7 Aug 2018
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 living standards rise, mainland market demand for lighting products is also expanding. In the last 20 years, China’s lighting industry has been developing rapidly and the country has become a world-leading lighting producer and consumer. Light emitting diodes (LEDs), compact fluorescent lamps (CFLs), electrodeless discharge lamps (EDLs) and organic light emitting diodes (OLEDs) are major products in the mainland lighting market.
There are many factors propelling mainland lighting market growth, including:
- Urban functional lighting: Infrastructure facilities, such as airports, railways, ports and urban rail transport systems, all need lighting. Also, flood lighting in city squares, green areas, roads and buildings has spread from large 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 continues to upgrade, consumers 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 are emerging 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. The 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 LED lighting. Market data reveals that the output value of outdoor lighting products reached RMB86.7 billion and that of landscape lighting exceeded RMB72.5 billion in 2017.
Today, luminaires for the home are no longer confined to simple lighting; they are now a must for tasteful interior design. Consumers place more emphasis on the ambience created by lighting in their homes. As a result, they pay great attention to lighting fixtures’ styles and materials to ensure that they match home decor. The design, style and colour of lighting fixtures are becoming increasingly sophisticated, while more efforts are being devoted to achieving artistic effects.
Stylish, 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, with the colours and designs of lighting also available in great diversity. Some lighting manufacturers have introduced integrated cove lighting designs that may incorporate Bluetooth-enabled audio systems, central air conditioning, air purifiers and other functions, based on customers’ requests. Integration of lighting with home decor may be the way forward.
The functions of lighting fixtures are becoming more specific as lighting products intended for different environments, purposes or even moods have been developed, such as iridescent lamps, writing lamps, daylight lamps, dinner lamps and floor lamps. Apart from functional applications, novel lighting series designed specifically for children are also gaining popularity. Energy efficiency, eco-friendliness and high technology are major development directions in the decorative lighting industry.
Many lighting companies have been working with technology companies to develop intelligent lighting in recent years. For example, Shenzhen-headquartered Huawei signed a cooperation agreement with Dutch firm Philips in 2016 for the seamless integration of its smart devices, systems and apps with Philips’ lighting products. Beijing’s Xiaomi also formed a joint venture with Philips to design and develop wireless connectivity LED lighting units for its smart home ‘ecosystem’, bringing lighting control by phone apps to reality.
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% average annual output growth for 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% market share for LED functional lighting products.
Under China’s Roadmap for Phasing out Incandescent Lamps, starting in October 2012, the import and sale of general-purpose incandescent lamps are to be phased out according to their wattage. Incandescent lamps 100W and above for general lighting have been prohibited from import and sale since October 2012; incandescent lamps 60W and above for general lighting have been prohibited from import and sale since October 2014; and incandescent lamps 15W and above for general lighting have been banned from import and sale since October 2016.
The demand for energy-saving CFLs, an alternative to incandescent lamps, is expected to rise gradually. Amidst the worldwide trend of green lighting, the promulgation and implementation of China’s subsidy policy for energy conservation and consumers’ increasing awareness of energy saving are set to boost the overall market performance of CFLs. As at the end of 2013, 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 government 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 street lamps strongly. 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 lighting market. LEDs, known as a fourth-generation light source, or green light source, can be applied in various areas, such as signage, displays, decoration, back lighting, general lighting and urban nightscapes. The illumination efficiency and lifespan of LED lights outperforms CFLs as well as incandescent lamps, but prices are also higher. They have found favour with consumers due to a smaller impact on the environment and human health.
China’s LED industry is growing fast. In 2017, the output value of the LED industry as a whole reached RMB636.8 billion, up 21% from 2016. The industry will show a compound annual growth rate of about 18% in 2018-2020 and is set to break the RMB 1 trillion mark by 2020.
EDLs have entered China’s lighting market in recent years as a new generation energy-saver, competing with LEDs as the leading fourth-generation lighting source. EDLs are durable, low-energy consumption, environmentally friendly and high efficiency. Nevertheless, they suffer in 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.
