8 July 2016
China’s Lighting Market
I. Market overview
Lighting products are essential to the development of the national economy and people’s livelihood. As China’s economy continues to grow and people’s living standard rises, the demand of the mainland market for lighting products is also expanding. In the last 20 years, China’s lighting industry has been developing rapidly at a steady pace and the country has become a leading lighting producer and consumer in the world.
There are many factors propelling the growth of the mainland lighting market:
Urban functional lighting: Infrastructures such as airports, railways, ports and urban rail transport systems all need lighting. Meanwhile, flood lighting in city squares, green areas, roads and buildings has spread from large cities to small and medium-sized cities. As China continues to urbanise, the potential demand for urban public lighting projects is huge.
Industrial and commercial lighting: Today, industrial enterprises are attaching more and more importance to the role played by lighting in enhancing production efficiency, while commercial enterprises are spending more money on lighting shopping malls in order to attract customers. At the same time, lighting in offices, schools and hospitals has also seen marked improvement.
Consumption upgrade: As consumption structure continues to upgrade, people are placing more importance on the choice of domestic lighting. This, coupled with the rapid development of the property market, is bound to boost the sale of interior lighting fixtures. Following the growth of the real estate sector in the mainland, high-class residential communities and villas emerge one after another, bolstering the demand for yard lamps and lawn lamps. The demand for high-end lighting fixtures is increasing.
Environmental protection and energy conservation: China has been promoting environmental protection and energy conservation in recent years. Its successive rolling out of policies and regulations such as The Energy Conservation Law of the People’s Republic of China and Opinions on Accelerating the Development of Energy-saving and Environmental Protection Industries is providing support for the development of the environmental protection industries. At the same time, the intensive promotion of energy-saving and eco-friendly products is driving up the demand for energy-saving lighting products.
In the landscape lighting market, decorative lights for public areas such as streets and squares are the leading products. The priority given by China to the policy of developing energy-saving environmental protection industries will continue to serve as the major impetus propelling the development of light emitting diode (LED) lighting.
Today, luminaires for the home are no longer confined to simple lighting; they are now a must for tasteful lifestyle. Consumers now place more emphasis on the ambience created by lighting in their home. As such, they would pay great attention to the styles and materials of the lighting fixtures to ensure that they match with the decoration of their home. The design, style and colour of light fixtures are becoming more and more sophisticated while more efforts are being devoted to achieving the right artistic effects.
Trendy, personalised, energy-efficient and eco-friendly lighting fixtures are the latest trends in home decoration. In the mainland market, demand for personalised luminaires is expanding and the colours and designs of lighting also come in a great diversity.
Meanwhile, lighting fixtures are becoming more sophisticated. Lighting products for different environments or purposes have been developed, such as iridescent lamps, writing lamps, daylight lamps, dinner lamps and floor lamps. Besides, there are lighting series designed specifically for children. Energy efficiency, eco-friendliness and high technology content are also major development directions in the lighting industry.
Driven by the National Semiconductor Lighting Project, seven national semiconductor lighting industrial bases (namely Shanghai, Dalian, Nanchang, Xiamen, Shenzhen, Yangzhou and Shijiazhuang) were formed. In February 2013, six ministries and commissions headed by the National Development and Reform Commission (NDRC) and the Ministry of Science and Technology issued the Planning for the Semiconductor Lighting Energy Saving Industry to promote energy efficiency and emissions reduction. The plan sets a target of about 30% for the average annual growth of the output of the semiconductor lighting energy-saving industry, a target of stabilising the market share of compact fluorescent lamps (CFLs) and other traditional high-efficiency lighting at about 70% and a target of over 20% for the market share of LED functional lighting products.
Under China’s Roadmap for Phasing out Incandescent Lamps, starting from October 2012, the import and sale of incandescent lamps for general lighting are to be phased out according to their power. Incandescent lamps 100W and above for general lighting are prohibited from import and sale as from October 2012; incandescent lamps 60W and above for general lighting will be prohibited from import and sale as from October 2014; while incandescent lamps 15W and above for general lighting will be banned from import and sale as from October 2016.
