LED Industry Sees Silver Lining as CFL Prices Soar in China

LED luminaires in the Chinese market might see a glimmer of hope for larger market shares as Compound Fluorescent Light (CFL) prices soar, according to a report by Chinese-language media Kyushu Building Network.

Soaring raw material prices have significantly raised manufacturing prices. Recently, trichromatic phosphor prices mainly comprises of rare earths hit record highs. Accompanying rare earth price upticks, CFL prices have also climbed up. CFLs are facing many challenges ahead. However, the CFL industry’s dire situation has surprisingly opened a new door for the more environmental friendly LED luminaire.

Rare earth prices have increased by 10 times since March 2014. “In March this year, a kilogram of rare earth was about RMB 280 (US $44.85), but it is now up to RMB 2,600 per kilogram,” said an industry source. “Prices can be even higher for good quality rare earth.” This has already seriously impacted the CFL industry’s development. A 100W CFL is sold on average at RMB 28, however, an incandescent bulb with the same brightness is only RMB 1.5 to RMB 2. Therefore, many CFL manufacturers still rely heavily on government subsidies, which can reach 50 percent of the product’s selling price.

In addition, local governments in China will allocate a certain amount of financial subsidies during CFL promotions. Under these subsidies, CFL under 45W are about the same as incandescent bulbs. However, this balance has been disrupted by the recent price climbs. Raw material price increases have severely damaged CFL industry, but has no doubt offered more opportunities for LED luminaire developments. Even giving LED luminaires the opportunity to substitute CFLs.

LEDs are more environmental then CFLs, and prices have steadily declined by 20 percent annually. The trend of LED luminaires replacing CFLs is a definitive trend. Many CFL manufacturers have entered the LED industry. Small CFL manufacturers have been most affected by the recent price trends. Although, Philips, Osram and other international brand product prices have also fluctuated, but it has not impacted overall sales. Manufacturers are more willing to spend money on “branded” products, and not interested in the smaller labels, said a luminaire retailer.

There are already reports noting many CFL manufacturers have closed down in Fujian and Zhejiang provinces in China. The CFL industry is a highly concentrated industry with issues including low technology standards, high costs, and serious pollution. With raw material prices soaring, SMEs should adjust and turns towards developing LEDs, which are more technologically advanced, environmental friendly, energy efficient, and innovative, said an industry insider.

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