The application of organic light emitting diodes (OLED) is expanding. Led by technology giants such as Apple and Sony, many companies are working on the use of OLED in AR/VR, smart phone, TV and computer products. OLEDs have the advantages of being light, thin and flexible and have a wide colour range and visual angle. Domestic colour TV manufacturers such as Skyworth, Changhong and Konka have turned out different models of OLED TVs. Thanks to the advance of OLED technology and the growing penetration rate of these products, the value of China’s OLED market grew from US$530 million in 2011 to US$6.23 billion in 2016, representing a compound annual growth rate of 63.8%, and is expected to approach US$65 billion by 2023.
China’s imports of major lighting appliances and related products in 2017:
|8539||Electric filament or discharge lamps; arc-lamps||1,011.8||26.3|
|94051000||Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares||47.6||38.4|
|94052000||Electric table, desk, bedside or floor-standing lamps||19.1||10.2|
|94053000||Lighting sets of a kind used for Christmas trees||0.6||53.6|
|94054090||Other electric lamps and lighting fittings||229.4||-0.4|
|94055000||Non-electrical lamps and lighting fittings||4.4||-20.3|
|94056000||Illuminated signs, illuminated name-plates and the like||17.7||-29.2|
|94059100||Parts, of glass||6.5||-12.0|
|94059200||Parts, of plastics||61.1||166.2|
Source: Global Trade Atlas
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 decorative luminaires. There are about 8,960 lighting companies in Guzhen, most of which are mainland enterprises, with total output of the local lighting industry reaching RMB19.03 billion in 2016, 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, 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 streetlights. 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 floodlights 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 RMB149.8 billion in 2017, accounting for 50% of the province’s total opto-electronics output value. Of this, the output value directly contributed by LEDs reached RMB40.6 billion, accounting for 27.1% of the industry’s total output value. By 2018, the total output value is projected to exceed RMB250 billion.
In order to add more value to their products, many brands have devoted more resources into technology development and innovation. For example, TCL has established a national-level lighting laboratory and signed a memorandum of understanding with Taiwan’s LED Lighting Industry Alliance (TLLIA) to promote smart lighting. Opple has developed its phased lighting LED lamps with touch sensors on the wall and alternating warm and cool light sources to create a rich atmosphere of colour and light.
International brands do not have an obvious advantage in China’s increasingly competitive lighting market. Since 2011 the prices of LED lighting products have been falling and the profit margins dwindling. International brands quitted China’s lighting market one after another. Osram terminated its lighting business in Asia in 2016. Philips also closed its lighting factory in Shenzhen in May 2016. By comparison, the trend of overseas mergers and acquisitions is intensifying, as Chinese LED enterprises gradually rise to prominence. For example, Konka Green Lighting Co Ltd of Anhui took over Toshiba’s China lighting operation in 2016.
Development in the direction of medical, aviation and electronic lighting is a growing trend for traditional lighting companies looking to upgrade and transform their business. International brands such as General Electric, Siemens and Philips have been downsizing their traditional lighting business and focusing on the more lucrative business of health applications in recent years. For example, they are increasing their R&D investment in medical devices, automotive lighting and industrial applications.
III. Sales Channels
In China, lighting products are mainly sold through specialised lighting marts, branded 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 all 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 resources on hardware stores in regional markets 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 sales networks. Examples include lighting giants Huayi, Opple, NVC and Midea. Meanwhile, lighting chain stores have emerged, such as Yidengdashi.
More lighting enterprises have adopted e-commerce models as a new sales channel in recent years. Many are relying on e-commerce platforms like Tmall and JD.com to seek new opportunities. This not only allows them to market and promote products and facilitates consumers browsing and choosing what they like, but can also increase sales and reduce inventory pressure within a short time. Traditional enterprises, as they usually operate a number of physical stores, can readily provide consumers with an 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.