The demand for energy-saving CFLs, an alternative to incandescent lamps, is expected to rise gradually. Meanwhile, amidst the worldwide trend of green lighting, the promulgation and implementation of China’s subsidy policy for energy conservation and the consumers’ increasing awareness of energy saving are set to promote the overall market performance of CFLs. As at 2013 year-end, the policy has cumulatively promoted the use of 780 million high-efficiency lighting products, accelerated the adoption of CFLs, LED lights and other high-efficiency lighting products and the gradual elimination of high energy consuming products such as incandescent lamps. According to an NDRC announcement, as many as 100 million CFLs have been taken by the market through national subsidy in 2014.
The development of the LED market is picking up speed as incandescent lamps are being phased out. China has been promoting the use of LED in street lamps in earnest: in 2009, it launched a “10,000 LED Street Lamps in 10 Cities” project, which was subsequently expanded to “Two Million LED Street Lamps in 50 Cities”. Such initiatives succeeded in accelerating the development of the LED light market. LED, known as the fourth-generation light source or green light source, can be applied in various areas such as signage, displays, decoration, back light, general lighting and urban nightscapes. The illumination efficiency and lifespan of LED lights outperform those of CFLs as well as incandescent lamps, but prices are also more expensive. They have found favour with consumers because they have a smaller impact on the environment and human health. According to a market survey, the size of China's LED lighting market grew by 15% year-on-year in 2015 to Rmb396.7 billion.
Electrodeless discharge lamps (EDLs) enter China’s lighting market in recent years as a new generation energy-saver and compete with LEDs for the title of the fourth-generation light source. EDLs are durable, energy saving, environmentally friendly and of high illumination efficiency. Nevertheless, they suffer by comparison because they are several times more expensive than CFLs; there is no uniform national standard; and there is the possibility of external electronic interference when in use.
Some lighting products in mainland cities were found to be sub-standard. According to the result announced by the Nanjing Consumer Association on quality tests on LED lighting sold in the local market, among the 42 batches of LED globes tested, all failed to meet requirements in their labelling and description, nearly 50% failed to meet requirements in their power factor, and over 60% failed to meet requirements in their colour rendering index. Eye-shield desk lamps are listed by the General Administration of Quality Supervision, Inspection and Quarantine as Class I risk products in 2016. Desk lamps of 32 batches with the words "eye-shield" or "non-flash" in their packaging/description were spot checked and 30 of these failed to meet requirements, accounting for 93.8% of the total. One reason for such low compliance rates could be attributed to the current keen price competition in the LED lighting market which forced some manufacturers into using sub-standard materials to reduce production costs. The healthy development of China’s lighting market would be hampered should this situation persist.
II. Market competition
Further integration of China’s lighting industry has led to the formation of five major production bases in Guangdong, Zhejiang, Jiangsu, Fujian and Shanghai. The number of lighting enterprises in these four provinces and one municipality account for over 80% of the total number of enterprises in the industry. In terms of product type, each of the five production bases has its own characteristics:
Guangdong mainly produces interior lighting fixtures, with Guzhen in Zhongshan and Dongguan being the leaders in producing decorative luminaires. There are almost 9,000 lighting companies in Guzhen, most of which are mainland enterprises, with total output of the local lighting industry reaching Rmb17.66 billion in 2015, making the town the largest specialised production base and wholesale market for decorative lighting on the mainland. In Dongguan, where Hong Kong and Taiwan-invested enterprises dominate, the products are mainly supplied to the international market. But in recent years greater efforts have been devoted to developing the domestic market. Other cities in Guangdong such as Foshan and Huizhou also account for a considerable share in the domestic market.
Zhejiang, Jiangsu and Shanghai mainly produce outdoor lighting fixtures and light sources. Yuyao in Zhejiang and Gaoyou in Jiangsu are the major producers of street lights. In the Ningbo region, outdoor decorative lighting fixtures are the leading products. Shangyu, Lin’an and Jinyun primarily produce CFLs, round tubes and car lights. Shanghai and Changzhou in Jiangsu are leaders in producing flood lights and electrical accessories.
