NVC Lighting Chairman: LED Lighting Construction Theory

News Source: 
Guangming Daily (光明網能源)

LED manufacturers are becoming increasingly lost in a flourishing market, with each searching for the road to transformation, according to an article by Guangming Daily. Lighting industry leader, NVC Lighting Chairman Wu Changjiang shares some of his insights on LED industry trends and future developments.

“The LED era has already dawned,” said Wu at a recent energy efficiency forum. “Within the next three to five years, the LED industry will witness explosive growth. Large volumes of conventional light sources, for instance in retail, markets, hotels, schools and hospitals will be replaced.” 

As resources become increasingly scarce, energy saving, environmental products and concepts will definitely become an emerging trend, said Wu. However, the actual execution cannot be taken lightly as economic and social benefits must be taken into consideration. These are the main factors behind NVC Lighting’s decision to enter this new industry. Several years ago, NVC Lighting had been closely monitoring LED lighting, but was not eager to promote products. In the face of Chinese government procurements, NVC Lighting also made it clear that the LED products sold could not be branded, and the company could not guarantee the product quality.

“At the time LED technology was still immature, and lumen depreciation was severe,” said Wu. “Some LED streetlights broke down just two to three months after installation. Places installed with LED street lights had the highest crime rates because the lights were broken, and it was easier to mug and steal.” Wu emphasized that economic and social benefits must be taken into consideration when selling products.

The LED industry has seen rapid progress since last year, with technology maturing, reduced costs, and luminaire prices increasingly affordable. LED bulbs, T8 tubes and other product prices are now very close to CFL and conventional luminaire prices. The timing is right for LEDs to replace conventional light sources, and is actually already happening, said Wu. In Dec. 2012, NVC Lighting and Elechtech International Co. (ETI) began cooperation. ETI invested RMB 1.34 billion (US$ 300 million) to acquire 20.05 percent stock share of NVC. The two companies have established a LED package manufacturing factory in Huizhou through a joint venture on Aug. 8, 2013. 

“What does the LED industry lack? The brain for resource integration.”

“The LED industry is not short of technology and funds, but lacks the concept and brain for resource integration,” said Wu. As LED approaches like a hurricane, resource integration has become a very important strategy for companies, and will become companies core competitiveness, Wu added. 

“Currently, NVC LED products have a sales revenue share of more than 30 percent out of the company’s total revenue,” said Wu. “It is hoped that in 2014, LED sales revenue market share will reach above 50 percent.” Wu was confident that the new partnership formed with ETI Chairman Wang Donglei will definitely boost NVC LED light performance.

Wu’s Brand Construction Theory

Accompanying LED products rising cost/performance, there has been high growth in LED applications. Yet, at the same time the LED industry has been under the shadows of bankruptcies waves; listed companies over reliance on government subsidies; and implementation of wrong solutions, such as limitless price competitions. The LED industry’s current condition can be described as half submerged in ice and half in flames. 

Speaking on the Chinese LED industry’s mixed product conditions Wu used Compact Fluorescent Lamps (CFL) as an example. During CFL’s initial promotion stage, some companies released low quality and low priced products for short-term gain. This seriously affected consumer’s confidence, despite receiving government subsidies popularization of CFL products remained less than ideal. The LED industry should use CFL case as an example, and strengthen product quality establishments, said Wu.

“Future company competitions will depend on comprehensive strength including in the fields of technology, team members, branding, capital, distribution channels and other resources,” said Wu. “Branding cannot be achieved overnight by just depending on a plan, packaging or concept, but requires long term commitment to providing good quality and services.” Companies will face many temptations during the period of commitment, but should not be short sighted in seeking short term brand awareness, while ignoring brand loyalty, Wu continued. For Wu the spread of brands is a form of culture that manages consumer’s confidence, while establishment of distribution channels is forming new networks. 

Speaking about branding, Wu compares brand building to a mega construction project. “If our target is to build a 100 floor skyscraper, than we have to first think about whether we have enough capital,” said Wu. “Where will all the funding come from? Next, do you have a team of experts? If you recruit a bunch of farmers that have only seen a three to five story house, and not a 100 floor skyscraper, than even the best design and planning will be difficult to execute. Thirdly, you need to take into consideration the supply chain. A skyscraper needs steel, concrete and other construction materials, where will all these raw materials come from? Fourth, you need to take into consideration where the future market is. What’s the aim of constructing the building, for your own use or for rent? Where are all your users? And what is the consumption level of your targeted clients?” Wu believes it is compulsory to include and complete the above five points in any plan before imppmentation.

Go find the mayor or go find a market? 

Over the last three years, with the aid of Chinese government policy and promotions, all sorts of funding have been channeled into the LED lighting industry. Accompanying China’s LED industry’s rapid promotions and developments, oversupply production structures, large enterprises reliance on subsidies to make it through on a day to day basis have all surfaced. Whether the Chinese LED industry should “go find the mayor” or “find a market” has been hotly debated. As the LED industry gradually matures, there should be less government interference, said Wu. The government should respect the market cycle and economic laws, while fulfilling its role as the invisible hand behind the market. Less competitive companies that lack product innovation and treat technology, products and distribution channels with contempt will be naturally replaced, said Wu. At the same time Wu showed concern for companies that still firmly believe “finding the mayor” will result in a bright future.

“For example, the Guandong Province completed its public LED lighting upgrade project worth more than RMB 10 billion within three years,” Wu pointed out. “Some manufacturers ignored their actual development conditions and blindly took on the large volume engineering project, but their production capacity was way below order demands. Hence, they expanded production capacity in a rush by purchasing equipments and recruiting employees. Yet, these companies face future risks of idle equipment and potential layoffs once the government cancels subsidies or if they are unable to attain future subsidies. Not only is this a waste of resources, it also creates social instability.” According to Wu’s understanding it is academics and research institutes responsibility to approach city mayors to make them value the LED industry. Manufacturers’ job should be product R&D plus market research. 

The chairman also reommended the Chinese government to improve R&D and human talent, while filtering the market and regulating companies.

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