LED Lighting Industry in the Changing Fundamentals of USA-China Relationship
The US-China trade war started in July 2018 when the US President Donald Trump started accusing China of unfair trade practices. He started imposing tariffs worth around $550 billion on goods manufactured in China. In response, China imposed tariffs on goods worth $185 billion on US products.
The tradeoff continued for many months as both Xi Jinping, and Trump showed no signs of backing down. Even though US-China Signed a “Phase One Deal” as a truce to slow down things, the LED industry is still under severe impact, thanks to Covid-19. The pandemic has created a slowdown in the global market, and the electronic devices market, especially the LED industry suffered a major setback.
In this article, we’ll explore how the LED industry is affected by the changing fundamentals of the US-China relationship.
Pre COVID scenario of LED Industry
According to a recent study conducted by Grand View Research, a global market research publishing firm, the global market size of the LED industry was valued at 54 billion USD in 2019. The study also reveals that the market is expected to grow at a rate of 13.4% until 2027. Among the various reasons proposed for the growth in the sector, the stringent policies against cheap light products along with the tax rebates provided for LED lighting are considered the major growth drivers.
Challenges Faced by the LED Industry During/After Covid-19
Since China is considered to be one of the primary suppliers of raw materials needed for manufacturing LED products, the pandemic has resulted in a sudden halt to the supply. According to a report by Market Research Future, 80% of supplies for the lighting industry is sourced from China. Covid-19 has played a huge havoc in the US LED lighting industry. The industry is currently facing a huge dropdown in production, supply disruption along with large scale price fluctuations. The US is one of the largest importers of PV modules from China for charging its Solar LED street lights installed all over the US. This pandemic situation has created a sudden halt in the supply chain network.
This provides an excellent chance for local manufacturers in the US to increase their production and meet the growing demand of LED manufacturers. According a survey conducted by the Lighting Industry Association (LIA), major LED brands have started shifting their production lines from China to other Asian countries, including India, Vietnam, Indonesia and Thailand etc.
A survey conducted by The Lighting Industry Association (LIA) to assess the effect of Covid-19 on the LED lighting industry. Here are some key pointers from the survey:
- 69% of members stated problems souring raw materials
- 38% reported that their customers extended the credit
- The US-China trade rift also caused in delayed deliveries and shortage of raw materials
What are the options for industry players?
LEDinside, a leading platform for news & trends in the LED industry reports that Cree, one of the renowned LED manufacturers in the US is currently evaluating their option about how to survive the tariff impact. According to a statement released by the company, it states that the current tariff charges could cause a large impact on the earnings of the company and in fact could even bring down the per share rate to 2%. Eaton, another US LED giant is looking at opening manufacturing hubs in places where they sell their products. They are also looking at increasing the price of their products to offset the tariff impact.
The Covid-19 Pandemic Has Opened New Opportunities for UV/IR LED Lighting Industry
While the Covid-19 situation has brought with itself a huge destruction to the world economy, it has opened up some new opportunities for the LED industry. With the increased awareness for social distancing, disinfection and sanitization, the demand for UVC LEDs and IR LEDs have increased. UVC LEDs are useful in monitoring people flow in a given area and can largely help in maintaining social distancing in public places.