In Fujian, lighting fixture production mainly concentrates in Xiamen, where CFLs are the major products. The total output value of Xiamen’s opto-electronics industry reached Rmb116.2 billion in 2014, accounting for 56.38% of the province’s total opto-electronics output value. By 2018, there is good chance that the total output value may reach more than Rmb250 billion.
China’s lighting industry is highly dispersed. According to the China Association of Lighting Industry, currently there are over 10,000 domestic brand companies in the country. First-line brands include NVC, TCL, Foshan Lighting, Yankon Energetic Lighting and Opple. However, both the influence and channel control of local brands are rather weak, especially in the area of commercial lighting projects, where a wide gap still exists between local brands and international brands.
International brands on China’s lighting market include Philips, General Electric and Osram. The quality, decorativeness and versatility of their products are better. These brands dominate the high-end market supplying mainly to corporate clients such as upmarket communities, villas, hotels and government facilities as well as a small number of high-end individual consumers.
Survey findings reveal that among a number of domestic and foreign lighting brands, Philips ranks first in “brand image and recognition” as well as “market share and consumer attraction” in 2016. Traditional lighting brands Osram, Opple and NVC are also top ranking. In general, consumers are not particularly loyal to any of these brands. Given the rapid growth of the lighting market, variables still exist in terms of brand awareness and ranking.
III. Sales channels
In China, lighting products are mainly sold through specialised lighting marts, brand stores, electrical appliance stores, home appliance chain stores, supermarket chains, hardware stores and building materials marts. Currently, most lighting products are distributed through specialised lighting marts. As technology advances, more enterprises have adopted online platforms as a new sales channel in recent years.
Many manufacturers and distributors showcase their products to consumers at specialised lighting marts under one roof. Since selling products at these specialised marts is more direct than counter sales, the interaction between buyer and seller is stronger, prices are relatively low, and choices are extensive, such lighting marts are highly popular with consumers and have been developing in leaps and bounds in recent years. In Zhejiang, Hangzhou, Beijing, Taiyuan, Shanghai, Chengdu, Zhengzhou, Wuhan, Tianjin, Qingdao, Chongqing, Shenyang and Shijiazhuang, lighting marts of various sizes have emerged.
Hardware stores, which are in effect building materials stores selling a great variety of building materials and related products, are one of the important sales channels for lighting fixtures. As hardware stores are widely distributed, some small and medium-sized enterprises, despite the fact that they cannot compete with international and domestic branded enterprises in terms of strength, can still make a breakthrough by concentrating their resources in hardware stores in a certain regional market and building regional brands.
A number of mainland lighting enterprises with considerable strength increasingly appreciate the importance of brand awareness. They have established specialised brand stores in various regions, unifying their store image, strictly controlling prices, and forming supply and sale networks. Examples include lighting giants Huayi, Opple, NVC and Midea. Meanwhile, lighting chain stores have emerged. For instance, Yidengdashi is one of the stores specialising in home lighting fixtures.
More lighting enterprises adopt e-commerce models as a new sales channel in recent years. Companies whose brands are less influential tend to seek new opportunities more actively through online channels as they do not usually have a comprehensive sales network. Many new enterprises have secured an advantageous position in the online sales market. The O2O e-commerce model which combines offline experience in physical stores and online ordering is also gaining popularity in the lighting appliances market. Market data reveal that, in 2014, the size of the online market for lighting products was Rmb14.68 billion, accounting for a 14.4% share of all sales channels. Traditional enterprises, as they are usually operating a number of physical stores, can readily provide consumers with offline experience and thus have an edge over pure online traders in establishing an O2O business. First-movers in the O2O market include Hugewin and Opple, while NVC’s O2O e-commerce platform and SFT’s e-lighting website have also joined the fray. This sales channel is set to be more widely adopted by lighting products vendors.
