More merg­ers and ac­qui­si­tions ex­pected in na­tion’s LED in­dus­try

China Daily (Hong Kong) - - BUSINESS -

BEI­JING — China’s LED in­dus­try will ac­cel­er­ate merg­ers and ac­qui­si­tions in a plan seek­ing to foster world-class brands. In a development plan jointly re­leased by 13 gov­ern­ment agen­cies, China aims to achieve break­throughs in key tech­nolo­gies in the LED in­dus­try to ex­pand mar­ket value to 1 tril­lion yuan ($148.6 bil­lion) by 2020.

China should have at least one LED com­pany with a sales vol­ume of more than 10 bil­lion yuan, and one or two world-renowned brands, ac­cord­ing to the plan.

The gov­ern­ment will en­cour­age more M&As in the in­dus­try to push con­cen­trated and dif­fer­en­ti­ated development in the sec­tor.

The news gave a boost to re­lated shares. On Mon­day, Foshan Elec­tri­cal & Light­ing went up 1.34 per­cent to close at 9.1 yuan per share, while Zhe­jiang Quartz Crystal Op­to­elec­tronic Tech­nol­ogy gained 2.4 per­cent to 23 yuan.

LEDs are semi­con­duc­tor light sources that are more en­ergy-ef­fi­cient than in­can­des­cent bulbs. Dur­ing the 12th Five-Year Plan (2011-15), China made the LED in­dus­try a strate­gic emerg­ing in­dus­try in its ef­forts to ad­vance high-tech man­u­fac­tur­ing and tackle cli­mate change.

The in­dus­try has since taken off — China has be­come the world’s largest pro­ducer, con­sumer and ex­porter of LED prod­ucts. In 2011-15 pe­riod, the sec­tor’s out­put value grew at an an­nu­al­ized rate of around 30 per­cent.

In 2015, the in­dus­try out­put value amounted to 424.5 bil­lion yuan, up 21 per­cent year-on-year, while ex­ports of LED prod­ucts came in at $12 bil­lion, ris­ing 15 per­cent as China’s LED in­dus­try is more and more re­liant on over­seas mar­kets.

The num­ber of listed firms in the sec­tor has grown from two in 2010 to 25 in 2015, and two of the firms have made their way to the global top 10.

The way up in the in­ter­na­tional mar­ket was partly driven by Chi­nese M&As. In 2015, China’s Puhuarui Pho­to­elec­tric­ity ac­quired full equity in BridgeLux Inc, a lead­ing US de­vel­oper and man­u­fac­turer of solid state light­ing tech­nolo­gies.

In 2013, Lu­mi­nus De­vices, a US seller of solid-state light­ing prod­ucts, was sold to Chi­nese LED maker San’an.

And with the re­cent development plan aim­ing to foster lead­ing global com­pa­nies, an­a­lysts ex­pect M&A ac­tiv­i­ties to quicken as China has a large num­ber of com­pa­nies, mostly small, in the busi­ness.

Liu Rong, pres­i­dent of HC SemiTek Corp, said the gov­ern­ment plan of­fered op­por­tu­ni­ties for his com­pany to strengthen in­ter­na­tional co­op­er­a­tion on research and development of LED prod­ucts to be­come a lead­ing com­pany in the global mar­ket.

China’s rapid ur­ban­iza­tion and top-level plans such as “Made in China 2025” will cre­ate more growth po­ten­tial for the sec­tor.

In May 2015, China in­tro­duced the Made in China 2025 blue­print, list­ing sev­eral tasks for the man­u­fac­tur­ing in­dus­try, in­clud­ing boost­ing in­no­va­tion, fos­ter­ing Chi­nese brands and en­hanc­ing ser­vice-ori­ented man­u­fac­tur­ing.

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