2016 Southeast Asian Lighting Market Report
LED lighting developed rapidly in Southeast Asia thanks to its infrastructure construction, which was promoted by the development and impact from the Association of South-East Asian Nations (ASEAN), according to LEDinside, a research subsidiary of global research institute TrendForce. ASEAN is an inter-governmental international organization gathering countries in Southeast Asia. Established in 1967, ASEAN covers a population of approximately 618 million people, covering a land area of 4.48 million km2, with abundant natural resources, and it is one of the world's fastest growing economic regions.
In view of economic integration, the current main form of cooperation within and outside the ASEAN is Free Trade Area. ASEAN Free Trade Area(AFTA)was officially launched on January 1, 2002. The ASEAN-China Free Trade Area has been fully implemented on January 1, 2010. At this time, mainland China and six ASEAN nations (Singapore, Malaysia, Thailand, the Philippines, Indonesia and Brunei) will reduce their industrial tariffs to 0%. The other four ASEAN nations (Myanmar, Vietnam, Laos and Cambodia) will reach this goal in 2015. In the first three quarters of 2014, total trade between China and ASEAN nations reached about $ 346.60 billion, accounting for 11% of China's total foreign trade. The two sides are planning to update and expand the content and scope of the ASEAN-China Free Trade Area agreement, cutting non-tariff measures, actively proposing a new set of service trade commitments, promoting real openness in the investment field by improving market access and personnel interflow and enhance trade and investment liberalization and facilitation, and striving to raise two-way trade to one trillion US dollars by 2020.
Benefiting from China-ASEAN bilateral trade agreement, Chinese manufacturers enjoy lower tariffs or zero tariffs when exporting LED products to ASEAN nations. For example, as long as the Chinese enterprises obtains certificates proving the products origin are from China, LED component products exported to the ASEAN nations can enjoy zero tariffs. For finished lighting products, taking bulb lamp for example,tariff concessions provide a good environment for Chinese LED manufacturers to enter the Southeast Asian market, and promote further industrial cooperation between China and ASEAN.
ASEAN not only actively negotiates free trade agreements, but also sets a goal that setting up the "ASEAN Economic Community" in 2015. The establishment of the ASEAN Community envisions the ASEAN to be a single market and production base. Moreover, the Southeast Asian nations achieved rapid economic growth, and invested heavily in infrastructure construction, also policy is very attractive, so the industry is optimistic about the growth of LED lighting in Southeast Asian nations. ASEAN Economic Community (AEC) has a number of specific objectives; the important ones that can promote the Chinese LED manufacturers to enter the Southeast Asian market include free movement of goods, investment and labor, freer flow of capital, and transportation facilities construction.
The establishment of FTA and the Economic Community has brought a great number of favorable policies for Chinese LED manufacturers, which provides entry point for Chinese LED manufacturers to access the ASEAN market, while different manufacturers should adopt corresponding specific strategies. For example, packaging manufacturers should seize opportunity to enter the supply chain of local lighting manufacturers, or invest in building local factories; lighting OEM should put more focus towards the direct export of finished products to the local market, and adopt new transporting way to reduce transportation time and distance. For lighting brands, they can set up a single agent or offices in the Southeast Asian market, and invest in building local factories, regarding Southeast Asia as a manufacturing base. Different manufacturers of LED industry chain should seize the current golden opportunity to enter the Southeast Asian market, broadening the highly anticipated emerging market.
Terri Wang, an analyst for LEDinside, said that Southeast Asia's LED lighting market had the fastest pace of growth in 2013 with a year-on-year increase of 63%. Though growth lagged during the 2014-2015 period, the rate was kept at 30% and above. Also, the market penetration rate of LED lighting in Southeast Asia has risen with each passing year and at an accelerating speed. Overall, the market penetration rate of LED lighting in the region is projected to grow from 12% to 32%
This report has compiled various data regarding related SEA government and industry agencies, local business partners, import and export figures, to identify and analyze key market variables and offer projections. The study also integrates Market research and firsthand interview of manufacturers or agencies to examine and validate key factors, and offer recommendations, solutions and comprehensive analysis based on these findings.
