GG LED: The opening ceremony of the 11^thLighting Expo was held yesterday (18^thOct.), which is an indication of the lighting decoration trend in China. It’s important to achieve the breakthrough on barriers of both the price and the channel. According to our correspondents, the 2^ndand 3^rdtier cities in China has become new territories for the LED industry. It’s thus imperative to make LED appliances both affordable and reliable.
 
 Breakthrough on the Channel: LED is about to light up rural markets
 
The Euro-American market has been on the downward trend since last year, and the home market has become a place of strategic importance for numerous big names in business. The once typical “high price, luxury style” LED lighting has become a thing of the past for the mass production and significant reduction of prices, which makes it possible for manufacturers to enter the rural market now. According to our correspondents, many LED manufacturers have deemed rural areas as very important.
 
Liu Zhu, marketing director of Nature Lighting Co., Ltd. has also agreed to the rosy prospect of the rural market for the LED industry. According to a survey, most people in rural areas use incandescent lamps, which use 8 times the amount of electricity compared with LED appliances and 2 times the electricity compared with fluorescent lamps. As energy crisis takes its toll, green energy is the world trend and for reasons that LED lighting appliances do not contain mercury, not as fragile, recyclable, they have become the best choice in the choosing of many countries’ green energy products.
 
“Almost every participant including LED manufacturers believed that China’s LED lighting market for agricultural usage will see the profit margin in two years and from now on, the vast rural areas will gradually see the largest market share in the LED lighting.” Liu Zhu said that the overseas recession and the slump of property market at home has been seriously affecting the LED market in the 2^ndand 3^rdtier cities.
 
Some buyers also said that the project “China’s elimination of incandescent lamps and promotion of energy-saving ones” had been launched at the end of 2011. And subsequently, rural areas will become the largest LED lighting market.
 
Challenge: The demand for product with “excellent quality and reasonable price” is a test on the competitiveness of manufacturers
 
 Our correspondents found Naipu Lighting’s booth that the company has priced the ceiling lamp-“Happy Family” at 230 yuan each. Zhang said that they would like to make the leading LED ceiling lamp manufacturer in China. As they have racked their mind in the search for the opening of the rural market that “Products targeted at rural market must be ’excellent quality and reasonable price’” Zhang said, compared to its counterparts, Naipu only priced their product at 70-80 yuan each. Only by means of this can the rural market be more sustainable.
 
People in rural areas have higher requirement for the quality of home appliances though with limited purchasing power. So it’s paramount that manufacturers maintain a set of competitive prices.
 
Zhang said that the whole industry had suffered a lot in the year 2011 and the obvious bottleneck being the “channel”, as the 1^stand 2^ndtier market being occupied by the best brands; the 3^rd and 4^thtier markets too expensive to attract most manufacturers. As luck would have it, interior lighting market has everything to do with the 3^rd and 4^thtier markets, thus the building of marketing channels for agents on the manufacturers’ side is the only way out. On one side, reduction of manufacturing/operating cost, on the other side, channel optimization.
 
From the biggest to the strongest
 
There’re 21,000 lighting manufacturers in Guzhen with an annual production output of 17 billion yuan. Guzhen has already become the biggest manufacturing center for lighting decorations though this does not necessarily mean the strongest. What’s the plan for the next decade? Guzhen government has now invited 18 professionals to help with that “plan”. Many have suggested the intensification of mergers and acquisitions in Guzhen.
 
On the 1^stindustry consulting annual meeting, Yu Xipen, Guzhen’s secretary of the Party Committee showed his concern over the current industry situation in Guzhen: The biggest though not the strongest and there’s a huge gap compared with its European and American cousins. Euroluce and many other international expos do not recognize Guzhen’s lighting decorations and the intellectual property rights being the biggest issue of all. It’s sad that though many exhibits on the Euroluce are made in Guzhen, the Euroluce reject any participation of manufacturers from Guzhen.
 
 
GG LED  Recommendation I
Mergers and acquisitions for the reinforcement of the protection for intellectual property rights
 
Su Qilin, PhD tutor in Industrial Economics said that he has been watching the development of Guzhen’s lighting decoration industry since 2006 and a lot has been achieved since then. Yet Guzhen lacks any major manufacturers and most of which are not that competitive as there’s inadequacy in the inspection area. He reckons that the level of R&D, inspection and financial service matters in terms of the vitality of industrial development. Then local government and leading manufacturers must jointly build the much needed inspection framework.
 
Shi Yucan, board director and GM of Huizhou Yuanhui said that among the total 21,000 lighting manufacturers in Guzhen with the total annual production output of 17 billion yuan, Yuanhui, together with other 2 manufacturers have already taken up 7 billion yuan. Why many others cannot “make it big”? The same story happened in Taiwan years ago as its local government launched the industrial reorganization plan, many “small potatoes” were then merged with “big brothers”, and thus the competitiveness was there. Guzhen should learn from the case and give it a go. 
 
Li Zili, senior engineer at Guangdong testing Institute of Product Quality Supervision said that Guzhen has many “small potatoes” and compromised professionalism. And local government should offer necessary training on the standardization of products. Emphasize should be put on the enhancement of protection on intellectual property rights. Moreover, as the staff turnover on key positions still a matter of everyday actuality with the loss of technical manpower in all ways, if local government cannot safeguard its manufacturers it cannot secure the “transformation and upgrade” of its industry.
 
Li Helong, associate professor of Economics and Management Dept., South China University of Technology has volunteered a solution to the barriers on the protection of intellectual property rights for manufacturers-the E-commerce, which is to build a uniformed framework with a unique identification mark on each individual lighting appliance – this is the solution to the copycatting and counterfeiting. Though huge sums of capital are needed to build the framework, it’s worth it and local government should get involved.
 
Recommendation II  The lighting industry has to rejuvenate its own “spirit”
 
As the recessed effective demand sets in, and the limitedness of brand awareness on manufacturers’ side in Guzhen, the question comes up as how to build good reputations for the town’s lighting industry. Many experts have also volunteered suggestions. 
 
A female entrepreneur said frankly that proprietors started their business long ago to survive; now that need has been met with considerable their business scale and they are now confused on how to proceed and where the “spirit” lies. She suggested that the government need to build a sensible social atmosphere for the nurturing of a pursuit in “spirit” for entrepreneurs.
 
Li Zili reckoned that the local government could learn a lot from its counterparts in the building of a local “quality city”. That those local produce with market competence, be them made from big or small companies, as long as their manufacturers play by the rules and the produce deemed qualified, are all allowed to enter the local “quality city” for exhibits and marketing purposes.
 
Lu Dingguang, associate professor with Management and Marketing Department of the Hong Kong Polytechnic University reckoned that the development of LED industry in Guzhen lagged behind its counterparts, thus it should make full use of the upsides in the making of LED appliances while applying LED related techniques to a wider spectrum of business activities. The move emphasizes the innovation of LED applications for the building of brand awareness. “The building of a good brand is the answer, which is the “spirit” in question, and it is to introduce consumers to a better lifestyle.”