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LED lighting in the short-term or there is an order return, the domestic market chain effect impact

The price competition of LED lighting applications is becoming increasingly fierce, and the profit pressure of the industry continues to increase. With the recent stalemate in Sino-US relations, the United States has announced two wave tariff lists since 2018, especially the second round of taxation officially implemented at the end of September. On the 10% list, LED lighting products are involved in a wide range. Whether China and the United States will evolve into a long-term war of resistance still has different prediction arguments, but if the dispute between the two sides fails to calm down, the tariff on the second wave of lists will increase to 25% from 2019.

Since 2018, the growth momentum of the global LED lighting market has been weak. From the perspective of regional economic performance, in addition to the strong economic recovery in the US, affected by exchange rates and uncertainties, many emerging economies are facing negative pressures from recession, including India. The regions of Turkey, Argentina and other regions all showed market volatility, which weakened the growth performance of the domestic market. Under the unclear overall economic chaos, the lighting market, which is the demand for people's livelihood, also showed the phenomenon of terminal pulling goods weak.

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Domestic LED lighting industry revealed that due to the situation of higher tariffs in the United States, the demand for LED terminal lighting in the fourth quarter has rebounded strongly. The downstream industry is worried that the 25% tariff will continue to cost high. The terminal market has emerged in the near future. Orders in the upstream supply chain of LEDs have strengthened. However, in 2018, the price of LED lighting components fell more than expected, and the annual decline was at least 20% to 30%. Under the dilution of LED component price profits, the decline of more than 20% is a severe test for the industry. At the same time, the prices of hardware and raw materials have risen. The lighting finished product manufacturing has also encountered pressure to increase the cost. Now the US tariff range is even worse. Once the tariff is raised to 25% in 2019, some of the costs will be passed on to the upstream supply chain, and the LED industry price reduction competition will be expanded again.

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According to industry estimates, the first round of tariff list announced in April 2018 has little impact on China's LED industry, only about 200-300 million US dollars, but the atmosphere of both China and the United States is arrogant for LED lighting. The actual impact is far more than expected. Due to the strong wait-and-see attitude of the market and the lack of stocks by terminal manufacturers, the traditional peak season for LED lighting is not prosperous. As for the second round of tariffs, the related products are more than 30, related to the LED lighting industry. The export volume of products to the United States accounts for nearly 80% of the total exports of domestic lighting products to the United States, equivalent to more than 8 billion US dollars in impact.

The industry believes that the increase in US tariffs coincides with the peak season of consumption at the end of the year. The short-term impact of standardized products such as LED bulbs and lamps should be limited. Since replacement lighting is a necessity for people's livelihood, the current retail price of LED bulbs is even lower than that of power-saving bulbs. Brands and suppliers each make a step back, the basic market demand will be maintained, but the price of embedded LED and design lighting products is relatively high. Since 2018, the lighting brands have gradually increased their prices, and in the future, under the increase of tariffs, LED package purchases may shift positions, and assembly lines will also give priority to existing domestic lines that have been certified.

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The industry believes that the second round of tariffs in the United States will put pressure on China's labor and employment market. After the domestic LED factories reduce their exports in the US market, their seaportof consumption capacity will shift to other emerging markets, and terminal brands will reduce risks. And controlling inventory, the upstream supply chain will also be more conservative, which will bring gloom to the industrial order, and more seriously, the domestic market problems may eventually expand into global economic problems.

The imbalance of the industrial order may lead to more sequelae of vicious competition, and will also add unpredictable variables to the industrial outlook in 2019.