Listed below are some of the lighting exhibitions in China in 2018 and 2019:
|3-5 September 2018||Shanghai International Lighting Fair||Shanghai New International Expo Centre|
|19-21 September 2018||Shanghai International LED Fair||Shanghai New International Expo Centre|
|21-23 February 2019||Shenzhen International LED Fair||Shenzhen Convention and Exhibition Centre|
|15-18 March 2019||Chengdu International LED & Smart Lighting Exhibition||Chengdu Century City New International Convention and Exhibition Centre|
|9-12 June 2019||Guangzhou International Lighting Exhibition||China Import and Export Fair Complex (Guangzhou)|
IV. Import and Trade Regulations
In order to further open the economy and satisfy consumer demand, the State Council reduced the most-favoured nation tariff rates on 1,449 imported daily consumer goods from 1 July 2018. The tariff cuts cover products such as lighting fixtures, apparel, headgear, footwear and cosmetics.
There are basically no changes in import tariffs on lighting products in 2018. Given below is a summary of related products:
|8539||Electric filament or discharge lamps; arc lamps||2-10.5|
|94051000||Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares||5|
|94052000||Electric table, desk, bedside or floor standing lamps||10|
|94053000||Lighting sets of a kind used for Christmas trees||8|
|94054090||Other lamps and lighting fittings||6|
|94055000||Non-electrical lamps and lighting fittings||10|
|94056000||Illuminated signs, illuminated name plates and the like||10|
|94059100||Parts, of glass||20|
|94059200||Parts, of plastics||20|
Source: Customs Import and Export Tariff of the People’s Republic of China 2018; Table of Adjusted MFN Rates on Imported Daily Consumer Goods published by the Ministry of Finance in 2018
Foreign companies entering the Chinese market should take note of the relevant standards on 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 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 products fall 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 LEDs are being formulated and improved following the industry’s rapid growth. A number of national standards were implemented in 2010, including LED Modules for General Lighting – Safety Specifications (GB 24819-2009), which took effect on 1 November 2010 and LED Modules for General Lighting – Measurement Methods (GB/T 24824-2009), which took effect on 1 May 2010. 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, visit the website of the Standardisation Administration of China and the standards website.
The Performance Requirements for Recessed LED Luminaires (GB/T 30413-2013), which was announced on 31 December 2013 and took effect on 1 December 2014, provides the norm and guide for the lighting industry.
China announced on 31 December 2013 a host of national standards for the manufacturing of lighting products: the new Luminaires - Application of the IK Code; the newly developed Safety Requirements for Electrodeless Fluorescent Lamps; and the newly revised Safety Requirements for Road and Street Lighting, Glow-starters for Fluorescent Lamps, and Neon Lamp Controlgear. Luminaires – Application of the IK Code (GB/Z 30418-2013) became effective on 1 December 2014. The newly revised Safety Requirements for 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/T 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.
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.
To ensure the effectiveness of certification for lighting appliances and to upgrade product quality, the Certification and Accreditation Administration of China (CNCA) promulgated the China Compulsory Certification Implementation Rules - Lighting Appliances (CNCA-C10-01: 2014) on 16 July 2014, which stipulates the basic principles and requirements for the compulsory certification of lighting appliances. The new mandatory rule has been in force since 1 September 2015. Products which have not been certified must not leave the factory, be imported, sold or used in business activities in China. According to the implementation rules, in addition to fixed general purpose lighting in which the power supply voltage is greater than 36V but not exceeding 1,000V, portable general purpose lighting, embedded-type lighting, aquarium lighting, 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.
The recommended national standard Accelerated Test Method of Luminous Flux Depreciation for LED Lighting Products (GB/T 33720-2017) was implemented on 1 December 2017. This new standard may be used on lighting products including LED globes, LED spotlights and straight tubular LED lamps to ensure the quality of these products.
The national standard Limits and Methods of Measurement of Radio Disturbance Characteristics of Electrical Lighting and Similar Equipment (GB/T17743-2017) took effect on 1 July 2018, replacing Limits and Methods of Measurement of Radio Disturbance Characteristics of Electrical Lighting and Similar Equipment (GB/T 17743-2007) as the basis for compulsory certification. The amendment specifies the scope of products covered by GB/T 17743 and includes new limits and methods of measurement for products like lamp cords and extra-low voltage (ELV) lighting.