IV. Import and trade regulations
Foreign companies entering the China market should take note of the relevant standards in the mainland. Under the Standardisation Law of the People’s Republic of China which came into force on 1 April 1989, there are four sets of standards which, in descending order of binding force, are respectively national standards, industry standards, local standards and enterprise standards. National standards are classified into mandatory standards and recommended standards, their standard codes are GB and GB/T respectively. Industry standards are also classified into mandatory standards and recommended standards; lighting falls under light industry and the standard codes are QB and QB/T respectively. Semiconductor lighting falls under the electronics industry, its mandatory and recommended standard codes are SJ and SJ/T respectively.
National standards on LED are being formulated and improved. A number of national standards were implemented in 2010, including LED Modules for General Lighting – Safety Specifications (GB 24819-2009), and LED Modules for General Lighting – Performance Requirements (GB/T 24823-2009). Moreover, a number of industry standards were also introduced in 2010, such as Measurement Methods for Semiconductor LED (SJ/T 11394-2009), and Measurement Methods for Chips of Semiconductor LED (SJ/T 11399-2009). For enquiries on relevant standards, please visit the website of the Standardisation Administration of the People’s Republic of China and the standards website .
To ensure the effectiveness of certification for lighting appliances and to upgrade product quality, the Certification and Accreditation Administration of the People’s Republic of China (CNCA) promulgated on 16 July 2014 the China Compulsory Certification Implementation Rules - Lighting Appliances (CNCA-C10-01: 2014), which stipulates the basic principles and requirements for the compulsory certification of lighting appliances. Effective since 1 September 2014, the new rule has been enforced mandatorily since 1 September 2015. Products which have not been certified must not leave factory, be imported, sold or used in business activities in China. According to the implementation rules, in addition to fixed general purpose lightings of which the power supply voltage is greater than 36V but not exceeding 1,000V, portable general purpose lightings, embedded-type lightings, aquarium lightings, ballasts for discharge lamps, AC electronic ballasts for fluorescent lamps, two product types, namely “high intensity electronic ballasts for gas-discharge lamps” and “AC or DC electronic control devices for LED modules” have been added to the list of products which must obtain China Compulsory Certification (“CCC”) for production and sales in China.
On 31 December 2013, China promulgated the new national standard Embedded LED Lamps: Performance Requirements (GB/T 30414-2013) which was subsequently implemented on 1 December 2014 to help regulate and guide the lighting industry in China.
China announced on 31 December 2013 a host of new national standards for the manufacturing of lighting products: the new Luminaires - Application of the IK Code (new); the newly developed Safety Requirements for Electrodeless Fluorescent Lamps; and the newly revised Safety for Road and Street Lighting, Glow-starters for Fluorescent Lamps, and Neon Lamp Controlgear. Luminaires – Application of the IK Code (GB/Z 30418-2013) was effective on 1 December 2014. The newly revised Safety Requirements of Electrodeless Fluorescent Lamps (GB 30422-2013), Luminaires, Part 2-3: Special Requirements – Road and Street Lighting (GB 7000.203-2013), Glow-starters for Fluorescent Lamps (GB 20550-2013) and Lamp Controlgear, Part 2-10: Particular requirements for electronic inverters and converters for high-frequency operation of cold-start tubular discharge lamps (neon bulbs) (GB 19510.210-2013) have all been effective since 1 July 2015.
On 16 September 2014, the Standardisation Administration of the People’s Republic of China promulgated three national standards related to the classification of LED specifications, thereby filling the void in China’s national standards for the related product area. The newly revised Performance Requirements for Non-directional Self-ballasted LED General Lighting (GB/T 24908-2014), was implemented on 1 August 2015 to replace GB/T 24908-2010. In addition, the newly revised Classification of Specifications for Reflective Self-ballasted LED Lamps (GB/T 31111-2014) and Classification of Specifications for Non-directional Self-ballasted LED for General Lighting (GB/T 31112-2014) were also implemented on 1 August 2015.