Products Specifications and Prices Analysis
Chapter Six: Lighting-Related Policies and Regulations
Chapter Seven: ASEAN Developments and Impact on Lighting Industry
Chapter Eight: Proposal on Entering into SEA Lighting Market
 
 
Chapter One: Report Summary and Study Methods
This report has compiled various data regarding related SEA government and industry agencies, local business partners, import and export figures, to identify and analyze key market variables and offer projections. The study also integrates Market research and firsthand interview of manufacturers or agencies to examine and validate key factors, and offer recommendations, solutions and comprehensive analysis based on these findings.
 
Chapter Two: SEA Market Macroeconomics
Due to low labor cost and abundance of natural and human resources, SEA has become one of the most economically dynamic region with immense market potentials. SEA holds a key role in future political and economic positions. General lighting demands have grown as living standards rise in SEA countries, and energy conservation awareness and demands emerge. This will eventually lead to the proliferation and growth of the LED lighting industry.
 
Chapter Three: Lighting Market Size and Market Trend Analysis
The lighting market scale of the six major SEA countries which referred to in this report was estimated USD 4.8 billion in 2015, while LED lighting market is expected to reach USD 1.5 billion. LED lighting has a very high market and import growth rates, and LED lighting penetration rate has gradually increased. Despite the slow down of growth speed in 2015 due to overall economic condition, it is estimated in the next few years, government policies and incentives will continue to spur lighting replacement demands. SEA LED lighting market penetration and import volume is expected to soar. SEA market has gradually become the main export market for Chinese lighting manufacturers.
Chapter Four: Major Manufacturers and Business Strategy Analysis 
Imported Chinese lighting products, can be classified into five types in the SEA lighting industry supply chain:  1. Chinese manufacturers supply lighting components to local lighting manufacturers. 2. Semi-finished products are imported from China and locally assembled. 3. Imported light sources are assembled locally. 4. Chinese manufacturers playing the role of Original Design Manufacturer (ODM) and shipping the products to SEA countries. 5. Chinese manufacturers distribute their products through wholesale channels or construction projects. In general, due to the lack of local manufacturing capability, international brands such as Philips, GE and Toshiba have the largest market share in SEA countries, followed by major local manufacturers.
Provides major LED, LED lighting and LED industrial lighting manufacturers lists in the six countries.
Three major LED lighting manufacturers in each country, 18 in total, including ODM/OEM and in-house production line, as well as distribution channel analysis.
 
Chapter Five: Major LED Products Analysis (LED Bulbs, Tubes, and Streetlights)
The indoor LED lighting products certification standards and regulations in SEA market are relatively low compared to mature markets, such as Europe and the U.S., with the exception of construction projects. By and large, low lumen and high C/P ratio products are favorable in SEA lighting market. Nevertheless, municipal projects such as streetlight constructions have certain product specifications and energy efficiency effects. In addition, the prices of LED lighting products vary across SEA countries.
Summarizes local manufacturers’ streetlight specifications (take one major manufacturer’s products in each country as example).
 
Chapter Six: Lighting Policies and Regulations
SEA countries have developed national LED standards that are based on IEC regulations to meet each country’s specific needs. In addition, upon the establishment of ASEAN Economic Community, the ASEAN Harmonized Electrical and Electronic Equipment Regulatory Regime (AHEEERR) will be implemented as guidance for electronic equipment policies and standards. Electronic devices can be sold in other ASEAN countries upon receiving approval in one of the ASEAN countries. The introduction of uniform standards undoubtedly benefits the market of Southeast Asia. Besides, SEA countries have set energy conservation targets and initiated several energy saving projects, which lead to local demands for new energy saving lighting products. This has in turn raised new products quality and performance.
 
Chapter Seven: ASEAN developments and its impact on lighting industry
Association of South East Asian Nations (ASEAN) Economic Community is established in 2015, and has become the second global single market aside from EU. ASEAN nations have signed bilateral agreements with China, some of the agreements have lowered tariff or tariff-free on LED products. The lifting of tariffs frees investment and finance flows, plus human resources and transportation facilities and infrastructures. All these can become points of entry into the ASEAN market for Chinese LED lighting manufacturers. Lighting manufacturers have also implemented different strategies, for instance package manufacturers have taken the opportunity to enter local lighting manufacturers supply chain or invested in local factories. Lighting OEMs have also shifted towards new modes of transport that have shortened freight time and distance by directly ship products to emerging markets. Southeast Asian market lighting manufacturers can adapt a single agent, or they can construct local factories and make Southeast Asia their manufacturing hub.
 
Chapter August: General Strategy for Southeast Asian Lighting Market
For these manufacturers which are planning to enter SEA market, it need to choose the right distribution channel based on the brand and channel condition; take initiatives to develop and maintain good relations with government; prepared product certification and examination to meet local market requirements; plan for products’ retail prices and specifications in accordance to local market demand. Manufacturers have to focus on their own market positioning based on their company strategy and every aspect mentioned above. Whether it is high end or low end product positions, distribute through construction project or retail, acting as an brand or ODM / OEM, choosing the right positioning strategy is a key factor in entering SEA market.
 
Further information, please contact:
 
Joanne Wu (Taipei)
joannewu@trendforce.com
+886-2-8978-6488 ext. 912
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