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Forbes
Asia China wants to go easy on energy by using LEDs. For now that means a lot of imports. 10.17.05 At a recent investor conference in Boston, Silicon Valley's Robert C. Walker asked his audience a trick question: Is China (a) a land of 800 million poor peasants, (b) a giant factory with plentiful cheap labor, or (c) the bleeding edge of the solid-state lighting revolution? The answer is, of course, all three. The revolution he refers to is the transition, now under way, from Edison's lightbulb to tiny chips called light-emitting diodes (LEDs). It began with niche applications such as traffic lights and displays like the Nasdaq screen in New York's Times Square. But industry experts predict that energy-efficient LEDs will sooner or later sweep away all other forms of lighting, up to and including household lights. "China will be the first country to adopt the solid-state lighting revolution," Walker says. "You're going to see China first, the rest of Asia second, Europe third and the U.S. last in adopting that technology." A bold call perhaps, but as the chief executive of ELite Optoelectronics, a Sunnyvale, California supplier of LEDs, and a senior adviser to the Chinese government's solid-state lighting committee, it is one that Walker is qualified to make. China's government has pressing reasons for embracing solid-state lighting, which in the West is still a fringe technology. Prime among them is the fact that LEDs will consume roughly 50% to 80% less energy than conventional (incandescent and fluorescent) lights. Rapid economic growth is already outstripping China's ability to supply energy. According to Wu Ling, the dynamic former medical doctor who directs the China Solid-State Lighting Alliance, a Beijing nonprofit organization that develops strategy for the government, 12% of electricity currently goes to lighting. Wu estimates that if over the next ten years LEDs were to take 30% of China's lighting market, then the saving would be 58 billion kilowatt-hours per year. She points out that that is almost as much as the yearly output of the Three Gorges Dam, the world's largest power plant, under construction at a cost of $24 billion. "Faced with a great shortage of energy, the government will push solid-state lighting," Wu says. And in China when the mandarins want something to happen, they have all sorts of ways of making sure that it does. Top-down strategies include financing, both direct and indirect. Wu expects Beijing's next five-year plan, to be announced at the end of October, to contain a major increase in spending on solid-state lighting R&D at Chinese universities and national institutes (up from the $17 million spent since the project began in January 2003). Wu estimates that $725 million has thus far been invested in China's domestic solid-state lighting industry. Some of this is private investment, but industry insiders believe much of the money has come from government banks in the form of soft loans to LED startups. Regulations--in both positive and negative forms--are another powerful lever. For example, officials can mandate that LEDs be used for certain applications, such as the illumination of tourist landmarks like Beijing's Tiananmen Square. Or, where the codes haven't caught up with technology, authorities can turn a blind eye to early adoption. "China is different, in terms of regulations," says Bingwen Liang, chief executive of Nanjing Handson Semiconductor Lighting, a leading LED packager and fixturemaker. "It's not so tight as in Europe or the U.S. As long as you have good relationships with the leaders, anything can happen." Also auguring well for the rapid take-up of new lighting technology, Wu points out, is that China's infrastructure is still a work in progress. "The whole country is like a construction site," she says. "In the U.S. I'm not going to go to the Marriott Hotel and have them change their whole electrical system," Walker explains. "In China I get to go to a guy who's building a new hotel and say, ‘Design your building around LEDs.'" In particular, the country is scrambling to prepare for the Olympics in Beijing in 2008. These are billed as environmentally friendly games. (Of necessity: It would be embarrassing if the city's appalling air quality were to affect the health of athletes.) LEDs are among the officially designated environmental technologies. The Olympics are also an opportunity for China to show itself off to the world. And it is in colorful outdoor decorative lighting rather than general-purpose white illumination--the implementation of which remains several years off--that the solid-state revolution has initially been manifesting itself. "The whole country's gearing up for the Olympics, not just Beijing. They expect a lot of foreign tourists all over China," says Robert V. Steele, an analyst at Mountain View, California market researcher Strategies Unlimited. "They want to dress up the country, and they see LED lighting as a key element in improving the appearance of buildings, bridges, fountains and ancient sites." For example, the Full Moon Tower, a 52-meter [170-foot] structure in Galaxy Park, Tianjin's civic center, is illuminated at night by a dazzling computer-controlled colored light show. City officials decided on an illuminated landmark to help raise the profile of Tianjin, a port city of 10 million inhabitants about 200 kilometers southeast of Beijing. In urban centers across the country the story is the same. "Every single local government is trying to do this kind of thing," says Xiao Guang He, executive vice president of Dalian Lumei Optoelectronics, China's second-largest LED maker. "If one lighting project turns out good, then people just keep on copying. And the cost is now so low that people can afford it." Outdoor decorative lighting accounts for almost a quarter of the Chinese LED market, which was worth $1.4 billion in 2004. In southeastern China's Fujian Province alone, according to Xiao, consumption of white LEDs is running at 500 million a month. Currently most of the LEDs and fixtures used in China, especially the high-end ones, are imported. Companies such as Cree (U.S.) and Nichia (Japan) provide the LED chips, while architectural LED fixtures are supplied by firms like Boston's Color Kinetics and Vancouver's TIR Systems, which was responsible for lighting up Tianjin's Full Moon Tower. Per annum the LED market is growing at 40% in terms of units and 23% in sales. It is serviced domestically by some 600 firms employing as many as 40,000 workers; almost all are small outfits at the low end of the industry, doing labor-intensive jobs such as packaging LED chips. But the Chinese are determined to work their way up the value chain. Already four Chinese companies have begun to produce their own chips, with maybe twice that number gearing up to follow. Xiao's company, Lumei, leads the field, largely thanks to having acquired the optoelectronic arm of AXT, a U.S. firm in Fremont, California, for $9.6 million in 2003. For the moment Lumei continues to make its LEDs in California. But the technology is migrating across the Pacific, carried to the mainland by returning Chinese-born, American-trained engineers. Xiao, for example, formerly worked for U.S. lasermaker Spectra-Physics. Liang of Nanjing Handson spent seven years at HP-Agilent. And though they may be late starters, the Chinese can draw inspiration from the success of their archrivals, the Taiwanese. The island has rapidly made itself a force to be reckoned with in LEDs. Steele reckons that around 40 Taiwanese companies now manufacture LEDs, including Lite-On Technology, a member of FORBES ASIA's new Fabulous 50 list of top-performing bigger corporations (Oct. 3). "Four years ago, when I was telling people about Taiwan and LEDs, everyone pooh-poohed me," Bob Walker says. "Now nobody talks about this industry without mentioning Taiwan." The same will soon be true of the mainland.
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© 2005 eLite Optoelectronics Inc. For information call (408) 329-5300. |
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