LED Lighting Market: Overseas markets offer huge potential in 2012

Due to the high electricity price (20 cents/degree average), incandescent lamp deactivation, and strong demand for energy conservation, the European market has a stronger demand for LED lighting than China. At present, LED lighting in the European market has already started. Taking Philips, the global lighting faucet manufacturer, as an example, it occupies approximately 20% of the market share in Europe. According to the company’s announcement, its lighting division’s revenue for the third quarter of 2011 was 1.91 billion euros (about 15.7 billion yuan), of which traditional lighting revenue was 1.58 billion euros. The decline was 3% year-on-year; LED lighting revenue was 300 million euros, a year-on-year increase of 32%, accounting for 16% of the total, which was the growth driver for lighting revenue.

Figure 1: European lighting market share in 2010

Source: Research Department of CITIC Securities based on research information

Figure 2: Philips Lighting Division's quarterly revenue and LED revenue share, ring growth

Source: Company announcement, researched by CITIC Securities Research Department

Fully disable incandescent lamps or start a large home lighting market

The global market is still mainly using incandescent lamps. In 2012, the total ban on incandescent lamps will be moved out of a huge market space. On the other hand, lighting is subjective and has strong regional characteristics. Europe and the United States and other places have a strong preference for low color temperature lighting. Fluorescent lamps can hardly meet the requirements. The space after incandescent lamps are disabled will be replaced by fluorescent lamps and LED lamps. The market space may bring explosive growth of LED lighting.

Figure 3: Incineration of incandescent lamps in various regions of the world in 2012

Source: Baidu and other network public information, CITIC Securities Research Department

Figure 4: Distribution of demand for lighting source products in various regions of the world (2009)

Source: Freedonia, Research Department of CITIC Securities

Export to Europe will be an important opportunity for domestic companies

China is the world's largest producer and exporter of lighting. From the total point of view, about 50% of the world's light sources are produced in China. In 2010, the output of incandescent and fluorescent lamps in China accounted for about 40% and 80% of the world's total. The proportions accounted for 29% and 36% of the global total respectively. At present, several domestic LED lighting companies have entered the supply chain of Philips. It is expected that the high growth of the European market in 2012 will provide important opportunities for domestic OEMs and LED manufacturers with their own channels.

Figure 5: Worldwide distribution of incandescent lamps in 2010

Source: China Lighting Association, CITIC Securities Research Department

Figure 6: Distribution of production and sales of global fluorescent lamps in 2010

Source: China Lighting Association, CITIC Securities Research Department