Due to low labor cost and abundance of natural and human resources, SEA has become one of the most economically dynamic region with immense market potentials. SEA holds a key role in future political and economic positions. General lighting demands have grown as living standards rise in SEA countries, and energy conservation awareness and demands emerge. This will eventually lead to the proliferation and growth of the LED lighting industry.
The lighting market scale of the six major SEA countries which referred to in this report was estimated USD 4.8 billion in 2015, while LED lighting market is expected to reach USD 1.5 billion. LED lighting has a very high market and import growth rates, and LED lighting penetration rate has gradually increased. Despite the slow down of growth speed in 2015 due to overall economic condition, it is estimated in the next few years, government policies and incentives will continue to spur lighting replacement demands. SEA LED lighting market penetration and import volume is expected to soar. SEA market has gradually become the main export market for Chinese lighting manufacturers.
Imported Chinese lighting products, can be classified into five types in the SEA lighting industry supply chain: 1. Chinese manufacturers supply lighting components to local lighting manufacturers. 2. Semi-finished products are imported from China and locally assembled. 3. Imported light sources are assembled locally. 4. Chinese manufacturers playing the role of Original Design Manufacturer (ODM) and shipping the products to SEA countries. 5. Chinese manufacturers distribute their products through wholesale channels or construction projects. In general, due to the lack of local manufacturing capability, international brands such as Philips, GE and Toshiba have the largest market share in SEA countries, followed by major local manufacturers. Provides major LED, LED lighting and LED industrial lighting manufacturers lists in the six countries. Three major LED lighting manufacturers in each country, 18 in total, including ODM/OEM and in-house production line, as well as distribution channel analysis.
The indoor LED lighting products certification standards and regulations in SEA market are relatively low compared to mature markets, such as Europe and the U.S., with the exception of construction projects. By and large, low lumen and high C/P ratio products are favorable in SEA lighting market. Nevertheless, municipal projects such as streetlight constructions have certain product specifications and energy efficiency effects. In addition, the prices of LED lighting products vary across SEA countries. Summarizes local manufacturers' streetlight specifications (take one major manufacturer's products in each country as example).
SEA countries have developed national LED standards that are based on IEC regulations to meet each country's specific needs. In addition, upon the establishment of ASEAN Economic Community, the ASEAN Harmonized Electrical and Electronic Equipment Regulatory Regime (AHEEERR) will be implemented as guidance for electronic equipment policies and standards. Electronic devices can be sold in other ASEAN countries upon receiving approval in one of the ASEAN countries. The introduction of uniform standards undoubtedly benefits the market of Southeast Asia. Besides, SEA countries have set energy conservation targets and initiated several energy saving projects, which lead to local demands for new energy saving lighting products. This has in turn raised new products quality and performance.
Association of South East Asian Nations (ASEAN) Economic Community is established in 2015, and has become the second global single market aside from EU. ASEAN nations have signed bilateral agreements with China, some of the agreements have lowered tariff or tariff-free on LED products. The lifting of tariffs frees investment and finance flows, plus human resources and transportation facilities and infrastructures. All these can become points of entry into the ASEAN market for Chinese LED lighting manufacturers. Lighting manufacturers have also implemented different strategies, for instance package manufacturers have taken the opportunity to enter local lighting manufacturers supply chain or invested in local factories. Lighting OEMs have also shifted towards new modes of transport that have shortened freight time and distance by directly ship products to emerging markets. Southeast Asian market lighting manufacturers can adapt a single agent, or they can construct local factories and make Southeast Asia their manufacturing hub.
For these manufacturers which are planning to enter SEA market, it need to choose the right distribution channel based on the brand and channel condition; take initiatives to develop and maintain good relations with government; prepared product certification and examination to meet local market requirements; plan for products' retail prices and specifications in accordance to local market demand. Manufacturers have to focus on their own market positioning based on their company strategy and every aspect mentioned above. Whether it is high end or low end product positions, distribute through construction project or retail, acting as an brand or ODM / OEM, choosing the right positioning strategy is a key factor in entering SEA market.