China's US$1 billion outdoor lighting export industry continues to ride out difficulties stemming from cutthroat competition and rising raw material and component costs. The solar lights sector, in particular, has grown immensely in the past three years. The product line is now almost entirely export-oriented and accounts for about 25 percent of the country's annual overseas shipments of outdoor lighting.
Competition in China's outdoor lighting industry is fierce and plans for the next 12 months are mainly designed to enable makers to keep up with their rivals.
The following are some of the key trends we see:
• Price increases in the next 12 months will mostly be limited to within 10 percent. Suppliers are adopting cost-cutting measures and improving efficiency to minimize additional operating expenses that can cut into their margins.
• Export sales will continue to be strong. Most makers are confident that improved manufacturing capability and a range of new energy-efficient models will compensate for any price increases they make.
• The majority of suppliers will be increasing capacity to prepare for larger export orders. Many will be upgrading their production lines while large suppliers will be opening new manufacturing facilities.
This report covers the three major categories of China-made outdoor lights: landscape and garden lights, surface-mounted lights and roadway lights. These three categories consist of products that run on either electrical current or solar energy. The key attributes of these products and pricing methods are discussed in the Products & Prices section.
Suppliers' production capability is discussed in the Manufacturing section of the report. This section also provides an overview of the major production processes, most of which focus on the manufacture of the fixtures' housing and support assembly.
In-house R&D work is fast becoming a priority, especially among midsize and large makers in China. These companies currently concentrate development efforts on energy-saving products. This and other areas of R&D focus are discussed in the R&D section.
The majority of outdoor light suppliers are wholly mainland China-owned private companies while a few are foreign-invested. The 86 suppliers in this report reflect the industry composition: 65 percent are private, wholly mainland-owned enterprises. The rest are Taiwan- or Hong Kong-invested or owned companies or publicly listed firms.
This report profiles several key manufacturers for each category. Far East Lighting is a specialist in landscape and garden lights capable of producing 8.7 million units a year. The company has collaborated with the Ningbo Municipal Technique Supervision Bureau to establish the Ningbo Lighting Testing Center.
Industry Overview
China stands out in the global lighting industry as the largest producer of outdoor lighting fixtures. Industry estimates place the country's output for the past several years between US$2.5 and US$3 billion worth of products. This is about 25 percent of the annual production of outdoor lights in the world. About US$1 billion worth of products are exported annually.
Although the majority of China suppliers produce only electrical models, which account for 75 percent of exports, the fastest growing and most dynamic sector of the industry is solar lights.
Production of solar lights soared 94 percent in 2004 to reach an estimated 60 million units worth US$250 million. This growth trend is expected to continue through 2005, particularly in light of strong export demand for environment-friendly products that run on renewable forms of energy.
Solar lights also continue to be the most heavily exported outdoor lights as a significant percentage of electrical models are still targeted at the domestic market. This may change, however, as the China government is promoting the use of solar lights especially in the western provinces of the country.
The solar light sector, however, is facing challenges. The popularity of renewable energy has set off a shortage in solar cells after suppliers of the component in the US, Germany and Taiwan started using most of their output in their own products.
Solar cells are the smallest and yet most critical component in solar panels. The scarcity of solar cells quite naturally triggered a corresponding shortage in solar panels and, further down the supply chain, an increase in cost. In the first six months of 2005 alone, solar panel cost in the mainland jumped 30 to 40 percent to about US$4.20 to US$4.80 per watt.
The rising cost and shortage in supply of solar panels have already pushed solar light prices up by as much as 30 percent in the past 12 months as suppliers struggled to shore up dwindling profit margins. This situation is particularly common among small suppliers that purchase finished or encapsulated panels.
Solar light suppliers in China are thus hard-pressed to keep prices at relatively affordable levels that will help sustain the product line's growth. Some companies are absorbing production cost increases of as much as 50 percent. Other makers are adopting more drastic measures such as cutting down spending on materials and components that reduce cost but can compromise product quality. There are companies in China, for example, that are using solar panels 20 or even 40 percent smaller than those traditionally used in solar lights.
The smaller solar panels are less expensive but result in less electricity being stored in the batteries and consequently, shorter operating life. Instead of the usual six to 10 hours, solar lights with smaller panels run for only three to six hours.
Suppliers are cutting down on costs in other ways as well. Until about a year ago, China-made solar lights were fitted only with crystalline panels. Some recent releases, however, have been fitted with low-cost alternatives such as amorphous solar panels. Amorphous panels have a lower efficiency-conversion rate than crystalline panels: 5 to 6 percent compared with the 13 to 15 percent rate of the latter. This could actually make amorphous panels more expensive to use in the long run because they need more space and mounting hardware to produce the same power output as crystalline panels.
Supplier Profile
Bailixing Solar Energy Scientific Co. Ltd
Bailixing, one of the leading suppliers of solar lights in China, has a strong product development team that works closely with top-caliber scientists in the field of solar energy after the company funded a post-doctoral solar energy research program at Zhongshan University.
Total revenue amounted to US$15 million in 2004. All output is exported, mainly to the US and EU. Ninety-five percent of overseas shipments are under OEM contracts. The company counts World Factory Inc. and Northern International Inc. in the US, and Ring Lamp Ltd of the UK as its major OEM customers.
Products
Most outdoor lights from the company come in classic designs and finishes, and are usually powered by NiCd batteries. Some high-end models run on NiMH batteries.
Sixty percent of products are made of brass while the rest are made of stainless steel and plastic. Bronze/brass lights range from US$15 to US$70 each while stainless steel models are priced at US$5 to US$8. Plastic models go for about US$2.50.
Bailixing spends about 6 percent of total sales or US$1 million on R&D every year. Its 12-member R&D team releases 15 new products annually.
Last year, the company's R&D team started to develop a solar-powered sunroof for automobiles. However, the project was aborted due to the scarcity of solar panels.
The team is currently working on polyresin solar garden lights. New products in the line will be released by the end of the year and will be priced at US$10 per piece.
The company started producing solar lights with 0.3 to 1W LEDs in the second half of 2005. These are expected to increase export sales by 10 percent. Another upcoming model is a lamppost that measures 1.8 to 2m in height and has two 0.3W LEDs.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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